Franchising for Apparels
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Transcript of Franchising for Apparels
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A Report onFranchising forApparels
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Chapter 1
What Is Franchising?
Franchising is one of three business strategies a company may use in capturing
market share. The others are company owned units or a combination of company owned
and franchised units.
Franchising is a business strategy for getting and keeping customers. It is a
marketing system for creating an image in the minds of current and future customersabout how the company's products and services can help them. It is a method for
distributing products and services that satisfy customer needs.
Franchising is a network of interdependent business relationships that allows a number of
people to share:
1) A brand identification
2) A successful method of doing business
3) A proven marketing and distribution system
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Chapter 2
Why do Companies Franchise?
For a company with a product or service to sell, franchising provides an excellent
opportunity for rapid expansion without an enormous outlay of capital. It is a distribution
system that allows a business to conserve capital, and at the same time achieve fast
market penetration making it a very attractive proposition to most business owners. One
of the greatest advantages to them is that they get 100% commitment from their
franchisees who have a stake in the business rather than staff or managers who simply
work for a salary and may be less motivated. Franchising enables them to utilize theentrepreneurial skills of the franchisee network to achieve better results than might
otherwise be achieved.
For any company franchising their business it is important that the business
model has been carefully researched and refined. It needs to be simple enough to be
capable of being replicated and the business system itself has to be clearly set out into an
operations manual that covers every aspect of the business.
The Franchisor has to understand that this is not a quick way for him to make
money, but a sensible way to expand and get on board people that are equally committed
to the business success.
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Chapter 3
Foreign Direct Investment:-
a) The Department of Industrial Policy & Promotion issues the guidelines
for Foreign Direct Investment in India.
b) FDI up to 51% has been allowed in retail trade of single brand products
with prior government approval and under certain condition:
Products to be sold should be of a single brand only
Products should be sold under the same brand internationally
Single Brand product retailing would cover only products that are branded during
Manufacturing
c) For example: an umbrella brand likes Christian Dior would not be allowed to
stock different brands like Pure Passion , Jadore and Dior Addict in one store.
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Franchising
Rights are granted by one party to another for some stipulated amount of money
Franchisee is allowed to conduct business using Franchisers know how and brand
name.
Cash & Carry (Wholesale Trade)
Allowed 100% FDI under the automatic route by FIPB, model is designed in a way that
the wholesaler deals with small retailers.
Joint Venture
International brands provide equity and support to a local Indian entity.
Share of the foreign player is restricted to 49%.
Distribution
International Player sets up a distribution office in India and supplies products for sale
to local retailers.
Can also set up franchised outlets for brands.
Manufacturing
International Player sets up an Indian company to manufacture its product and also gets
the right to retail in India.
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Chapter 4
Distribution Channels:-
Owned Stores / Exclusive Brand Outlets
Advantages:-
1) Direct medium of selling apparel.
2) High realization for the garment sold.
3) End-user feedback and knowledge of their
preferences.
Disadvantages :-
1) Requires greater advertising
expenditure.
2) Greater fixed costs.
Multi-Brands Outlets or Shopping Malls
Organization sells apparels to multi-brand outlets, which in turn sell them through large
retail space.
MBOs are located in prime locations of the various cities and towns ensuring
maximum reach.
MBOs are chain of
shopping malls having a presence in more than one location. Realization from this channel is lower than those earned by selling to the retailers; as
MBOs keep higher margins because their costs are higher.
Distributors
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This channel involves two middle agencies between the seller and the end-
user.
Organization sells it to the distributor, who in turn sells to the Retailers or
MBOs.
Realization from this channel are low.
Discount Stores
For selling apparels at lower prices to attract larger volumes.
Used for selling apparels with minor defects or for selling slow moving
stocks.
Low realization from this channel as garments are old-fashioned or sold at low prices
for gaining big volumes.
Retailers
Company sells garment to Traders or Commission Agents.
Greater reach of the distribution channel.
Creation of a middle agency between the organization and the end-user.
Lower realizations from this channel.
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Chapter 5
Major Franchising Industry:-
The Major Franchising for Apparels in the Indian RMG Industry are profiled as follows:
1) Shoppers Stop:-
Background
Established in 1991 by the K. Raheja Group.
The group is a well known player in the construction sector.
It is a Public Limited Company.
Principal Fascia Shoppers Stop, Crossword, Home Stop, Mother
Care, MAC.
