Selling U.S. Products and Services in Poland

A Hot Tip about Sales in Poland

Posted on: 1 Apr 2010

Using an Agent or Distributor

Polish trading partners most often serve their U.S. counterparts as distributors. Distributors import goods, clearing them through customs, and offer them onto the local market. Their network of contacts in the industry is highly leveraged when offering products on the market. One of the most common tools for distributors to use is the Internet, where goods are advertised and, increasingly, also sold through e-commerce.

 

Signing an agent agreement with a Polish entity allows the agent to act as a representative for the foreign company in Poland. Agents have the authority to manage the company’s activities in country and often also act as distributors. There are no local laws imposing rules specifically for Polish importers. Distributor and agent agreements may take any form mutually beneficial to the parties involved.

 

It is best to select a distributor (or agent) who is experienced, knowledgeable, and well-connected to existing distribution channels for the product. Polish companies tend to be less experienced than their western counterparts. In most cases, product and marketing training must be provided to new distributors.

 

A good starting point for finding a distributor or an agent is to review websites of local companies. There is also a “Kompass” database, with information on a large number of local businesses. Visiting a trade show in Poland is also a good occasion to review local businesses and to meet with potential partners. Catalogs of trade events usually include a brief description of each exhibitor, also in English.

 

Of course, we highly recommend utilizing CS services, such as the International Partner Search (IPS) and/or our signature Gold Key Service (GKS) if you are inexperienced in the market. Our specialists have deep and broad knowledge of many market sectors and can help save time and money finding and screening (International Company Profile) potential distributors or agents. As an EU member, Poland adheres to EU-wide business directives and requires local market compliance. Companies wishing to use distribution, franchising and agency arrangements need to ensure that the agreements they put into place are in accordance with European Union (EU) and Member State national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. In essence, the Directive establishes the rights and obligations of the principal and its agents, the agent’s remuneration, and the conclusion and termination of an agency contract, including the notice to be given and indemnity or compensation to be paid to the agent.

 

U.S. companies should be particularly aware that the Directive states that parties may not derogate certain requirements. Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.

 

The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of "vertical agreements”. U.S. small- and medium-sized companies (SMEs) are exempt from these Regulations because their agreements likely would qualify as "agreements of minor importance," meaning they are considered incapable of affecting competition at the EU level but useful for cooperation between SMEs. Generally speaking, companies with fewer than 250 employees and an annual turnover of less than €50 million are considered small- and medium-sized undertakings. The EU has additionally indicated that agreements that affect less than 10 percent of a particular market are generally exempted as well (Commission Notice 2001/C 368/07).

 

The EU also looks to combat payment delays with Directive 2000/35/EC. This covers all commercial transactions within the EU, whether in the public or private sector, primarily dealing with the consequences of late payment. Transactions with consumers, however, do not fall within the scope of this Directive. In sum, the Directive entitles a seller who does not receive payment for goods/services within 30-60 days of the payment deadline to collect interest (at a rate of 7 percent above the European Central Bank rate) as compensation. The seller may also retain the title to goods until payment is completed and may claim full compensation for all recovery costs. As of January 2010, this legislation is undergoing review.

 

Companies’ agents and distributors can take advantage of the European Ombudsman when victim of inefficient management by an EU institution or body. Complaints can be made to the European Ombudsman only by businesses and other bodies with registered offices in the EU. The Ombudsman can act upon these complaints by investigating cases in which EU institutions fail to act in accordance with the law, fail to respect the principles of good administration, or violate fundamental rights.

 

Establishing an Office

The type of business entity that U.S. companies choose to establish is often determined by the scope of activities the company plans to undertake in Poland. If a U.S. company plans to sell its products and services in Poland exclusively through its own office, it usually establishes a representative office. If a U.S. company plans to invest in Poland, there are different legal forms available to carry out business activity.

 

Franchising

Generally speaking, the Polish franchise market is considered to be mature. The market is dominated by domestic networks, and Polish franchises are expanding successfully abroad. The growth of this sector is projected at a rate of approximately 20% annually over the next several years.

 

Market Growth

 

According to PROFIT system, at the beginning of 2009 there were over 480 franchise networks (an increase of 25% over 2008) including 330 local franchise systems and 150 foreign owned. The sector employed over 230,000 workers. PROFIT systems forecasts more than 560 franchisors operating in 2010. At the beginning of 2009 there were approximately 23,000 franchisees (a 25% annual growth) and about 26,000 franchise units (a 19.5% annual growth). Experts estimate that in 2009 the number of franchise units will increase by 3,000 reaching 30,000 units. The largest growth sectors within the Polish franchise market are mostly in retail and services. In 2008 Poles willingly invested in grocery, consumer electronics, and home appliance, as well as telecom stores. In services, the most popular sectors include catering, hairstylist, beauty care salon, education and laundromat. In 2008 franchisees invested over $ 450 million in their own franchising businesses. The average investment amounted to $ 100,000, although the most popular franchises are valued at less than $ 20,000. This seems to be the going price to invest in a small retail or services outlet. The most expensive investments involve supermarkets and petrol stations at a cost of over $ 2 million.

