San Francisco Coffee House: An American-Style Franchise in Croatia. Group 4 Entrepreneurship and Innovation December 4th, 2013

Jose Miguel Flores Diaz MA1N0227 Group Members Mirek Kysely MA1N0228 Dacia Tucker MA1N0209 Jose Miguel Flores Diaz MA1N0227

Company overview On the return to their homeland of Croatia following a six-year visit to the United States, Denis Tensek and Jasmina Pacek decided to open an American-style coffee house reminiscent of San Francisco’s atmosphere.

Company overview While Croatia had many coffee houses, few had the combination of service, quality, products, and atmosphere that they remembered from their time living in the United States.

Company overview Tensek and Pacek started with a single coffee house. From the beginning they felt that it had the potential to grow into a franchise. Instead of purchasing a franchise from someone else, they considered creating one that had all the elements of the modern franchise chains that were available on the international market plus the adjustments needs to the local market.

Company overview They decided to use all of their US lifestyle and professional experiences as well as understanding of habits and behaviors of the local market to create this new local concept in Croatia. The initial coffee house became a success. The business steadily grew and operating profits had reached a satisfactory level.

Company overview Motivated with the success of the first coffee shop in one of Croatia’s poorest regions, the couple realized that the potential for this concept was national, if not regional. Growing organically by opening self-owned stores was costly, slow, and hard to control. They had neither the means nor the staff.

Company overview They knew they did not want to put more capital at risk, and did not have the time to travel to various locations around the country. Furthermore, their concept had started to garner local publicity and inquiries from would-be franchisees began to arise.

Company overview Croatia had a small economy and changing legal system. Growing through franchising was appealing, but they only had one store, the business was young, and franchising was unfamiliar to the emerging market of Croatia.

Question 1 Should Tensek and Pacek consider franchising in Croatia? Yes they can consider an Area Franchising Agreement (allows a Franchisor to own and operate a specific number of Franchisees in a particular geographic area). Franchising is most appropriate when a firm:

Question 1 Has a strong or potentially strong trademark. SFCH got excellent reviews and unusually large media attention. Ranked it among six best decorated service industry interiors. Has a strong or potentially strong trademark. SFCH good Human Resource Management Made wise and responsible financial management. A well-designed business method. The initial coffee house was a success. Motivated owners to consider growth opportunities. A desire to grow. SFCH offered customers a wide variety of choices in coffee and muffins. Strong focus on ambience and entertainment (Wi-Fi, newspapers, music) The brand adds value for customers.

Question 2 How could Tensek and Pacek overcome the weaknesses they possessed and the environmental threats? Lack of Legal support. Lack of Financial support. Not enough Information about franchising. Company was young and unproven in other locations. No well-established support organization for the development of Franchise networks.

Question 2 However… They can get professional advice; plan advertising strategy and franchise training programs; and put together a team. Despite the situation in Croatia, the emerging market and the new openness to European integration had created opportunities to start bringing in new businesses from the outside. There were two Centers for Franchising which worked with the Croatian Franchising Association to stimulate franchising development. The establishment of McDonalds was stimulating the growth of franchise operations in Croatia.

Question 3 How could Tensek and Pacek protect their intellectual property and business format know-how? How could they fight imitators? Conduct an Intellectual Property Audit. Source a Special Utility Patent- Business Method Patent. The can register their trademark/ service mark.

Question 4 Develop franchise documents. Prepare operating manuals. What should be the next steps? How could they become the biggest and most successful coffee house nationally or regionally? 1 Develop franchise documents. 2 Prepare operating manuals. 3 Plan a strategy for soliciting prospective franchisees. 4 Help franchisees with site selection and the grand opening of their franchise outlets.

Thank you for your attention.