Romania - a New Player on the Market

The past decade saw an acceptance by the Romanian market of the Western concepts of doing business, a new perception of the value of brands and the creation of an entirely new market - the one for franchisers. Seven years have passed since Romania enacted a franchise law. During this period, the market has evolved, and the pioneering period in franchising during which major companies entered the market only for market testing - first performing distribution operations (Coca Cola) or establishing a subsidiary (McDonald's) and only afterwards developing their franchise concepts - has come to an end. Indeed, 60 of the 107 franchises currently operating in Romania have been established during the last two years.

What entices franchisers to come to Romania? Among the countries that are going to be part of the European Union or that are still in the accession process, Romania represents the second largest market, with a population of over 22 million inhabitants. However, despite a general upward trend in foreign direct investment (37.6% increases in 2003, over last year), the instability that often characterizes the Romanian market leads most investors to prefer licensing of their "know-how" over direct financial investments.

Despite the reduced level of their revenues, Romanian consumers are highly receptive to and traditionally demonstrate an affinity towards international brands. Consequently, all the franchises that have been established in Romania have become success stories, and the idea of "buying" an already successful business and "selling" a famous name has been heartily embraced by Romanian entrepreneurs. Thus far, franchising has developed mainly in services - accommodations, restaurants, and consulting services But there still is room enough for firms who are interested in entering the Romanian market. The recently established Franchise Network Association of Romania (A.R.F.R.) is determined to be supportive of new franchises, and to improve both the legal and the social conditions for the development of such operations through market studies and research.

When franchising in Romania, bear in mind that pursuant to the Romania's franchise law, a franchisor must be the holder (i.e. either owner or holder of rights) of the applicable intellectual or industrial property, in order to obtain a registration of the trademark covering Romanian territory with the Romanian State Office for Inventions and Trademarks. Incidentally, the registration of a trademark in Romania may take up to 16 months.

There are two registration requirements: the franchise agreement or a short form license agreement must be registered with the Romanian State Office for Inventions and Trademarks and, in certain circumstances, as justified by the parties' turnover and market share on the Romanian market, with the Romanian Competition Council, in order to obtain either a block/individual exemption or a non-objection decision for the respective franchise agreement.

The franchise law also provides that franchisor must disclose certain information to franchisee. The law is not specific with regard to the kind of information to be disclosed, but provides that the information must be sufficient to enable a franchisee to draft a financial plan. In practice, the disclosure of the information referred to in the Uniform Franchise Offering Circular is sufficient.

Franchise enterprises cannot disregard a nation in the middle of Europe, with Romania's population, with its recent accession to NATO and its likely admission to the European Union before the end of this decade. The Romanian economy may be a young one, but its consumer base has caught on quickly to the importance of brand awareness. These factors make Romania a destination of inevitability for most major franchisors.

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