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Franchising



Chapter1
Objectives

• Understand definition & concept of franchising .

• Types of franchising .

• Benefits & pitfalls of franchising .




                                                     2
Introduction

• Mr. Menon an NRI ,was very happy to return to India .

• He was amazed to see changes in Indian economy

• What one noticed is that all these companies have 
  expanded gradually & made their presence by franchising




                                                          3
History of Franchising

•   The earliest signs of franchising in the united states dates
    back to 1850’sjust after Isaac Singer invested Sewing 
    machine.

•   The problem was lack of capital for manufacturing the 
    machine.




                                                             4
History of Franchising

•    Singers idea got noticed and over the next several 
    decades many other companies began to copy and 
    enhance the business model franchising.

• Later Companies such as McDonald’s and Burger king 
  took franchising  to a whole new level.




                                                           5
History of Franchising

•    Franchisor is the entity or person owning to the rights or
    license of the business.

• Authorization granted by a manufacture to a distributor 
  or dealer to sell his products. 




                                                             6
Definition of Franchisee


• An individual or a company who purchases and  runs a 
  franchise.

•    Franchisee is the party in franchising agreement that is 
    purchasing the rights to use business trademarks, 
    associated marks & other proprietary knowledge in order 
    to open branch.




                                                             7
Definition of Franchisor


• An individual or a company owning rights or license of 
  business.

•   Franchisor is a person who grants the license or 
    permission to various franchisees 




                                                            8
Definition of Franchisor


              Franchisor              Franchisee
Site Selection Oversees, may choose   Chooses with approval
Design        Provides Prototype      Implements design
              Design
Menu          Set by Franchisor       Changed only by approval
prices        Recommendations         Decides actual prices




                                                                 9
Franchising in India

•    India with its huge market and growing demand in all 
    sectors of the economy is extremely  attractive 
    proposition for entry of foreign brands through 
    franchising route.

•   In the 1990 the market opened foreign franchise.




                                                             10
Franchising in India

• The key attractions for this franchising is.
• Lower capital requirement
• Laws
• Language
• Huge Market




                                                 11
Franchising in India

• Franchising is in early stages in India ,and has become 
  increasingly popular as a means of doing business.

•   As a result the Franchising Association of India was set 
    up Mumbai in the year 2000.




                                                                12
Franchising in India

    Early Entry of Foreign players.
•    International soft drinks and hotel Franchisor arrived in 
    India.
•   Marks & Sponsors
•     Pepe Jeans & Adams
•     Baskin Robbins
•   Pizza Hut




                                                              13
Franchising in India

    Indian companies adapting the Franchise Model.
•    Franchising become very popular method of doing 
    business in India 
•   This has case in IT education e.g.
•   SGL
•    NIIT
•    Aptech 




                                                        14
Franchising in India


•    It took some time for international franchise to become 
    acceptable because of certain attitudes of Indian Business.

• If the brand name is very well known worldwide and the 
  product is marketable in India.




                                                             15
Franchising in India


• Lower the price ,product or services can be sold at , the 
  more customers they are likely to have.
• It is not difficult to spot malls
• India offers lots of potential for franchising community.




                                                               16
Franchising in India


•  In many instances the product sold by the franchisee 
  outlets may have to be significantly tailored to local taste.
• Foreign Franchisor  to be needs  aware of local culture 
  and customs.




                                                              17
Types of Franchise


•   Business format
•   Product or trade name
•   Dealership 
•   Master Franchise
•   Unit Franchise
•   Regional Franchise




                            18
Business Format Franchise


• Business Format Franchise is the most popular form of 
  Franchising.

•   Agreements under this Franchisor offer are:
•     Use trademark
•      Advertising




                                                           19
Product or trade name Franchise


• Product Franchise or Trade Franchise0nly involves 
  product.
• Agreements under this Franchisor offer are:
• Allows Using trademark
• The manufacture grants a Franchise the authority to 
  distribute goods




                                                         20
Dealership or Distributorship ,Licenses, 
      Agencies



• Dealership and distribution ship Format Franchise is the 
  also most popular form of Franchising.
• Allow to sell Franchiser product under their own 
  trademark.
• Agencies Format Franchise Own the rights to sell 
  products on behalf of a supplier.




                                                          21
Manufacturing & Unit Franchise 



• Manufacturing Franchise provide an organization with 
  the right to manufacture

• Examples include Coca Cola.

•   Unit Franchise is granted the right to operate one unit.




                                                               22
Master  Franchisee 

  A Master  Franchisee  is granted the rights to a substantial 
  territory, usually a whole country.
• This a structure adopted by many Franchisee.


                        Franchisor

                           Master  
                         Franchisee 



Unit Franchise                         Unit Franchise 
                                                             23
Regional Franchisee 

  In a Geographically large area Master Franchisee  may 
  decide to appoint Regional Franchisee 


                       Franchisor


       Regional                          Regional 
      Franchisee                        Franchisee 



  Unit             Unit            Unit            Unit 
Franchise        Franchise       Franchise       Franchise 
                                                           24
Multiple  Franchisee 

    Some  Franchisees operates not just one unit but several.
•

                         Franchisor




                      Unit Franchise 

                                                                25
Developers

    Large corporations sometimes prefer to exploit their 
    territory by opening outlets themselves.
•
                         Franchisor




                        Developers

                                                            26
Advantage of  Franchise 



•   Increase number of outlet with minimum capital

•   Name recognition

• Running small business under Franchise  name is very 
  beneficial
•



                                                          27
Advantage of  Franchise 



•   Big Business help in corporate marketing.

• Proper & effective marketing tactic.

•   Training & Management facilities




                                                28
Disadvantage of  Franchise 



• It has to control and coordinate a network of semi 
  independent businessmen.

•   Indulgence of big business into small business.

•    Safe guarding the interest of both the parties are 
    complex. 



                                                           29
Disadvantage of  Franchise 



•   Much time is required while selecting a Franchise 
• Complex procedure




                                                         30
Summary


•  Franchisee is the party in franchising agreement that is 
  purchasing the rights to use business trademarks, 
  associated marks & other proprietary knowledge in order 
  to open branch. 
• Franchisor is an individual or a company owning rights or 
  license of business.
• Franchisor is a person who grants the license or 
  permission to various franchisees 
•


                                                          31
Summary

Types of Franchise
• Business format
• Product or trade name
• Dealership 
• Master Franchise
• Unit Franchise
• Regional Franchise




                                    32
Summary

The main advantage of franchising
• Increase number of outlet with minimum capital
• Name recognition
• Running small business under Franchise  name is very 
  beneficial
However disadvantage
• Much time is required while selecting a Franchise 
• Complex procedure



                                                       33
Franchising



End of Chapter1
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