franchising in serbia (with remax serbia)

Franchising in Serbia

Business concept for economic and entrepreneurial growth in Serbia

Lecturers:Goran SečujskiMiodrag Kušić (RE/MAX)

Faculty of Technical SciencesNovi Sad, November 13th, 2007.

University of Novi SadUNESCO Chair of Entrepreneurial Studies

UNESCO Chair of Entepreneurial Studies- Franchising in Serbia -

Franchising in Serbia

• Franchising – concepts, forms

• Franchising in Serbia – business concept for economic and entrepreneurial growth

• RE/MAX – case study


PART IFRANCHISING

(terms, forms)


1. Franchising

- Franchising from 4 perspectives:• franchising from economic perspective• franchising from legal perspective• franchising from the perspective of Franchiser• franchising from the perspective of Franchisee


1. FranchisingFranchising from economic perspective

- Objective of the lecture– how franchising can contribute economic growth of Serbia

- Positive social-economic impacts of franchising on other countries’ economies

- Form of vertical cooperation- Business concept based on association of producers,

wholesale and retail into a unique functional system


1. Franchising Franchising from legal perspective

- Franchise Agreement – the most important document which regulates relations in the franchise network

- Original Agreements – up to 3 pages- Present Agreements – more than 50 pages- Franchise Agreement as a complex creation of

autonomous economic law (license, know-how)- Ethical codex in the USA of the 70’s- UFOC (Uniform franchise offering circular) – general

rules of performing business in franchising systems


1. Franchising Franchising from the perspective of

Franchisor- Strategic decision- Franchisor: decision regarding franchising system of

distribution, procedures, training, control system, protection of trade name and trade mark, conditions which need to be fulfilled by a potential user...

- Franchisee: decision regarding entering a franchising system, fees, control level...

- Advantages and disadvantages for both parties


1. Franchising Advantages and disadvantages for

FranchisorAdvantages:• a small amount of capital needed for fast growth• a potentially high growth rate• highly motivated and committed local management• lower administration costs and less administration problems• continuous protection of trade mark through contract• faster ascertainment of the national image•destroys competition

Disadvantages:• development of sense of independence and egotism with users, after the period of danger• difficulties with standard controlling • difficulties with hiring the best staff • more delicate interpersonal relations• success often depends on the way users think


1. Franchising Advantages and disadvantages for

FranchiseeAdvantages:• deficiency of expertise is compensated with training• Franchisee performs business by themselves and for themselves-Franchisee is a legally independent organization• smaller risk of failure• smaller amount of initial capital• use of a brand name and image• standard product and quality• continuous expert help• group relieves for supply

Disadvantages:• limited freedom of decision making• necessary accordance with agreement and standards• financial obligations towards Franchisor


1. FranchisingBasic concepts

Taken from An Introduction to Franchising



- FRANCHISE – comes from the French word franchir, meaning right or privilege. Definition – a right of a firm (Franchisee) to sell products/services of another firm (Franchisor) by using its trade mark or service mark and its experience in a certain industry. For the use of the right, Franchisee pays an agreed upon fee, and Franchisor retains the right to control the application of the license law, apart from the obligation of providing constant support to the user.



- FRANCHISING – agreement form of vertical marketing system in the distribution channel

- A method of market expansion of a firm (Franchisor) based on distribution of products/services through a developed network of cooperation relations with other legally independent firms (Franchisees) which perform business under Franchisor’s trade mark or service mark, whereby Franchisor provides constant support and performs control with charging the agreed upon fee for the license rights.



- FRANCHISE AGREEMENT – agreement of a more continuous business cooperation with which Franchisor is obligated to perform periodic deliveries and certain economic services, as well as to transfer knowledge and experience regarding the fields of production and business performing to Franchisee, and with which Franchisee is obligated to pay an award to Franchisor for service providing and to observe the obligations from the Agreement in Franchisee’s business performing.



- FRANCHISOR– a legally independent firm which, owing to its multiannual business experience in a certain field, has developed a successful trade mark or service mark and business concept which it can easily project to another legally independent firm

- FRANCHISEE – a firm which performs business by itself and for itself, but which uses the given rights regarding the use of trade mark or service mark and the rules of performing business of another firm, for which it pays the agreed upon fee.



- FRANCHISING SYSTEM or FRANCHISING NETWORK – a collection of connections and relations between Franchisor and all Franchisees.


1. FranchisingForms of franchising

1. Product distribution franchising2. Business format franchising


1. FranchisingProduct distribution franchising

- Isaac Singer and Singer Sewing Machine Company – the second part of the 19th century

- Creates a dealer network of sewing machine sellers - Gives the right of exclusive sewing machine selling to

local sellers-he charges commission for it- The first franchise agreement- Coca-Cola, General Motors, Ford Motors...


