Foto: Jakub Hněvkovský
The specialized restaurant brand Hooters, run by Atlanta, Georgia-based Hooters of America, Incorporated, hopes to open its first outlet in the center of Prague in the first half of 2010. Other brands such as the fast-food chain Carl’s Jr., a subsidiary of CKE Restaurants, Inc., are waiting in the pipeline to catch the right entry opportunity. For brands already established on the Czech market, this means more competition, but also a healthy push for an individual approach.
The coffee chain operator Starbucks Corporation, for example, is one of the brands trying to stand up by building a solid, inclusive company culture and an enticing atmosphere. All such brands are gathered on Oct. 20, 2009, at the FrAMchise Day conference in Prague, organized by the Czech Institute for Franchising (ČIF) and the U.S. Commercial Service in Prague. FrAMchise is a play on the word, with AM standing for America.
As new brands keep entering the Czech market, it can be only hoped that it will contribute to the maturity of the local Czech business environment, said Jaroslav Tamchyna, managing partner of ČIF. For the moment, entry barriers such as mentality differences, low bank interest in financing franchise deals or low support from municipalities are still in place. As time goes by, these burdens should be removed, which would only be to the benefit of the Czech consumer, Tamchyna said.
Q: There are some new brands ready to enter the Czech market, such as Hooters. What are the opportunities that the Czech market can still offer to foreign franchisers?
A: Some 30 brands are getting ready to come to the Czech Republic, and a big part of them is in the food and beverage (F&B) industry. More interesting for our market are franchises from advertising. We’ve got four franchisers from advertising, billboard and so on in the pipeline. The second is in repairing, from automotive or leather repairs. Third is education—for example [the online training service provider] Crestcom International, which is an internationally known brand. The fourth is in leather repairs and shipping. I hope that in the future there will be more opportunities for these kinds of franchises, not only in F&B.
Q: Why is that important to attract franchisers from other industries as well?
A: It is indeed important because these franchises help to raise the level of Czech services. We can inspire and it’s good for the overall market competitiveness.
Q: Who, from all the countries with companies represented in franchise on the Czech market, is most successful?
A: It’s difficult to say. American brands are very successful because their philosophy is very near to the Czech mentality. Moreover, inside there is a very good [business] system, which fits the Czech mentality very well. When I compare, Italy is maybe good in coffee, but Americans have the longest history, and among the top brands in Europe there are also three American brands.
Q: What are the difficulties or barriers ahead of American companies before entering the Czech market?
A: If you compare how Americans and Czechs think, Czechs, when they start a new business, use relations and soft skills and not only hard competition. I think that it’ll be difficult sometimes to compare these two philosophies and styles of entrepreneurship. At this conference, we would like to point out those differences and barriers and eventually overcome them.
Q: How about bureaucracy, red tape and the maturity of the Czech business environment, isn’t that difficult to handle as well for an American entrepreneur?
A: Sure it is. For Americans, it’s horrible to be in touch with the Czech bureaucracy, with the Czech bribing and the corrupt system. The second thing is how Czechs want to get money for marketing and advertising. It’s typical that in the American system there is an advertising royalty standing at about 4 percent. Originally, Czech companies chose about 2 percent. Americans believe that advertising and marketing get more money than Czech people. There is also a chance now to learn how to do business from the American companies; it can be a great inspiration because some American brands are very old and have a long history, which means they are long-term successful.
Q: Except for raising the quality of Czech services and being long-term sustainable, are there any other things that Czechs could learn from these companies?
A: Briefly, American brands can help raise the normal consumer to a higher position—from the level of [consumption] slave to the level of master. This is a big inspirational source for the Czech market. We can learn how to be in contact with consumers, how to do proper market relations, how to be a client and not only a consumer. In the franchise system, we can look at how service is in a restaurant in the U.S. and compare it with some average Czech pub. It’s a big difference. Such firms can teach us how to feature real hospitality toward guests.
Q: What are the biggest weaknesses of the Czech franchising market?
A: We have two problems. One is that people don’t know what a franchise is. We [Czechs] have a very young franchise culture; franchising wasn’t a part of the culture of Czech entrepreneurs. The concept is very young; we don’t know what it means to be the owner of a license for more than 100 years. We don’t know what that is, while that is notorious in other markets. Second, we need the help of banks to start franchising. Yet, also our bankers know this model for only 20 years and don’t understand that franchising is a business with low risk.
Q: Yet, at the opening press conference you mentioned the interest of local banks to support new starts. How come banks show an open interest these days when we all know how restrained they are in lending money?
A: Banks in the Czech Republic are very careful—more careful that the reality would require. If you compare with other countries, banks here don’t believe in franchising.
Q: However, the majority of the local banks are arms of Western banks that should be used to this type of business. Why do we have this situation then?
A: This is a challenge for the Czech Franchising Institute and for this conference. I think the future will be better. The first bank, Citibank, is a partner of this conference, so it’s an early bird.
Q: Is the quality of goods produced in franchising on the Czech market similar to those produced in the home country of the franchiser?
A: I can’t compare goods and their quality, but I can compare the quality and detail of [the franchise] systems, and that is different. The Czech system is young, while the U.S. system is much older. There are also differences between the emphasis put on offering good services for the franchisee, because he is also a consumer and a client. When the franchise system is mature, they have a good system to help franchisees. The majority of the Czech franchise is only learning how to do that, and that’s normal. We can’t be at the same level as American companies after only a decade of franchising.
Q: What companies or brands would you expect to enter the Czech market in 2010, except for Hooters?
A: I hope that Hooters will definitely enter the Czech market because it’s a very good restaurant with a nice atmosphere and good services. This would be almost certainly a success. Usually success comes from a package of offers—not only a good meal, but also a good interior and combining them. This is the future and I hope the American companies will keep coming in because this is good news for consumers.
Q: Except for Hooters, do you have anyone else in mind?
A: Yes, we have a second wave of fast-foods, because the first was McDonald’s [Corporation] and now we have alternatives, such as Burger King [Corporation] or Carl’s Jr. For me, as a consumer, this means a wider choice and that’s good.
Q: Where would you see the Czech franchising market five years from now?
A: I hope that there will be a wider spectrum of franchise concepts. I hope there will be more competition on this market and bigger dynamics and more emphasis on the quality of services. I also hope that municipalities will start being a good partner for changes. We think that big municipalities are important partners, together with the quality of hotels, restaurants and others. We want to start discussions among these parts: one is the quality chain and the second is the quality municipality. One such issue is to have an old historical brand in an old street in Prague. Why is that a problem in Prague and isn’t a problem in other cities, when it’s a very good cultural design? This is a question to be answered in the future.