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Franchising

Commercial Specialist responsible for the sector:

Jana Ruckerova, Jana.Ruckerova@trade.gov

Reports available to US companies upon request:

Real Estate Franchising (2010)

Franchising Sector in the Czech Republic (2010)

Summary

Franchising has become a well-known and successful concept in the Czech market and it is poised for further growth.  After a rather moderate start in the 1990s, franchising has seen rapid growth, especially after the Czech Republic’s accession to the EU in 2004.  Czechs have seen the success of the foreign franchising systems and are now establishing domestic franchising concepts and expanding abroad. There are currently about 150 franchised brands on the Czech market, up by 67% over the last three years. The total number of license holders increased by 33% over the last three years, from 752 to over 1,000 holders in 2006.  Around 50% of the franchised brands are of Czech origin.  Most franchise businesses operate in the hotel and hospitality sectors.  Fast-food establishments are very popular with a strong U.S. presence.  The most successful franchisor in the Czech Republic is McDonald’s, using multiple franchising techniques. The bulk of franchises are also found in the retail sectors, including clothing, cosmetics, gas stations, automobile rentals, photo processing, training and other services.  Most recently, the real estate sector has seen rapid growth. Thanks to its advantageous geographic position and rapid economic development, the Czech Republic is an ideal starting point for expanding a franchise into Central and Eastern Europe. Many foreign franchise networks operating in Europe are still missing in the Czech Republic and they are expected to enter the market soon. There is still a lack of U.S. firms present, so U.S. franchisors should not miss the opportunity to enter the booming Czech market.  Another key point for U.S. franchisors is that their licenses are comparatively cheaper given the weakness of the dollar.  For that reason, Czech investors may find investment in this sector especially profitable at the moment.

Hotel franchising, though it is more widespread than other types of franchising, is still waiting to take off in the Czech Republic.  Most franchised hotels are clustered in Prague, and the Czech Republic’s second and third tier cities are hungry for internationally known hotel brands.

There is room for growth in the fast food sector.  Czechs spend about $1.2 billion (25 billion CZK) annually on fast food.  This totals approximately 30 percent of restaurant revenues.  The two biggest players on the local fast food market are McDonalds and KFC; these two chains account for 14 percent of the total of fast food market.  Czechs eat fast food 3 times more frequently than Hungarians and 4 times more than Polish consumers.  Popular pizza franchising systems are still absent in the Czech market.

Great potential also exists for coffee shops.  Current players like Segafredo, Illy and Coffee Heaven are expanding rapidly and the market has attracted newcomers. Starbucks just entered the market in January 2008, and it is expected to be followed by other famous franchises, such as German Cup&Cino, Indian Café Coffee Day and Coffee Republic of the U.K. later this year.

The market for real estate franchising is booming.  Three major players RE/MAX, ERA, and Chirs have entered the market recently and others plan to come soon. The real estate market has been growing rapidly in the last few years and it is undergoing major development.

Some franchising segments have yet to develop in the Czech market.  Good prospects exist for Business Services, Travel Services, Digital Entertainment, etc. There is also room for Convenience and Apparel/Fashion stores, Senior Home Care and Children/Education and Training services.

ARTICLES IN THE PRESS

After troubled U.S. expansion, franchise finds success in Czech Republic

The Globe and Mail, January 10, 2014

“Despite depressed economy, international franchisers expand on Czech market”; Czech Radio; May 22, 2013

“ČR a paradise for fast food chains”; Prague Daily Monitor/Hospodarske noviny article (February 2012) – to request the article please contact Jana.Ruckerova@trade.gov