Dhanraj Kumar G
Jagadheeshan G Krishnan Jeesha Roshni Sarogi
Agenda
Franchising
Types Of Franchising
Starting a Franchise
Pros and Cons of Model
What is Franchising?
A franchise operation is a contractual relationship between the franchisor
and franchisee in which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as knowhow and training; wherein the franchisee operates under a common trade name, format and/or procedure owned or controlled by the franchisor, and in which the franchisee has or will make a substantial capital investment in his business from his own resources. [Definition by International Franchise
Association ] License to use an established brand Use is very restrictive many rules to be followed. Provide a proven successful business format Entrepreneurship for people that are not particularly entrepreneurial.
What is Franchising?
Legal and commercial arrangement concerning the successful business of a franchisor Use of franchisors trade name, format, system and/or procedure under licence Means to raise capital and expand
quickly
Assistance to franchisee
Marketing, management, advertising, store design, standards specifications
Payment by franchisee by way of royalty, licensee fee or other means
Franchising
Franchisor Franchisee
Owns trademark or trade name
Uses trademark or trade name
Provides support:
Expands business
(sometimes) financing
with franchisors support
advertising & marketing
training
Receives fees
Pays fees
Some popular business format franchises include:
Restaurants KFC McDonalds Pizza Hut Taco Bell Health & Beauty Merle Norman Costmetic Studios Supercuts Jenny Craig International Cost Cutters Family Hair Retail Blockbuster Video Radio Shack The Athletes Foot Business Services Mail Boxes Etc. Care Automotive Service Meineke Discount Mufflers AAMCO Transmissions Convenience 7-Eleven FamilyMart Maintenance/Cleaning Jani-King International The ServiceMaster Company Merry Maids Real Estate Century 21 RE/MAX International Coldwell Banker Residential Affiliates
GNC Franchising
H & R Block
ACE America Cash
Midas International
Precision Auto Care
Lodging Choice Hotels Bass Hotels/Holiday Inn Marriott Hotels
Express Kwik Kopy Education/Training Dale Carnegie Training Barbizon School of Modeling Berlitz International Sylvan Learning Systems
Types Of Franchise
3 main types of franchise:
Product distribution franchise
Business format franchise and Management franchise.
PRODUCT DISTRIBUTION FRANCHISES
A product distribution franchise model is very much like a supplier-dealer relationship. Typically, the franchisee merely sells the franchisors products. However, this type of franchise will also include some form of integration of the business activities.
Restaurants & F&B Outlets
Produces the syrup concentrate Sells the syrup concentrate
FRANCHISEE
Produces the final drink
Retail Stores Vending Machine Operators
BUSINESS FORMAT FRANCHISING
In a business format franchise, the integration of the business is more complete. The franchisee not only distributes the franchisors products and services under the franchisors trade mark, but also implements the franchisors format and procedure of conducting the business.
MANAGEMENT FRANCHISE
A form of service agreement. The franchisee provides the management expertise, format and/or procedure for conducting the business.
STARTING A FRANCHISE
USA Today reported that the 10 most popular franchising opportunities are in these industries 1. fast food 2. Service 3. restaurants 4. building and construction 5. business services 6. Retail 7. automotive 8. Maintenance 9. retailfood 10. lodging
STARTING A FRANCHISE
Evaluate if your business is ready
Learn the legal requirements
Make important decisions about your model Create needed paperwork and register as a franchisor
Make key hires
Sell Franchisees Support Franchisees
BEST PRACTICES
Standard Operating Procedures
Covering all aspects of business including
logistics, storage, display, preparation & serving food, hygiene, packing, etc.
Staff Training Quality Checks Surprise Audits Customer Feedback Care for the Environment
SOME TIPS
The franchisee is not completely
A damaged image or franchise
independent.
In addition to the initial franchise
fee, franchisee must pay ongoing royalties and advertising fees.
Franchisee must be able to balance
system can result if other franchisees perform poorly or the franchisor has financial problems.
The duration of a franchise is
restrictions and support provided by the franchisor with their own ability to manage the business
usually limited and the franchisee may have little or no say concerning termination
Things to Look for Franchisees perspective
Proven operating location
Credible top management
Skilled field support staff A trade identity A proprietary operations manual Effective training programs Disclosure and offering documents Plans for advertising, marketing, PR and promotion
A communications system
Sufficient capital
ADVANTAGES
Franchisors Point of View Financial Operational Strategic Administrative
ADVANTAGES
Franchisees Point of View
The franchisee has an opportunity to run a proven business concept
with a successful operational track record. Lower financial risk. The opportunity to learn the latest developments and changes in the local and global market from the franchisor and focus entirely on developing the sales revenues. Have better marketing results due to recognized trade name/trademark. The franchisee has access to accumulated business experience and technical know-how in managing the business. A unified store design which leverages the business reputation in marketing the concept. Easier purchasing, storing, and product display systems.
DISADVANTAGES
Franchisors Point of view
Considerable capital allocation is required to build the franchise
infrastructure and pilot operation. At the beginning of the franchise program there is a broader risk that the trade name can be spoiled by misfits. There is a risk that franchisees exercise undue pressure over the franchisor in order to implement new policies and procedures. The franchisor has to disclose confidential information to franchisees and this may constitute a risk to the business.
DISADVANTAGES
Franchisees Point of view
The requirement to pay the franchise fees and royalty to the
franchisor, which in some cases can be exaggerated. The transfer of all goodwill built in the local market to the franchisor upon expiration or termination of the franchise contract. The necessity of abiding by the franchisors operating systems, standards, policies and procedures. Reduced corporate profit margin due to payment of royalties and levies.
THANK YOU
