The biggest problem facing U.S. franchises seeking to enter the Czech market is the lack of available domestic capital. This makes it extremely difficult for franchisors to locate and license a Master Franchisee. Most foreign franchisors in the Czech Republic have modified their normal strategy by investing corporate resources and maintaining corporate management control. Over 40 percent of all Czech franchises are corporate financed. Czech banks have been slow to accept the concept of franchising, making it difficult to obtain credit.
Foreign banks operating in the Czech Republic do sometimes help back franchises.
For example, Citibank provided some of the financing for the recently opened TGIFridays. Another major obstacle is the fact that the Czech Republic has no specific laws or regulations for franchising, which means that no legal definition of franchising exists. The absence of a franchising law does not favor either domestic or foreign companies, but rather makes it equally complicated for all. Joining the EU will force the Czech Republic to create legislation defining franchises and exempting them from the laws banning exclusive sales agreements. The Czech Republic is now in the process of harmonizing its laws to the EU, but entry is not expected until, at the earliest, 2004.