Franchising in India W.R.T. Baskin Robbins Shiny

Franchising In India W.R.T. Baskin Robbins

Index

SR NO. TOPIC PAGE NO.

1 Introduction 1-2

2 Introduction to Franchising 3-7

3 Business Format Franchising and Product & Trade Name

Franchising

7-9

4 Emerging Trends in Franchising 10-13

5 Evolution of Franchising in the World 14-15

6 Evolution of Franchising in India 16-18

7 4 R’s of Franchising 19-20

8 Franchising Framework 20-22

9 Offer Document 23-25

10 Modes of Franchising 26-28

11 Advantages & Disadvantages of Franchising 29-31

12 Issues in Franchising in Indian Market 32-33

13 Franchise Laws in India 34-37

SR.

NO.

TOPIC PAGE NO.

1 History of Baskin Robbins 38-41

2 Marketing Strategies of Baskin Robbins 42-47

3 Competitors & Promotions of Baskin Robbins 48-52

4 Case Study-The Loot Stores 53-58

5 Bibliography 59

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EXECUTIVE SUMMARY

Franchising is a unique and dynamic business method. A successful franchise will allow both

the franchisor and franchisee to reap the benefits. However, franchising should not be

considered a fast road to fortune, nor should it be used to assist a business that is not

performing well.

Understanding, time and money are all required to successfully establish a franchise. Time

required for setting up a franchise could be up to three years and then it could be a further

three to five years before the franchisor begins to make a profit from the franchise.

Benefits of franchising include the franchisee’s funds and labor are used to expand the

business; franchisor can be free from the day-to-day operations of the business; the

franchisor can see a profit without excessive investment in the business; fewer staff

management problems; each franchisee will be the owner of the business and therefore more

determined to succeed and more franchise businesses can be spread over a greater geographic

area, therefore increasing the pool of potential customers.

Franchising is one avenue that can be used to successfully expand a business. Many of the

world’s largest corporations have used franchising to speed up their growth as global brands.

Like any business venture, a franchise needs to be managed correctly.

There are several guidelines to operate within for those considering expanding a business via

franchising. The franchisor should own and operate at least one outlet before franchising

commences. The franchisor will then be able to predict any problems and rectify these before

others invest in the business.

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Also, the business must be profitable and be able to be easily replicable. Before any

expansion commences, the franchisor must receive professional franchise advice. A detailed

operations manual must be written by the franchisor and the franchisor must also establish a

sound training program. The franchisor must be keen to develop the business and be open to

suggestions that could benefit the franchise and to maintain standards to ensure consistency

across the network. The franchise should have a sound marketing campaign.

An unfortunate statistic is that an entrepreneur has a high chance of failure in their first five

years of operating the business. Before franchising is chosen as an expansion method, a

business should be trading for at least three to five years to show it has a profitable concept,

demand for its good or service and a business structure able to support franchisees in many

different locations. If the business fails to meet these guidelines, it may become another

statistic of failed business.

Franchise consultants should be approached for advice regarding expansion via franchising.

It is crucial for potential franchisors to speak to these experts.

INTRODUCTION

Businesses can be started in different ways. There are sole proprietorship, partnerships and

joint ventures. But among these, the recent trend of expanding business through a wide

network is known as franchising. But in addition to franchising, there are two other popular

methods by which businesses expand their market and distribution channels:

1. Distributorships

2. Licensing

In a distributorship, the distributor usually:

• has a contractual relationship with the supplier

• buys from the supplier in bulk and sells in smaller quantities

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• is familiar with local markets and customers

• may do business with many companies, more than just the supplier/producer

• may not receive contractual support and training from the supplier/producer like afranchisee.

Some distribution arrangements are similar to franchises and vice versa. A franchisee with a

great deal of leeway in how to run the business may look like an independent distributor. A

distributor may be subject to many controls by the supplier/producer and begin to resemble a

franchise.

Some popular distributorships include:

a. Amway

b. Color Me Beautiful Cosmetics

c. Knorr Soup Vendor

Licensing, on the other hand, allows a licensee to pay for the rights to use a particular

trademark. Unlike franchises, in which the franchisor exerts significant control over the

franchisee’s operations, licensors are mainly interested in collecting royalties and supervising

the use of the license rather than influencing the operations of the business.

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Some popular licensors include:

a. Netscape Communications

b. Apple Computers

c. Canon Inc.

d. Compaq Computer

INTRODUCTION TO FRANCHISING

A sizeable proportion of the Indian population still lives in the villages and has limited

purchasing power, India also has a large and growing middle class and a much smaller

wealthy segment of consumers. The Indian market has a segment of approximately 150-200

million people with growing purchasing power, who seek products and services for a better

lifestyle. Approximately 2 percent of Indians have a per capita income in excess of $13,000,

which translates into a segment of 20 million relatively well-off consumers. This is small in

comparison to India's total population, but still comprises a substantial market segment.

Approximately 8 percent of Indians have a per capita income of more than $3,500, or about

80 million people; more than 100 million Indians have a per capita income in excess of

$2,800.

Franchising in some form has been operating in India for several decades. One well known

example of this is the Bata shoe chain, started in the 1960's. However, franchising in its

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modern concept has become popular in India only in recent years. The industry is still very

much in an evolutionary stage. New franchise business concepts now span across diverse

sectors as education, specialized food services, healthcare, garments and apparel,

entertainment, fitness and personal grooming clinics, stationery and gift shops, and courier

services to name a few.

