Small fry. Nevertheless, settings such as this inside Twiststeak House Bratislava may spread across Slovakia via franchising starting next year. Rick Zedník |
Franchising is so new to this country that the Slovak Association of Franchisers, founded two years ago, has only eight members. Those and other firms seeking franchising partners face special challenges in former Communist countries such as Slovakia, where few people have either the capital to invest into their business or the experience to run it. It is here, in the criteria that qualify a franchisee and the process that selects one, where the differences are most clear between long-established multinational franchisers and newly-formed Slovak ones.
For an entrepreneur seeking to become a franchisee, generally the choice comes down to either linking up with a multinational firm, which may require a greater investment of money and time but offers wider support for longer, or joining a young local firm, which offers less support but requires less of a commitment of time and money.
Except for the most established and dynamic Slovak franchisee aspirants, however, the ultimate power to make or break a franchise relationship is the franchiser's.
With its tradition and experience, McDonald's is especially well positioned to call the shots. In order to be one of their franchisees, the applicant must: 1) have $75,000 (2.25 million Sk) of their own money - no third parties - to invest initially; 2) demonstrate a strong business background; 3) be willing to work full-time on day-to-day operations; 4) be flexible to relocate anywhere in the country; and 5) be willing to participate in training for nine to 14 months before the restaurant opens. Add the 20 year agreement McDonald's franchisees sign, and the potential field of Slovak applicants is narrowed considerably.
While these criteria are stringent, they are not extreme by multinationals' standards. Levi Strauss, while not a classical franchiser, has similar standards its partners must meet to qualify for an Original Levi's Store (OLS). Like McDonald's, Levi's requires an investment of around 2 million Sk. Unlike McDonald's, Levi's itself doesn't own or lease the property its stores occupy.
Instead, they require an applicant to have store space that they either own or have a lease of at least five years on. This store must be in a town of at least 100,000 people, and it must be in the city center, preferably in a pedestrian zone. Once again, the pool of candidates is shallow, but Levi's found three qualified people that opened OLSes in Prešov, Bratislava, and Košice last autumn.
Character counts most
Representatives of both these companies said, however, that success depends most on the person's mind and attitude, not their wallet and resume. "What is most important for us is to have the right person," said Philippe Echenard, McDonald's country director for Slovakia. "For us, the financial criteria are a second priority. It is the person that will make it successful, not the money."
"I often refuse people who don't seem to have the right attitude towards Levi's itself," said Patrícia Procházková, Levi's sales representative for Slovakia. "For example, after the May advertising campaign, the majority of potential partners were excluded after the first call or meeting." In fact, both these companies make character such a higher priority over finances, that just showing the money is not enough - they demand to know where it came from.
"An OLS must keep Levi Strauss's ethical principles," Procházková said. "Therefore, we try to find out as much as we can about the potential partner and the source of the money. We do this through bank references and other business references." "We want to be sure the money has been earned correctly and is clean," Echenard echoed. "This is key."
Next to a world famous brand name like McDonald's, Chick 'n' Chips and Twisteak are small fries, which may make them more suitable partners for Slovak franchisees. Neither firm was willing to say what kind of investment they would require of their partners, but they both expected it to be lower than what McDonald's requires.
Mikuláš Čurik, one of Twisteak's two managers, said his franchise's license fee would be lower than McDonald's, but the monthly revenue sharing fee may be higher. Ján Badžgoň, the man behind Chick 'n' Chips, said, "We will research and make it affordable for an investor, but the fee must cover the cost of building the network."
One cost of building the network is training. McDonald's and Levi's have been known to give their new partners free training for a year or more before having them start their business. Even more, their representatives said the two chains work closely with their partners as long as the association exists to trouble-shoot potential problems.
This extensive support network is something that new Slovak companies won't have the luxury of providing. Badžgoň said Chick 'n' Chips franchisees will receive two months of training before opening, followed by two months of support after opening. "This will be covered in the license fee," he said. "If it is necessary for us to help later, they will have to pay."
Twisteak's representatives were even harsher. "If the quality suffers," said Čurik's Twisteak partner, Peter Bajus, "then we will break the contract." In return for offering support, multinational franchisers require that their partner commit for a long time. In McDonald's case, it's 20 years. But Echenard stands by the policy. "McDonald's is making an investment and the franchisee is making an investment," he said. "We want to make sure our partner is thinking long-term. This may be something new in Slovakia. Three years from now, it will not sound so strange."
