It is easier to become a Papa John’s franchisee in the US than in Romania!
I was very glad to encounter Papa John’s – #36th franchise system in the world – last Saturday at Rofrancize, the Romanian franchise fair that took place in Bucharest. Romania is the 7th country in European Union, size-wise, but Papa John’s attendance to this fair it was this company’s first presence in Romania.
In Romania the medium growth rate of any franchise is about 20% per year. But, due to the requirements upon their (future) franchisees, Papa John’s risks to chase away its potential franchisees.
Why is this? Unfortunately, these days, more and more US franchises, after many years of testing the grounds, want to break on international markets, without conducting any studies or research about the local market they want to enter. Also, the offer of these American franchises is not flexible, which can be a disadvantage.
I reached the conclusion that it is easier to become a Papa John’s franchisee in the US than in Romania!
I’m showing, as follows, the reasons of such affirmation.
1.
Unlike the US franchisees, Romanian franchisees are obliged by the franchise agreement to open up to 10 shops, as follows: at least 2 in the first year, at least 3 in the following year, etc. At this moment, though, 40% of Papa John’s franchisees own each only one shop.
2.
The entry fee is the same as the one for the US franchisees, but investing capital required, for one shop, is, in Romania, between $200,000 and $300,000, while in USA, it is of $250,000. Why $300,000 in Romania? Romania isn’t exactly a place where many people have such sums to risk and invest. I assume that through this, the franchiser wants to make sure that gets a serious franchisee, determined to work hard for the shop he/she invested so much in.
3.
If they would have had conducted a research and a financial analysis, Papa John’s would have been able to come with a more attractive offer for the Romanian investors. Thus, if conducting that study, those from Papa John’s would have found out that, for example, the furnishing for the restaurant can be manufactured in Romania, at prices 3 times smaller, at the same quality of the product. Also, the costs with the personnel wages are way lower in Romania, since the medium wage here is $500 per month.
4.
Express and kiosk options aren’t available for Romania. These options would make the offer a lot more attractive because for these options the investments are considerably lower than for a proper restaurant.
Entering international markets is not an easy thing for the franchiser. Research and proper analysis are needed, and this need is illustrated best by the following figures.
The inflexibility of their approach made the franchisers from their office in US to lose market share; if in 2004, in Romania, 50% of the international franchises were American franchises, in 2007 their market share decreased to 22%. The rest is of European and local franchises which, in this case are the winners because they are more flexible in their requirements to their franchisees and pay more attention to the situation on the market they try to enter.
