Franchising

FranchisingFranchising

Mrs. Jayashree VisputeMrs. Jayashree Vispute

Franchising Start up Franchising Start up PackagePackage Market survey and site selectionMarket survey and site selection Facility design and layoutFacility design and layout Financing adviceFinancing advice Operating Manuals Operating Manuals Management training progarmsManagement training progarms Training the franchisee’s Training the franchisee’s

employeesemployees


A privilege or right granted to a A privilege or right granted to a person or a group by a government, person or a group by a government, state or sovereign. Authorisation state or sovereign. Authorisation granted by a manufacturer to a granted by a manufacturer to a distributor or dealer to sell his distributor or dealer to sell his products.products.

Franchising is a method used by Franchising is a method used by business for the marketing and business for the marketing and distribution of products and services.distribution of products and services.


The two parties involved are:The two parties involved are:

1. The Franchisor: The Franchisor is the 1. The Franchisor: The Franchisor is the provider of the franchise. Typically he provider of the franchise. Typically he owns the trademark/product/service and owns the trademark/product/service and licenses the trademark to another party. licenses the trademark to another party. He may provide support for the running He may provide support for the running of the franchise. In exchange, he of the franchise. In exchange, he receives a fee, commonly known as the receives a fee, commonly known as the royalty or franchise fee. This fee varies royalty or franchise fee. This fee varies from industry to industry.from industry to industry.


FranchiseeFranchisee

Franchisee is the person who pays for Franchisee is the person who pays for and purchases a franchise from a and purchases a franchise from a franchisor and operates a business franchisor and operates a business using the name, product, business using the name, product, business format and other items provided by format and other items provided by the franchisor. The franchisor helps the franchisor. The franchisor helps the franchisee in setting up the the franchisee in setting up the business and managing it.business and managing it.

ROLESROLESFunctionFunction

1.1. Site selectionSite selection

2.2. DesignDesign

3.3. EmployeesEmployees

4.4. Products to be Products to be soldsold

5. Prices5. Prices

6. Advt. & 6. Advt. & PromotionPromotion

FranchisorFranchisor

OverseesOversees

Provides designProvides design

TrainingTraining

DecidesDecides

Sets/RecommendsSets/Recommends

At national levelAt national level

FranchiseeFranchisee

Chooses with Chooses with approvalapproval

Incurs the costIncurs the cost

Hires and paysHires and pays

Can change only Can change only with approvalwith approval

FollowsFollows

Local requirementsLocal requirements

Ongoing BenefitsOngoing Benefits

Field supervision of operationsField supervision of operations Management ReportsManagement Reports Merchandising and employee retrainingMerchandising and employee retraining National advertisingNational advertising Centralized planningCentralized planning Market data and guidanceMarket data and guidance Auditing and record keepingAuditing and record keeping Group insurance plansGroup insurance plans

Advantages of Advantages of FranchisingFranchising

Low RiskLow Risk

-- eliminates the risk of learning -- eliminates the risk of learning from a completely new businessfrom a completely new business

-- risk of whether the business will -- risk of whether the business will be successful or not is much be successful or not is much lower for the franchisee.lower for the franchisee.

Advantages of Advantages of FranchisingFranchisingGrowthGrowth-- A franchise is a part of a network. A huge -- A franchise is a part of a network. A huge

network projects a successful network, network projects a successful network, which the franchisee can take advantage which the franchisee can take advantage ofof

Financial and Operational SupportFinancial and Operational Support-- Franchisor assists the franchisee in -- Franchisor assists the franchisee in

obtaining finance for setting up the obtaining finance for setting up the business. Training and consultancy is also business. Training and consultancy is also provided on the business and the product. provided on the business and the product.

Advantages of Advantages of FranchisingFranchising

AdvertisingAdvertising

-- Advertising costs are also -- Advertising costs are also reduced and shared by the reduced and shared by the franchisee. Franchisee enjoys a franchisee. Franchisee enjoys a national exposure at an national exposure at an affordable price. affordable price.

Disadvantages of Disadvantages of FranchisingFranchising Royalty and feesRoyalty and fees

-- Huge amount of money is paid in -- Huge amount of money is paid in the form of royalty and fees. the form of royalty and fees. Franchising fee is normally paid Franchising fee is normally paid only at the time of starting or only at the time of starting or renewing agreement. Royalty is renewing agreement. Royalty is recurring cost and is paid at a recurring cost and is paid at a predefinied frequency.predefinied frequency.

Disadvantages of Disadvantages of FranchisingFranchising

Lack of ControlLack of Control

-- Franchising requires adherence -- Franchising requires adherence to the stipulated terms and to the stipulated terms and conditions as set by the conditions as set by the Franchisor. Also the franchisor Franchisor. Also the franchisor can terminate the franchisee if can terminate the franchisee if the policies and guidelines the policies and guidelines prescribed are not observed.prescribed are not observed.

Franchising

Business

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