 

Franchise Market Sectors in Depth

 

The majority of foreign franchise systems come from the EU, while the major foreign franchise chains are German, French and U.S: others include Great Britain, the Netherlands, the Czech Republic and Spain. Poland’s accession to the EU in May 2004 increased the interest of European franchisers in entering the Polish market. About 40 local franchisors found franchisees abroad. The most active are apparel networks such as Tatuum, House and Reserved and the cosmetics concern Dr. Irena Eris Institute.

 

Popular U.S. franchises were the first to arrive and helped to introduce the concept in Poland. Their success has promoted the franchising model in Poland. McDonald’s, the first franchiser to Poland, established its first operation in Poland in 1992 and has become the most popular fast-food chain. About 78% of the McDonald’s restaurants are company- owned and 22% are sub-franchised. McDonald’s is actively refreshing its brand’s image, remodeling restaurants, introducing a breakfast menu and beer, developing coffee shop modules (McCafe), establishing wait staff service, adding dessert selections, French-style sandwiches and toast, and serving on china.

 

American Restaurants (AmRest), the Dutch incorporated company and stock-listed operator of the Pizza Hut and Kentucky Fried Chicken (KFC) fast-food chains, has finalized a deal with International Fast Food Polska (IFFP) to take over the latter’s network of Burger King (BK) restaurants. AmRest operates in Poland and the Czech Republic. In 2007 AmRest started operations with Burger King, Rodeo Drive, and Starbucks in Poland and the Czech Republic. The company does not sub-franchise and develops only through company- owned network of investments. Other fast growing U.S. franchise networks include: Kodak Express, Coca Cola Services, T.G.I. Friday, Blimpie, Sbarro, Midas, Collagena, Subway, Levi Strauss, Budget Rent-a-Car, Futurekids, Lee Cooper, and Century 21. The latest U.S. franchise systems to have entered the Polish market include Mail Boxes ETC, Coldwell Banker and Papa John’s.

 

The largest foreign franchisors (non-American) active in Poland are: TelePizza, Pizza Express, Pizza Pai, Tivoli, John Bull Pub (fast food), Adidas (sportswear and equipment), Intersport (sportswear and equipment), Aral (oil stations), Agfa (photo laboratories), Whittard (tea-shops), Yver Rocher (perfumeries and beauty salons), Petit Bateau, Petit Patapon (children clothes retail networks), United Colors of Benetton, Tally Weijl, High and Mighty, La Vantil, (apparel), Jean Louis David, Camille Albane (hairstyling salons), Jean-Claude Biguine, Collagena (beauty salons), Albert, InterMarche, Bricomarche, E. Leclerc, Spar (supermarkets), Lingua Nova, Leader School, Helen Doron Early English (education), HDS (stationery), Cyberland (Internet clubs), Mamuska-The Cheescake Shop, Demmer’s Teahouse, Wayne’s Coffee, Chateau Blanc, Alois Dallmayr, Ann Rent a Car Poland, Yamaha Szkola Muzyczna (music schools), Ritz Collection (jewelry retail chain) and Mobil’ Affiche Polska (mobile advertising).

 

Local Polish franchise firms began operating in 1991-1992, simultaneously with large western franchisers entering the Polish market. Of the 500 franchise systems operating in Poland in April 2008, approximately 375 were Polish. Among the earliest Polish franchisors were A.Blikle (luxury cake-shops-since 1991) and Pozegnanie z Afryka (“Out of Africa” gourmet coffee shops-since 1992). They were followed by Pizza Dominium, Da Grasso, Mr. Hamburger, Green Way, the Ready’s, Cleopatra Restaurants, Lesne Runo, Bonsai, Conieco, Gruby Benek, Kurcze Pieczone, Podniebny Barek, Lunch Bar, Tele Catering, (fast-food), Cava, Chocoffee (coffee shops), Dr Irena Eris (beauty salons), Drogerie Natura (drugstores), Saloniki Prasowe (press distribution), Ambra, CCC (footwear retail chain), Debica Dekart (tire sales and replacement), Laboratorium Kosmetyczna Dr. Irena Eris (beauty salons & retail), YES Bizuteria (jewelry), Grycan (ice-cream shops), ), Lewiatan, Chata Polska, Sklepy Familijne, Groszek, Piotr i Pawel, Albert Siec 24, (food stores), Deep, Hot Oil, Aryton, Atlantic, Swiat Bawelny (apparel shops), and Kukartka, Galeria Prezentow (gift shops).

