Franchising is very popular growth model but despite the wide application of franchising in the developed countries of the world, its impact on the Croatian economy is still marginal. The purpose of this research is to identify the obstacles and challenges to a wider application of franchising in Croatia and generate policy recommendations for removing the identified obstacles. Obstacles and recommendations are identified on the basis of a conducted longitudinal qualitative research, the first phase of which was conducted in 2006, and second in 2014. The overall results of this research were presented in a form of PEST analysis and compared with the results of the 2006 research aiming to detect changes (improvements/ deterioration) in individual areas of the research political, economic, legal and technologic factors of influence on the development of franchising in Croatia. Based on the detected changes, conclusions and policy recommendations were identified.The obstacles can be divided in two categories: franchising specific barriers and general business related obstacles for doing business in Croatia. Without removing most of these obstacles, it is unrealistic to expect high growth of franchising activities in Croatia in near future.