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San Francisco Coffee HouseAn American-Style Franchise In
Croatia
Valerie- MA1N0220David- MA1N0219Bảo Bảo- MA1N0230Amos- MA0N0241
Group 2
San Francisco Coffee House
San Francisco Coffee House Introduction SFCH- was started in winter 2003 , Two Croatian entrepreneurs; Denis Tensek and Jasmina
Pacek The couple utilized their specific professional experiences
and understanding of the habits of Croatian customers to create a unique visual identity business opportunity
Tensek: manager in US companies, MBA ( creating Service Quality and satisfying customer expectations
Pancek: MA in Fine arts and Design, Art Director in US Corporations
SFCH Uniqueness They started with one coffee shop The shop had a combination of service,
quality, products and cozy American atmosphere
They felt it had a potential to grow into a Franchise
But had the following questions to answer;1. How would they grow? Growth model?2. Should they develop their own outlets
or open more company owned outlets?
Possible Options1. Taking a master Franchise license for
Croatia from US Starbucks-Lengthy, complicated and extremely expensive process vs expected returns - also Starbucks had a low brand recognition in Croatia,-Imported Brands were not flexible- they did not allow adjustment needed to succeed in the local market ( pricing is too high) for market with lower purchasing power.
Challenges Opening self owned stores Costly, slow, hard to control Lack of means and lack staff More risky, No time to travel to all locations around
the country
Investment Challenges in Croatia Croatia has a small economy (low
economic development) Changing legal system, Little experience in franchising They only had one young store, Franchising was quite unfamiliar to the
Croatian emerging market, Overall conditions were not ideal for
franchising ( insufficient regulation)
Further Questions Raised Should they Franchise or not? How could they protect their Intellectual
property and Business Know –how? How could they fight Imitators? What would happen is Starbucks and other
major coffee chains entered the market? How could they become the biggest and
most successful coffee House nationally or regionally?
Investment climate in Croatia Political environment Economic environment Institutions for Franchising
Educating about franchising Franchising promotion Creating websites with information about
franchising on internet Connecting Franchisors with potential franchisees Helping domestic companies to become
franchisors Establishing Franchise fairs and Round tables
Barriers to Franchising Development
LawsFranchise professionalsProblems with banks unfamiliar with Franchising
Small market
Opening of SFCH- 2003 The entrepreneurs pursued uniqueness in
their business venture Differentiation was their concept Name SFCH has the Impression “Made in
USA” to attract a “new market” Location: was crucial and had to be
strategic Town center, with heavy foot traffic Target market was business people: students
and business professionals of all ages
Uniqueness of SFCH First American coffee house in Croatia-
enjoy first mover advantages : Customers could enjoy the Authentic
Ambience of the American City, Best decorated service industry interior with
an Urban, bright and sophisticated Environment
Research visits to Us, studying technology of coffee making, buying supplies and ingredients
Product offering Unique assortment, different types of coffee
and ‘coffee to go’ Coffee in 17 diff latte (in milk) and mocha
varieties American-style muffins, many varieties, Environment: relaxing urban atmosphere Local and international newspapers and
magazines, free wireless internet Ambience plus smooth jazz and billboard
music
Employee Training and Management Hired young employees, no prior
experience in coffee making, Qualities: trustworthy, loyal and honest, Trained employees for working in coffee
shop and bar, workstations with detailed job
descriptions, checklist and shifts for weekly or monthly routine duties vs ambiguous job descriptions
Incentives for employees and Stakeholders1. Salaries were higher by 20% compared to
other local coffee shops,2. There were scheduled performance
reviews, if satisfactory employees were awarded with 5% salary increment
3. Motivated employees, improved service quality and increased customer satisfaction
4. Paying suppliers on time- care for stakeholders
SFCH FINANCIAL PERFORMANCE INCOME DATA 2006(IN EUR) 2007(IN EUR)Net Revenues 13,333 16,666Total Expenses 86,666 93,333Direct Costs 50,666 54,000Depreciation 2,666 7,333Gross Profit 80,000 105,333Operating expenses 36,000 39,333Earnings Before I&T 44,000 66,000Taxes 9,680 14,500Earnings after I&T 34,320 51,480
Foreign Franchising competitors FRANCHISOR INDUSTRY # OF OUTLETSo McDonalds fast food 16 restaurantso Subway fast food 6 restaurantso Fornet bakeries over 15 locationso Dama Service refilling Toner cartridges 3 locationso Berlitz foreign language school 1 locationo Firurella weight-loss for women 2 locationso Berghoff kitchen equipment 3 locations
Local Franchising Competitors FRANCHISOR INDUSTRY # OF
OUTLETS
Electromaterijal household appliance distrib >50 Stores
X-nation fashion clothes 40 s / corner
Rubelj Grill grill 17 rest.Skandal Fashion clothes 15 storesBody Creator weight-loss for women 4 centersBio & Bio health food 3 shopsBike Express courier services 1 centerSFCH COFFEE BAR 1 LOCATION
Way Forward? Franchising: possible model for business
growth. Advantages: Lower financial investment, Lower risk Faster growth Local market knowledge by franchisee The franchisee’s motivation to succeed
shortcomings Not enough information about franchising;
low entrepreneurial and institutional awareness of franchising
No well established support organizations for the development of franchise networks in Croatia (2 centers only)
No significant support from financial institutions; banks reluctant to take the risk,
Company –SFCH- was young and unproven in other locations
Options for SFCH growthoEnjoy their local success,oOpen additional stores themselves, or
oTry their own Franchise concept
Question1 Could the couple develop franchising in
a market where the local conditions were less than conducive?
Answer: too Risky
Question 2Could they gain national prominence? Yes they could, since they were first cafe in
American style combining quality, service, style and good price Moreover, the taste of coffee as well as other
cafe‘s features were adapted to the local hobbits (which for example Starbucks cannot be so flexible)
They were successful in the poorest region..why not to be successful in other Croatian regions
Franchising is a challenge
Question 3 The couple had never run a franchising business and
did not have the necessary experience and knowledge. How could they overcome the weaknesses they possessed and the environmental threats? Bring Foreign investors – can take advantage of
incentive, tax benefits, customs privileges Cooperation with centers for franchising business (future
franchising – long-term view) according the EU prognosis we can find high potential in Franchising system
Cooperation with foreign banks directly - not only with subsidiary banks
Other form – licensing, join venture
Question 4 How could they seize the opportunities in the market
place using their unique experiences, capabilities and strengths?
The uniqueness of the concept which gave birth to San Francisco Coffee House places itself at an advantage over its competitors.
The idea behind this coffee shop is rooted in America, from the menu to the ambiance of the shop itself present a one of a kind experience which is totally different compared to Croatian coffee shops.
Since the concept is Americanized, a way that they can seize more opportunities in the market is through research and development as the food and beverage industry in America is changing constantly.
Based on the research and development that they will be doing, they will be able to keep up with the trends present in American coffee shops so that they can offer new items in their shop while continuing to maintain their competitive advantage and possibly attract more opportunities at the same time.