 

Financing the Franchise

 

There is no established practice in Poland for financing franchise ventures; however financing is the most critical element for successful penetration by U.S. franchisers. Unfortunately to date, Polish banks have not introduced any financing schemes for franchisees. Governmental agencies as well as loan and surety funds grant financial support to small entrepreneurs primarily by using EU funds. However, they apply the same criteria toward franchisees as they would toward small-size entrepreneurs applying for financial assistance. Also, there are no agencies or programs that grant financial or tax incentives specifically to foreign franchisers.

 

Although it might be difficult for foreign companies to locate Polish investors capable of becoming master franchisees, the number of local candidates is increasing. Capital requirements set by the franchisers in the past have often been beyond the means of candidates. What is considered “no significant initial capital” in developed countries often constitutes a remarkable amount in Poland. Some franchisers offer a special leasing franchise requiring smaller outlays at the start of the business operation. Others have tried to facilitate loans directly from banks for new franchisees.

 

Legal and Tax Issues

 

There is no legal definition of a franchise in the Polish legal system. There are no laws or government agencies regulating the offer and sale of franchises. The franchisors are not required to make any specified disclosures to prospective franchisers prior to the grant of franchise and are not required to register with a government agency or obtain governmental or other approvals or licenses. The offer and sale of franchises is affected by the principles of contract law. The ongoing relationship between franchisor and franchisee after the franchise contract comes into effect is regulated by the general provisions of the Polish Civil Code and is affected by competition law, intellectual property regulations, consumer protection and tax law. Sub-franchising is permitted and is not restricted in any way.

 

Polish tax legislation does not distinguish between franchising and other forms of business. The exceptions to this rule are businesses where taxation is regulated by international treaties signed by Poland (Agreement on the Avoidance of Double Taxation). Such agreement has been signed by Poland and the U.S. The franchise fee is subject to a 22% VAT and 19% CIT (on the difference between franchising income and tax-deductible expenses).

 

Protection for a trademark is obtained by registration with the Patent Office of the Republic of Poland and remains in effect for ten years from the date of correct submission of a trademark, and not from the date of registration.

 

Best Prospects

 

The best franchise concept prospects are in retail trade, mid-range and low-end hotels/motels, beauty care salons, and fast-food chains. Business and financial services also holds great potential in Poland.

 

Trade Show Opportunities in Poland

 

The Polish Franchise Organization (PFO) is the only association of franchisors operating in Poland. Each year the Polish Franchise Expo is organized under the auspices of the PFO. The next nearest Expo will take place on October 2010 in Warsaw.

 

Direct Marketing

Direct Marketing (DM) has been practiced in Poland for almost 20 years. During this time, the concept and practice of DM has gone from being a virtually unknown activity to receiving wide recognition and practice as a means to market both goods and services. DM practice in Poland continues to gain popularity and acceptance among corporate and individual consumers. Direct Marketing is steadily increasing in market share – growing at an average annual rate of approximately 10%. Demand for new concepts and existing DM expansion in Poland is a direct result of many Polish and foreign owned company’s successful campaigns.

 

DM Growth Rates

 

In 2009, 95% of companies were using the Internet on a daily basis, with 60% using direct mail and 40% employing telemarketing. Almost 90% of all Polish companies use the Internet to promote their business activity while 20% actually conduct business via the Internet.

 

There is also a significant and still growing number of mobile phone and Internet users. Some 85% of Poles have cell phones; 51.4% of households have regular/fixed telephone lines; 64.9% of households have personal computers in their homes, and 89.1% have access to the Internet in their homes. The over 17 million Internet users in Poland constitute approximately 46% of the population.

 

A growing number of Poles (40%) shop via e-commerce regularly. Sales over the Internet continue to grow at a significant pace in Poland. The most popular goods bought via the Internet are books, clothes, handsets, and computer hardware.

 

Popular DM tools in Poland are: direct mail, e-mail, distribution via own website, telemarketing, advertising, catalog sales, press inserts, radio and DR Radio (Direct Response Radio), non-addressed mail, TV and DR TV (Direct Response TV), face-to-face contact, text messaging SMS, conferences/trainings/exhibitions/samplings, brochures/fliers, and posters/billboards.

 

The best DM prospects for 2010 include the following tools: Internet (e-commerce, advertisements), mobile phones, catalog sales, and DR TV. The fastest growing and most effective DM sectors are catalog sales, sales through own webpage, and e-commerce. The Electronic Commerce sector is reported in depth in this Guide.

 

Direct Sales Market Potential

 

In 2008, the direct sales market in Poland was worth $ 92 million, representing an increase of 8.2% over 2007. The growth potential of this market in Poland is considered high, especially since Poland shares only 3% of the entire European direct sales sector and is still ten times lower that of Germany. In 2008, there were over 770,000 direct sellers operating in Poland, representing 5% of the entire Polish working population. Women constitute 90% of direct sellers, with 25% of them 50 years or older. The best selling products were cosmetics (70.4% of total sales), household appliances (16.1%), and diabetic products and nutritional supplements (8.5%), apparel and accessories (3.2%). Telecommunication services represent 0.8% of the total direct sales value.

