Business Forum • 5 March, 2024 at 4:41 PM
Romanian brands would have resounding success in other countries, but most entrepreneurs are still reluctant to expand their business internationally. However, the interest of entrepreneurs in expanding through franchising in new markets has started to grow, predominantly for countries in the European Union, where the tax regime is more friendly. Most types of businesses that expand internationally are from HoReCa and retail, and recently from the service sector, according to Franchwise, the largest internal and external franchising consulting company in Romania.
While the franchise market in Romania was formed by the massive import of international brands, more than 65% of the brands in the market being international, Romanian brands are expanding more and more often to foreign markets.
"We support more and more Romanian entrepreneurs in accessing new markets for the development of companies through franchising, helping them in the entire process of analysis and launch on the respective markets. Although sometimes we see a fear of entrepreneurs in Romania related to expansion because we are not culturally set to be expansionists, the expansion into new markets began to develop quite actively. Most often we notice an increased interest of entrepreneurs in terms of international expansion mainly in European Union countries where Romanians live, but also because in these countries legislation is harmonized, brand protection is very easy, and geographical distances are relatively small. Also, with a favorable business atmosphere and a proactive approach to government policies regarding the ease of setting up and running a business, Dubai and Arabia Saudi Arabia will become attractive points for Romanian entrepreneurs. With friendly taxation and a stable business climate, these markets are ideal destinations for business expansion," explains Raluca Voicu, co-founder of Franchwise.
In terms of the field of activity, physical companies are most attracted by the desire to scale through franchising, either locally or internationally. In general, HoReCa, food and beverage and retail businesses, once they reach maturity in Romania, begin to expand to foreign markets. Among the most famous brands in Romania that chose to enter new markets through franchising are 5togo, SaladBox, Tucano Coffee, French Revolution, Tudor Tailor, Made by Society, Sophia Home Deco.
How a Romanian brand can expand abroad: what entrepreneurs need to know
Preparing for internationalization, while perhaps the most administrative and least enjoyable part, is the most important step in the international expansion process. Potential partners from foreign markets generally have a much higher level of franchising experience than individual investors from Romania. Thus, if the partner realizes this very quickly, the Romanian entrepreneur's chances of reaching a collaboration drop to zero.
"Many businesses in Romania approach expansion in a metropolis and a new country with the same tools, processes and preparation as they would opening a new store in a city in Romania, which is of course a wrong choice. Preparing to open a franchise in a new market consists in establishing the franchise structure - we are talking about master franchise, we are talking about potential partnerships (joint venture), as well as simple franchise. The legislative area is very important in preparation, that is, to be able to understand which jurisdictions you are going to, what are the differences and similarities from a legislative point of view, and how you can build the structure that will give you protection for your brand. In general, approximately 80% of the preparation process for expanding abroad can be solved already in Romania, but there is an absolute need for a consultant in the country and city where Romanian entrepreneurs want to expand their businesses", explains Raluca Voicu, co-founder Franchise.
The next step in the franchising process is the selection of partners and the negotiation of collaboration contracts when the Romanian entrepreneur starts selling the business. It is necessary to calibrate the profile they are looking for, but also how to position themselves in the negotiation and to have advice from a specialist with experience in international partnerships. It is also important to have access to a network of international partners. As part of Franchise Pool International, the Franchwise company offers Romanian entrepreneurs' direct access to a network of independent consultants who know the specifics and culture of the respective country and whose aim is to assist brands in scaling internationally.
To help Romanian brands enter new markets, Franchwise is organizing, on February 29, Go Global, an intensive international franchising workshop, through which entrepreneurs will learn how to move toward global success.
Why companies choose to expand internationally - advice from established entrepreneurs
The expansion of Romanian brands in new countries takes place both because of reaching a maximum level of growth in Romania looking for new areas of development, but also as a desire to test new limits, to have new challenges and to reach international brands.
At the same time, there is an increased interest from foreign investors for Romanian fir trees. Moreover, as the latest trend, businesses appear in Romania that are thought globally from day one, as it is in their DNA to explore new markets and territories.
In the opinion of Radu Savopol, the founder of the chain of coffee shops 5 to go, in the process of external franchising, the stage at which the expansion takes place is very important. "If it wants to expand internationally, it is important to start with a consultant who can ensure a stable market, and offer several development options, either through a master franchise or through direct development in the respective country. We managed to develop a master franchise in Hungary, but until then we tested several partnership models in France, Belgium, or England, where we learned various things about the respective countries and where we went with a chain of donuts", says Radu Savopol .
At the same time, Alin Copîndeanu, CEO and co-founder of Tudor Tailor, a company specialized in making made-to-measure suits for men, emphasizes how important it is to collaborate with a consultant in franchising and international expansion right from the beginning when Romanian entrepreneurs consider crossing Romania's borders with their businesses.
"Besides the fact that it will help you to structure your operational manuals very well, it will also help you in choosing the business model. The experience of a consultant goes beyond the theoretical area and helps you with practical examples, pointing out both the positive aspects and the limitations or risks of this type of development. We have set out, since we started the business in 2010, to overcome the country's borders and become an international brand. We always had a desire to develop, so things moved quite naturally. The process was a pleasant one and I recommend it to any entrepreneur looking for international development. These days it's easy to get on a plane and go validate a location or partner outside of the country. Technology helps a lot in the whole process, and with the help of suitable consultants you will better filter the partners and set up a contract and a solid partnership", says the entrepreneur.
Ruslan Cojocaru, the founder of Tucano Coffee, emphasizes that it is important for Romanian entrepreneurs to choose the future franchising consultant with experience in the market and to have successful cases, but to know the mindset, the market, and the legislative part of the country where the brand is going to enter. In the case of Tucano Coffee, the brand was requested in foreign markets. "We started when coffee shops were not so popular, and I think the diaspora of Bessarabians and Romanians from various countries also mattered. It wasn't a strategy to go to Kyrgyzstan - we didn't analyze the market, it was more of an intuitive choice," says the entrepreneur.
At the same time, Florin Panaitescu, co-founder of French Revolution, says that it is important to establish a strategy starting from the definition of the business concept (the object of franchising) to the most viable model and geographical locations. "We learned together with Franchwise to better evaluate the most important qualities in a potential partner, namely how well we are aligned on values, principles of business ethics, and uncompromising execution. Summarizing, Franchwise creates a coherent framework for approaching the organization of franchising (rigorous documentation and strategy), how potential partners are selected, but also the discussions with them (interviews and discovery days)", says Florin Panaitescu, co-founder of French Revolution, about franchise expansion.
Franchwise representatives emphasize that Romanians should have more courage to expand their businesses, especially in international markets. Therefore, progress can be felt in terms of the quality of businesses, and they believe that Romania has a nursery of business champions who will emerge with international success.