Consumer and economic conditions in Serbia are developing quite favorably for the entry of international franchising.  The U.S. Commercial Service has been very proactive in developing this market segment in Serbia in that we helped create a Center for Franchising in 2008 with the Serbian Chamber of Commerce and the Serbian Franchise Association in 2009.  In addition, we embarked on a 13-city tour around Serbia to educate local entrepreneurs and small and medium sized enterprises (SMEs) on the benefits of importing U.S. franchise concepts.  Moreover, in conjunction with the Serbian Chamber of Commerce, the Belgrade Fair, and the newly established Serbian Franchising Association, we plan to host the first ever Franchise Trade Show in Belgrade in Autumn of  2010.

Business and government experts generally agree that the foreign franchising industry will be the pioneer of further economic growth and technical development.

Serbian customers are intrigued by a variety of new products as both quality merchandise and quality services are still lacking in the market. Therefore, new marketing ideas, promoted through franchised systems, are welcome.  Awareness of how successful franchising is in the United States is very strong and many Serbian businesses are interested in acquiring the rights to operate American franchises, especially in the services sectors.

In spite of the current economic crises, Serbia still has a large number of companies and private entrepreneurs with sufficient funds to commence small size franchising operations without having to borrow money.  As a result, the current economic crisis may not have as big an impact on this segment as one might expect.  On the other hand, obtaining financing for more expensive concepts is also possible, but in light of the current global financial crisis could become more difficult.  However, the key to success can be offering more single-unit contracts, instead of going for the master franchise agreements, which drastically limits the pool of potential franchisees. 

There is a strong potential market for franchises in services, food, and apparel sectors. Serbians spend a disproportionate amount of their income on eating out.  Typical Serbian restaurants are heavy on meat.  Italian and French cuisines are very popular, but few Asian or Mexican restaurants exist in Serbia.  Currently, there are three U.S. fast food chains: McDonalds, with several restaurants throughout Serbia; Pizza Hut, with one restaurant in Belgrade; and Kentucky Fried Chicken, also with one restaurant in Belgrade.  The number of foreigners living in Serbia is still increasing, which is another target market for franchisers.  The U.S. Commercial Service in Belgrade has been approached by several Serbian businessmen inquiring about possibilities of obtaining a U.S. franchise in these sectors.  One of the primary success factors is location.  Real estate owners are well aware of this fact and are pricing their property accordingly.  Our office has not seen any drop of prices caused by the current crisis.

The apparel sector is another good prospect for U.S. franchisers.  Other than the establishment of retail outlets, production franchises would support the government strategy and revive the deeply troubled textile sector.

Franchising concepts such as dry cleaning, fitness facilities, pet grooming, etc., that have lower buy-in costs than restaurants; probably have the strongest potential in Serbia.  There is a general lack of consistency across local service providers, making franchised concepts potentially popular.

Market Opportunities

Generally speaking, the business community in Serbia is relatively familiar with the concept of franchising, as it is understood in developed markets in Europe.  Awareness of franchise businesses in the United States is very strong among local consumers who traditionally associate such U.S. brands with superior quality, excellent customer service, and a western lifestyle.

Though Serbia has no specific franchise laws (it is regulated by the Law on Contracts and Torts), both government officials and business circles agree that the foreign franchising industry could be the pioneer of new investment as interest in franchising is growing daily. Given the importance of trade secrets and trademark protection, substantial work has also been done on IPR protection, both in legislative and enforcement aspects.  Careful choice of local partners, protection of IPR and a smart pricing policy remain critical to success.

For more information on franchising opportunities please read the separate market research report: “Franchising Market in Serbia” in the US Commercial Service, market research library database.

Resources

Serbian Chamber of Commerce - Franchising Center
Ms. Marica Vidanovic, Head of Center
Phone: +381 11 3304 518
E-mail: marica.vidanovic@pks.co.yu

For more information on market entry strategies contact:
Boris Popovski
Commercial Specialist
U.S. Commercial Service
E-mail: boris.popovski@mail.doc.gov