1. FranchisingProduct distribution franchising

- Franchising of the first generation- Franchisee sells products under producer’s trade mark - Soft drinks bottleing plant (Coca-Cola), auto part

shops (Ford, John Deer), gas stations (Exxon, OMV)- 1/3 of the total retail in the USA has been achieved

through this form of franchising


1. FranchisingBusiness format franchising

- Today’s most present form of franchising- Franchisee sells products/services of Franchisor,

using its trade mark or service mark and business model which Franchisor developed through its multiannual experience

- Concept which can be taught to someone and applied in other locations

- Most used in the service sector-restaurants, fast food restaurants, business services, maintenance, tourism, hotel industry, real estate...


1. FranchisingUnit and multi-unit franchising

- Division made according to the way of franchise networks spreading

- International franchising- UNIT (DIRECT) FRANCHISING – Franchisee only

opens one franchise unit- MULTI-UNIT FRANCHISINGa) (area development franchising)b) General franchise agreement (master franchising)


PART IIFRANCHISING IN SERBIA

(business concept for economic and entrepreneurial growth)


2. Franchising in SerbiaDomestic franchise networks

- There are 15-20 domestic franchise networks- There are no records on the exact number of

Franchisors and Franchisees - 3 (three) Franchise associations (Beograd, Novi Sad,

Niš)- The most frequent form of franchising in Serbia-

product distribution franchising


2. Franchising in SerbiaDomestic franchise networks


2. Franchising in SerbiaForeign franchise networks


2. Franchising in SerbiaThe first franchise conference

- The first franchise conference in Serbia – April 11th, 2007

- Milan Parivodić, Slobodan Milosavljević, Michael Polt, William LeSante (Vice-president of the IFA’s Global Marketing Committee)

- Topics: basics of franchising, how to buy a franchise, how franchising can help economic growth of Serbia

- Conclusion: franchising is under developed- AMCHAM and IFA offer help


2. Franchising in SerbiaThe first franchise conference

- Serbia: Franchising Market – a report:• The second largest market (after Romania) • It has a growing consumptive power which needs to

be satisfied• Western products are highly valued• Laws are created according to the EU laws• There are no limitations to emerging of American

franchises


2. Franchising in SerbiaBusiness concept for economic growth of

Serbia

- Franchising is not a guarantee for success - Serbia has advantages in the fields of agriculture and

services (most franchise networks belong to the service sector)

- How franchising can help:1) It reduces the unemployment rate2) It enables business activities of small businesses conducted

by great trade chains3) It creates new domestic franchise networks and their

expansion in the country and surrounding countries


2. Franchising in SerbiaFranchising and unemployment rate reduction

- Unemployment is one of the greatest problems of our economy - The advantages of franchising – beginners’ mistakes are avoided

and no previous experience is needed - Success of businesses which bought a franchise greater than the

success of businesses which started off with their own ideas- Social program for the employed whose work status is soon to

be terminated (2002) – franchising is one of the solutions- Fund for economic growth of Serbia – start-up projects financing


2. Franchising in SerbiaSmall players join big players

- Owners of retail shops are faced with fierce competition (Rodić, Mercator, Delta, Metro...)

- By entering franchise system (for example, DIS, DELTA MAXI/PEKABETA) advantages are gained – unified supplies, discounts, corporate marketing, no incoming costs, survival

- If you can’t beat them, join them


2. Franchising in SerbiaNew franchise networks

- Anyone can name at least 1 domestic business which can expand using advantages of franchising

- Advantage: network expansion in Serbia and the surrounding countries, recognizability and image awareness, employment increase


2. Franchising in SerbiaWhat now?

- Based on the existing examples we see that franchising does exist in Serbia

- There is no law which regulates franchising (it is only mentioned in Competition Law)

- There is no law which limits creation of new and expansion of the existing franchise networks

- Possible solutions: stronger promotion of franchising (state promotes it through agencies, banks promotes it through development of financing programs for franchise buying, private initiative), creation of national associations, Ethical codex


2. Franchising in SerbiaSomething IS happening...

- The year 2007 is a milestone in franchise development in Serbia:• The first franchise conference• Emersion of Internet sites promoting franchising• Chamber of Commerce of Serbia prepared brochures for

franchise promotion, series of training in 2008


PART IIIRE/MAX

Mr. Miodrag Kušić,Regional Director of RE/MAX Serbia and Montenegro


3. RE/MAXCase Study

- RE/MAX – leader at the real estate market in the USA, Canada and other most competing markets

- Founded in 1973- 121 000 agents in 67 countries- More than 1 million transactions in only one year- The best in real estate industry- The fastest growing franchises- 11th place; The most

advantageous franchises-4th place; The best world franchises-9th place

- Among “Fifty companies that changed the world” (a book by Howarda Rothman)

franchising in serbia (with remax serbia)

Documents