Discusses opportunities for U.S. franchisers and legal requirements in the market.
The Polish franchise market is considered mature, yet growing. Local entrepreneurs are aware of the plethora of potential choices that enables them to make discerning decisions regarding future franchise opportunities. According to the private franchising consulting company PROFIT System, in 2018 the Polish franchising sector encompassed 1,250 independent franchise networks. Franchising is one of the fastest growing options for small, private firms. Per data, the average franchise employs 5-6 people and the sector as a whole is responsible for 460,000 jobs in Poland.
Average investment in a franchise in 2018 amounted to USD 40,000. Most of those franchises - 80% - originated in Poland. The largest franchising sector, with 204 brands, is gastronomy. Leading brands include KFC, Starbucks, Pizza Hut, Subway and McDonald’s. Following this is the retail sector, with 156 retail brands and 36,000 licensed locations. Recent U.S. retail brands that announced new locations in Poland are Forever 21 and Steve Madden. In addition, consulting/business services that are in Poland include Signarama, Mail Boxes Etc., and RE/MAX. New additions are Keller Williams, Circle K, and Orangetheory Fitness.
One of the fastest growing trends is online sales, especially in the food and retail sectors. For example, in Poland it is now becoming popular to order food or groceries online for delivery or pick-up. Uber Eats is now operational in Poland. Local meal kit services akin to Blue Apron are also very popular in Poland.
Strong competition and an increasing number of franchise systems have strengthened the position of potential franchisees. Successful franchisors offer franchisees programs for customer service (CRM), product training, merchandising, etc., and often contribute to recruitment campaigns and investment cost-sharing.
American franchisers should be willing to raise brand awareness by committing sufficient resources to advertising and marketing, this is especially true for brands without global recognition. U.S. franchisers should be prepared to modify their product mix or implement other changes in their marketing policy to compete and meet the demands of Polish consumers. Franchise networks successful in the United States will not automatically succeed in Poland. However, well-known U.S. franchises operating in the U.S. or Europe have a strong advantage.
U.S. franchisers often have difficulty locating local investors willing to provide sufficient capital to develop a Polish franchise. To overcome this challenge, firms often create a master franchise that can attract foreign and domestic investors. This practice is especially prevalent in the gastronomy sector.
Poland has no special legal requirements for franchises. The Polish Civil Code regulates franchise agreements. Franchisors should take steps to protect their intellectual property in accordance with Polish and European Union regulations. As in most markets, trademark registration is limited to protecting only trademarks registered in Poland. Registration at the European Union level protects trademarks in Poland and all member states. Sub-franchising is permitted without restrictions and Poland and the U.S. have signed a double taxation avoidance agreement. The franchise fee is subject to a 23% value-added tax (VAT) and 19% corporate income tax (CIT) on the difference between franchising income and tax- deductible expenses.
U.S. businesses looking to franchise within the European Union will likely find the market is generally quite robust and welcoming to franchise concepts. There are several laws that govern the operation of franchises within the EU, but such laws are broad and generally do not constrain the competitive position of U.S. businesses. The potential franchiser should review the applicable EU regulations at the web-site of the European Franchise Federation, as well as local laws in Poland governed by the Polish Franchise Organization (POF).
The Polish Franchise Expo, held annually in Warsaw, is the largest franchising trade show in Central and Eastern Europe. Over 200 exhibitors and 7,000 visitors attended the show in 2018. This year’s Franchise Expo will be held October 17-19, 2019.