Retail sector activity Departmental Stores, Specialty Stores (books, home products,
cosmetics, F&B, Baby Care).
Website: www.shopperstop.com
Business Area
The store offers a wide variety of international and Indian
brands
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Stocks private labels like Stop, Kashish, Vettorio Fratini,
Elliza Donatein
The store also offer concessionaire space to brands, whereby the counters are arranged
by the employees of the concessionaire
Business strategy
Primarily catering to the Lifestyle Retailing segment through
Departmental Stores
a) Offers a gamut of products apparels, accessories, footwear, cosmetics, music,
books, leather products, furnishing etc.
Ventured to the Value Retailing segment with inception of
HYPERCITY
Apart from these stores, the company also has presence in Niche Retailing format with
the brands such as:
a) Crossword a lifestyle bookstore; these are run in 3 formats Corner Store,
Brand Stores and Flagship Stores.
b) MAC its a tie-up with a cosmetic major, Estee Lauder.
c) Home Stop its a specialty store, caters exclusively to home furnishings andfurniture.
d) Mother Care - its a franchise agreement with a UK-based Mother Care
marketing baby clothes, toys, baby care products and maternity clothes.
Future Expansion Plans
The company plans to form a JV with AGROS of UK to start
Catalogue Retailing Business in India. Plans to diversify into airport retailing, for which also signed
An MOU with the Nuance Group of Switzerland.
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2) Tata Trent Ltd:-
Background
Established in 1998 as a part of Tata Group.
Started operations by acquiring the UK-based Littlewoods departmental stores in
Bangalore.
The company owns a chain of department stores across the country& is also increasing
its foothold in the high volume hypermarket sector.
The company has initiated a new retail venture called Infinity Retail Limited dealing
primarily in electronic consumer durables.
Website: www.mywestside.com
Business Strategy
Westside stores
a) Primarily apparel stores comprising a mix of clothes,footwear, and accessories for men, women and children.
b) Established its outlets in Mumbai, Pune, Bangalore,
Hyderabad, Chennai, New Delhi and Kolkata.
Landmark
a) Company acquired a 79 per cent stake in this Chennai
based books and music retail chain.b) The chain has its presence in Bangalore, Mumbai,
Vadodara and Chennai.
Star India Bazaar
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a) First store opened in Ahmedabad (Gujarat) with which
company entered the Value retailing segment.
b) Store offers wide range of products like staples,
perishables, health and beauty products.
c) The company is planning to open such stores in Mumbai
and Bangalore as well.
Infinity Retail Limited
a) The company has set up a new store Croma which sells
electronic consumer durables.
b) For this a sourcing agreement has been signed with the
Australian retailer Woolworths.
c) Company plans to set up around 100 more such stores in
coming years.
3) Madura Garment:-
Background
Established in 1988 as the garment division of the Indian subsidiary of Coats Viyella
(UK).
In 1999, Aditya Birla Group acquired Madura Garments and is now a part of Aditya
Birla Nuvo Limited.
Focuses on mens shirt and trousers and has also diversified into jeans and westernwear for women.
The company owns several brands like Louis Philippe, Van Heusen, Allen Solly, SF
Jeans and Peter England.
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Website: www.adityabirlanuvo.co.in
Business Strategy
Plans to strengthen its portfolio in womens wear, premiumclothing and accessories.
Has tie-up with ESPIRIT , an international lifestyle brand.
Expanding its retailing network by marketing womens wear under the Van Heusen
brand.
Recently the company acquired Trinetra , chain of 174 convenience stores in South
India.
Chapter 6
Conclusion:-
Report suggests that the Franchising for Apparels in Indian Market has the largest
growth potential in comparison to the Other Market and is expected to grow to 4 to 5
per cent a year in volume and 13 per cent in value.
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Franchising enables you to become involved as part of a company that has established a
tried and tested system and has achieved some market share and name awareness.
When starting a business as a self employed person you will make mistakes which can
be costly if not catastrophic. An established franchise will have ironed out those
problems. They will have a written system contained within the franchise manuals as to
how operate the business so as to achieve maximum sales and profitability from day
one. It is effectively the name awareness and the system that you are paying for.
If you decide to buy a franchise, do not relax and wait for the Franchisor to do all the
work, that simply won't happen. Franchising can provide a structure and a proven
system but it is still your hard work and effort that will be decisive in making it work.
Chapter 7
Bibliography:-
www.gaebler.com
www.franchisemart.in
www.allbusiness.com
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www.wisegeek.com
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