German auto-parts giant offers financing to franchisees
Robert Bosch, the german autoparts giant, said it would develop a nationwide network of vehicle service centers in Ukraine, using funding from the European Bank for Reconstruction and Development.
Bosch officials said the firm would open between 30 and 40 Bosch franchises across the country in the next four years. Owners of local service centers will be able to obtain Bosch franchises using EBRD funds.
Owners wishing to use the Bosch trademark may qualify for five‑year bank loans of up to $500,000. Bosch officials wouldn’t elaborate on the loan’s interest rate, but said it would not exceed 10 percent per annum.
Bosch Ukraine Sales Director Oleh Ryabtsev said that to qualify for financing, entrepreneurs should be able to make a 20 percent equity investment and must have the additional working capital necessary to help get them through the startup period.
Ryabtsev said the company prefers franchisees whose shops are located on high‑traffic streets. Shops should also employ at least seven mechanics.
“We do our own analysis to make sure an entrepreneur meets our criteria,” Ryabtsev said. “If we agree, the loan application can go forward.”
Ryabtsev said that Bosch is looking for franchisees with managerial experience, financial backing and a strong belief in providing first‑class customer service.
“Customer service is the golden rule and a person with strong people skills could operate and enjoy our franchise,” he said.
Rene Schlegel, general director of Robert Bosch Ukraine, said the Bosch franchise would be in high demand since Ukraine’s automobile population has been rising steadily and most auto service centers are in poor shape.
Schlegel said that only about 250 of Ukraine’s 5,000 auto‑service centers meet international standards. With the number of cars increasing by 2 percent to 3 percent per year, the country certainly has potential. Presently, Ukraine has about 6.5 million vehicles.
Schlegel said that he expects that loans granted under the project will be repaid within four years.
Bosch wants to establish service centers in each of the nation’s 25 oblasts. Mechanics trained by Bosch to work at the centers are qualified to diagnose and repair all makes of automobile.
Bosch’s plans to aggressively franchise its centers worry some in the industry.
Autolife General Director Mykola Chaplyhyn said that the nation lacks a comprehensive law dealing with franchise development or which protects franchisees.
An auto repair shop owner in Kharkiv said that while buying a franchise could have advantages, there are some who don’t like the corporate control and franchise fees the arrangement entails. Bosch franchisees pay fees equal to 4.5 percent of sales.
Ryabtsev said that Bosch has received 200 franchise applications. Franchises have been awarded to Autolife, Ukrauto and Saga Auto, self‑financed companies that did not utilize the loan program.
Ryabtsev said that the company invests its money in training programs for its franchisees’ managers.
“Our training program gives franchisees a good basic overview of auto repair,” he said. Bosch’s training center has developed about 20 training courses covering diesel systems, fuel injection, brake systems and mechanics.
Ryabtsev said that franchisees benefit from advertising and marketing campaigns initiated by the corporation, and from the products and services used by the repair service.
“Franchisees buy directly from the manufacturers, which helps to keep their prices competitive,” he said.
Bosch developed its franchise system after setting up its service center network in 1921. The company currently has 10,000 repair shops in more than 120 countries.