 

The Direct Selling Association of Poland (PSSB), established in 1994, has been actively involved in promoting direct sales. The most active direct sales companies were (in alphabetical order): ACN Communications Polska, AMC Alfa Metalcraft Corp., Amway Polska, ATW, Avon Cosmetics Polska, Betterware Poland, DLF, Forever Living Products Poland, Global property Solutions, Herbalife Polska, Lampe Berger Poland, Lux, Mary Kay Cosmetics Polska, NL Polska, Oriflame, Tupperware, and Vorwerk.

 

Poland’s Direct Marketing Association - SMB (Stowarzyszenie Marketingu Bezposredniego) was established in 1995 and has been actively involved in introducing regulations and principles for DM in Poland ever since. SMB promotes the development of direct marketing according to existing laws and professional ethics. The organization also participates in the development of legislative procedures concerning direct marketing. In 1996, SMB introduced the Code of Ethics and Robinson List. The main aims of the ethical code are to: protect the privacy and rights of consumers, protect SMB members’ interest against companies that breach the law or good commercial practice, promote the highest quality of activities of SMB members as well as the credibility of SMB members. The Robinson List introduces a system of consumer privacy protection and protection against receiving unwanted promotional materials. SMB members are required to respect the Robinson List. SMB is a member of FEDMA (European Federation of Direct Marketing) and IFDMA (International Federation of Direct Marketing).

 

Processing Customer Data

 

The EU has strict laws governing the protection of personal data, including the use of such data in the context of direct marketing activities. Compliance requirements are stiffest for marketing and sales to private consumers. Companies need to focus, in particular, on the clarity and completeness of the information they provide to consumers prior to purchase, and on their approach to the collection and use of consumer data. Following is a brief overview of the most important provisions flowing from EU-wide rules on distance selling and e-commerce. It is worth noting that the EU is currently overhauling its consumer protection legislation. Companies are advised to consult the information available via the resource links that follow this Chapter or to check the relevant sections of each Country Commercial Guide you read. You may also wish to contact the Commercial Service at the U.S. Mission to the European Union for more specific guidance.

 

There are no Polish laws or regulations that specifically address DM. In general, Polish law is compatible to legal regulations applied to DM activities throughout the EU. For companies operating in the DM sector, laws to consider are the Law of Personal Data Protection (introduced in August 29, 1997) and the Law of Protection of Consumer Rights, especially regulations referring to the “distance sale” (introduced in March 2, 2000).

 

Polish protection of personal data is very rigorous, although recent interpretations in court have been less strict. It should be noted however, that there are some limitations on using electronic means of communications (such as e-mail and SMS).

 

Distance Selling Rules

 

• Distance and Door-to-Door sales

The EU’s Directive on distance selling to consumers (97/7/EC and amendments) sets out a number of obligations for companies doing business at a distance with consumers. It can read like a set of onerous "do’s and don’ts," but in many ways it represents nothing more than a customer relations good practice guide with some legal guidance. Direct marketers must provide clear information on the identity of themselves as well as their supplier, full details on prices including delivery costs, and the period for which an offer remains valid – all of this, of course, before any contract is concluded. Customers generally have the right to return goods without any required explanation within seven days, and retain the right to compensation for faulty goods thereafter. Similar in nature is the Doorstep Directive (85/577/EEC) which is designed to protect consumers from sales occurring outside of a normal business premises (e.g., door-to-door sales) and essentially assure the fairness of resulting contracts.

 

• Distance Selling of Financial Services

Financial services are the subject of a separate Directive that came into force in June 2002 (2002/65/EC). This piece of legislation amends three prior existing Directives and is designed to ensure that consumers are appropriately protected in respect to financial transactions taking place where the consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the Directive establishes criteria for the presentation of contractual information. Given the special nature of financial markets, specifics are also laid out for withdrawal of a contract.

 

Direct Marketing over the Internet

 

The E-commerce Directive (2000/31/EC) imposes certain specific requirements connected to the direct marketing business. Promotional offers must not mislead customers and all terms must be clear and easily accessible. The Directive stipulates that marketing e-mails must be identified as such to the recipient and requires that companies targeting customers on-line must regularly consult their national opt-out registers where they exist. When an order is placed, the service provider must acknowledge receipt quickly and by electronic means, although the Directive does not attribute any legal effect to the placing of an order or its acknowledgment - this is a matter for national law. Vendors of electronically supplied services (such as software, which the EU considers a service and not a good) must also collect value added tax (VAT) (see Electronic Commerce section below).

 

Read the full market research report


Posted: 01 April 2010

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