|
(Last updated: 7 Mar 2011)
Trends and opportunities
The market
In 2010, it was estimated that there were 150 franchising systems active in the Czech Republic. Between 2003 and 2010, the number of franchise systems grew by over 66 per cent. It is expected that this trend should further accelerate in the following years with a number of franchise concepts considered to reach 200 in 2012.
Franchising is an emerging business model in the Czech Republic with 62 per cent of the franchising concepts currently present in the market offering services, and 38 per cent retail concepts. Almost 50 per cent of franchise concepts operate in food and beverage, real estate or clothing/shoes sectors.
The number of outlets organised in franchise networks reached 8,552 with 59 per cent of these outlets owned by a franchisor or a master franchisee and 31 per cent owned by franchisees. The average number of outlets per franchisee in 2010 reached 1.7.
Majority of franchise concepts are of local origin (49 per cent). Foreign concepts come mainly from the USA (11 per cent), Germany (9 per cent), Italy (5 per cent) and France (5 per cent).
Czech Republic – franchising concepts per sectors
| Sector |
No. of franchise concepts |
Share |
| Food and beverage |
;29 |
19% |
| Real estate |
20 |
13% |
| Clothing and shoes |
19 |
13% |
| Personal services |
13 |
9% |
| Cosmetics and health |
13 |
9% |
| Housing and building |
11 |
7% |
| Tourism services |
10 |
7% |
| Groceries |
10 |
7% |
| Beauty and wellbeing |
9 |
6% |
| Education |
7 |
5% |
| Banking and financial services |
5 |
3% |
| Other retail concepts |
4 |
3% |
Czech Republic: Top 10 concepts per number of establishments
(Source: Single companies and the Czech Franchise Association data as of 18 August 2010)
Development of the retail market
The Czech economy grew rapidly until 2008, when real GDP growth reached 2.5 per cent. In 2009 the country was hit by the global financial crisis with real GDP falling by 4.1 per cent. In 2010, the economy returned to growth with GDP increasing by 2.4 per cent, with 2011 expected to bring a 2.8 per cent growth (Source: OECD).
In 2009, the average monthly salary increased by 3.5 per cent reaching approximately A$1,350. Retail sales in June 2010 grew by 5.2 per cent year on year, which proves the return to economic growth.
The retail market has, in past years, expanded dramatically and increasing the sales area available to customers from 350m2 per 1,000 inhabitants in 1989 to 2m2 per 1 inhabitant! This rapid growth was, however, accompanied by deteriorating levels of service and by excessive offer of retail space which led to difficulties of some commercial centres and increased the purchasing power of retailers. This presents significant market opportunity for new entrants.
Major characteristics of consumers in the Czech Republic:
- Tend not to be loyal to any particular distributor
- Intentionally choose to purchase from different distributors according to product/service they intend to buy
- Some tend to lose their price sensitivity as they educate themselves and act more pragmatically
- Tend to spend more time at shopping – understood as a leisure activity
- Some have recently been moving away from large shopping centres
- More fragmented – opting for natural/organic, ethnic, unusual products
It is estimated that the size of the retail market not occupied by big groups (and thus available for smaller enterprises) is approximately A$11 billion in non-food products and A$7.3 billion in food products.
Opportunities
Franchising may present a more secure way of doing business in an economically unstable environment. Major companies, especially in banking, services and manufacturing sectors, consider expanding by implementing franchising business model in their core strategies.
- FMCG distributed in particular areas to reach emerging market segments.
- Modern distribution channels – Internet sales, direct sales and highly specialised shops.
- Majority of present franchise concepts offer restaurants, cafes, teahouses and fast-food establishments – this could still represent good market opportunity for innovative concepts.
- Advanced services in new areas such as services for elderly people, childcare and teaching services, represent great market opportunity. The ageing population and emphasis on children are among the strongest trends likely to influence consumer behaviour in the near future.
- Other sectors that are not currently provided by business models or franchise systems such as – food security/quality control, consultancy and accounting services and HR (personnel search).
|