Franchise Report in Croatia: 248 Franchise Systems Employ 20,000 People

In Croatia, in 2023, 248 franchise systems operated at 4,500 locations with around 20,000 directly employed, and of the total number of franchises, almost 30 percent are Croatian, emphasizes the Croatian Franchise Association in the first report on the franchise business sector ‘Croatia Franchise Report 2023.’

This report also showed that the franchise market in Croatia has increased over the last three and a half years, which, according to the franchise association, is a sign that this market is finally consolidating and is becoming very interesting to Croatian entrepreneurs as a growth model. The Croatia Franchise Report 2023 presents a comprehensive analysis of the franchise sector in Croatia but also shows the future direction and development trends, where technological innovations, automation, and artificial intelligence will be key in 2024 in that segment.

Growth is also expected in extracurricular education for children and the wellness sector, as well as the growth of domestic franchises and the entry of new foreign franchises, while increasing awareness of sustainability opens up potential for new franchises that apply sustainable practices, the report emphasizes.

It also reminds of the basics of the franchise business model that is applicable in various activities, as well as for existing and new entrepreneurs, with relatively small initial investments and a risk-sharing between the franchisor and the franchisee, and the key to success is their collaboration in business and brand development.

The report also provides data on this system in several countries, including neighboring Hungary and Italy, which have more franchises and more employees compared to Croatia – Hungary has 300 franchises, of which 210 are domestic, at a total of 20,000 locations and 100,000 employees, while Italy has 1,000 franchises, of which as many as 960 are domestic, at a total of 60,000 locations and with 200,000 employees.

From that perspective, the association comments that there is certainly much greater potential in Croatia than the current state of the franchise business and believes that the growth and development of that segment will continue, supported by the growth and foreign breakthroughs of domestic franchises such as the educational Tinker Lab, Museum of Illusions, Carwiz rent a car, Fast Review in the IT sector, Surf’n’fries, and others that have significantly expanded and improved the quality of their franchise systems in recent years.

Current State of the Franchise Sector in Croatia

Franchise business in Croatia, present since the 1960s, has long sought its stable place in the market. In the past three years, significant growth in this sector has been recorded, especially in the domain of domestic franchises. This growth testifies to the adaptability and innovativeness of the Croatian market, as well as the increasing interest of entrepreneurs in the franchise business model.

The franchise sector in Croatia is characterized by high dynamics, which is evident from the significant number of brands entering and exiting the market. Unlike larger markets where the closure of one location may go unnoticed due to the number of others, in the relatively smaller Croatian market, every closure of a prominent brand location becomes very noticeable.

Many entrepreneurs, attracted by the possibilities of the franchise model, have launched business ventures in this sector over the past twenty years. However, challenges such as a lack of specific knowledge, unmet expectations, or insufficient commitment sometimes lead to the failure of certain franchise initiatives. According to current knowledge, more than 80 franchise brands have left the Croatian market in the last twenty years. This includes both globally recognized brands such as Marks and Spencer, Sephora, Dr. Vinyl, Southern Fried Chicken, Vapiano, and Hooters, as well as domestic franchises and Croatian recipients of foreign franchises.

Examples such as Subway and Costa Coffee indicate that even globally successful franchise chains can experience difficulties, whether due to the wrong choice of franchisee, overestimating market potential, or a lack of adaptation of the model to local specifics.

However, some brands have shown the ability to re-enter the market with adapted strategies and new partnerships.

Overall, the franchise sector in Croatia is in a phase of continuous growth and development, with numerous experiences and successes shaping its future and providing important lessons for further improvement.

Great Potential

The Croatian franchise sector shows significant potential for further growth and development, especially in the context of global trends and the adaptability of the local market to international business models. The current situation in this sector is characterized by the presence of 248 franchise brands, both foreign and domestic, from various business sectors. This wide range of brands has contributed to the creation of more than 4,500 franchise locations in Croatia, employing over 20,000 people.

At this moment, domestic franchises make up 29 percent of the total number, but this share will soon change, as the advisory team of the Croatian Franchise Association is completing the development of 8 new domestic franchises and contracting the development of another three for the beginning of 2024.

Comparing the franchise sector in Croatia with that in other European countries such as Spain, Italy, and Germany shows the significant strength of this sector in terms of the number of employees and present franchise brands. However, the most noticeable difference is in the high share of domestic franchises in those countries, which ranges between 80 and 96 percent, while in Croatia that share is only 29 percent, although it has nearly doubled in the last three years.

The example of Ireland, with a slightly larger number of present franchises but a significantly larger share of domestic franchises (44%) and a similar number of franchise locations as Croatia, but with double the number of employees than in Croatia. All of this indicates a significant opportunity for further development of the franchise sector in Croatia, especially through the creation and promotion of new domestic franchise concepts, which can further strengthen the domestic economic ecosystem.