As the service economy grows in India, opportunities for franchising will increase. Given

the current boom in the retailing and entertainment sectors in India, an increasing number of

players are seeing franchising as a growth option. According to industry experts, the Indian

franchise economy currently accounts for 5 percent of the countryâ€™s GDP. According to a

study conducted by the Federation of Indian Chambers of Commerce and Investments

(FICCI), there are approximately 600 active franchisers and more than 40,000 franchisees in

India currently across various sectors.

The same study estimates that total annual sales turnover achieved by franchised businesses

in India is in the range of $1.6-2.1 billion. Franchising is poised to spur economic growth

because it encourages private enterprise with no danger of flight of capital, and because it

offers the potential to establish products and services that meet global standards. Unlike in

the U.S. and some countries in the west, India does not have a specific law on franchising as

yet. Franchising is covered within the broad definition of transfer of technology contained in

domestic legislation. A legal framework for new franchisers interested in setting up master

franchises in India exists, in terms of brand protection and rules regarding payment of

franchise fees. However, there is a growing need to improve this regulatory framework.

Following the economic liberalization of 1991, several foreign companies with strong brand

names established a presence in India through franchising. In the hospitality and food service

industries, this has been the preferred method for starting operations in India. Some

international companies that operate through franchises include: Hertz, Avis and Budget for

car rental; Radisson, Best Western and Quality Inns for hotels; Kentucky Fried Chicken,

Dominos Pizza, TGI Friday, Ruby Tuesday, Subway, and Baskin Robbins for food. Pizza

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Hut and Dominos Pizza have opened many outlets and McDonald's has been open for

business since 1996. Similarly, Indian companies with strong brand recognition are also

using the franchising route to expand business volumes. Archies for giftware, MRF for

automotive tires, NIIT for computer training schools and Apollo Hospitals for healthcare are

examples.

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What is Franchising?

Franchising in general means granting of certain rights by one party (the franchisor) to

another (the franchisee) in return for a sum of money. The franchisee then exercises those

rights under the guidance of the franchisor.

The above definition is a very general in its nature and encompasses many different forms

of licensing arrangements. The business format of franchising, being the important one,

can be defined as the contractual license granted by one person (the franchisor) to another

(the franchisee) which:

Permits or requires the franchisee to carry on a particular business using

the franchisor’s know-how under the franchisor’s brand as an

independent business;

Allows the franchisor to exercise continuing control over the manner in

which the franchisee carries on the franchised business;

Obliges the franchisor to provide the franchisee with ongoing support in

carrying on the franchised business.

As a commercial matter, the agreement inevitably requires the franchisee periodically

during the period of the franchise to pay to the franchisor sums of money in

consideration for the franchise and / or goods and / or services provided by the

franchisor to the franchisee.

The International Franchise Association (IFA) defines franchising as a “continuing

relationship in which the franchisor provides licensed privilege to do business, plus

assistance in organizing, training, merchandising and management in return for a

consideration from the franchisee”.

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Who is a Franchisor?

He is the owner of the franchised system. It owns the know-how of the concept and the

brand name. It grants franchises to third parties.

Who is the Franchisee?

He is the one who has been granted the right by the franchisor to carry on the business

using the franchisor’s know-how and the brand name. Now, depending on the rights

granted, franchisee’s can be classified into:

1. Unit Franchisee – This is the simplest and most common form of franchising. This

franchisee is granted the right to operate one unit or outlet of the franchised

business.

2. Master Franchisee – He is generally granted the right to a substantial territory. It

will then grant unit franchises to unit franchisees throughout the territory. The

Master Franchisee needs to have sufficient drive and resource to fully exploit the

territory and control the unit franchisees territory.

3. Regional Franchisee – In a geographically large area a franchisor, or a Master

Franchisee may decide that it is commercially appropriate to further divide the

territory up with separate regions and grant a Master Franchise for each separate

region. These franchises are known as regional franchises or sometimes area

franchises.

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4. Multiple Franchises – Some unit franchisees operate not just one unit, but several.

These are referred to as multiple franchises and usually have a large number of

individual unit franchise arrangements – one for each unit.

5. Developers – Large Corporations sometimes prefer to exploit their territory by

opening outlets themselves. These are known as developers. They have a single

developer agreement, which allows them to open many units. These are pilot

operations so that they become fully familiar with the business at an operational

level and can localize it so as to improve its chances of success.

Business Format Franchising

Business format franchising offers a variety of services to the franchisees. They provide the

franchisee use of trademarks and logos, as well as a complete system of doing business. They

will assist the franchisee with site selection, interior layout and design, hiring and training,

advertising and marketing, product supply and more. The franchisee pays an up front

franchise fee and agrees to pay continuing royalties to the franchiser that help the franchiser

provide research, development and support for the entire system.

There are many examples of business format franchising, including – fast food restaurants,

automotive services, estate agents, convenience stores, recruitment agencies, hairdressers etc.

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The type involves three characteristics:

1. The franchisee sells goods or services which meet the franchisor's quality standards

(in cases where the franchisee operates under the franchisor's trade mark, service

mark, trade name, advertising or other commercial symbol designating the franchisor

("mark") or which are identified by the franchisor's mark;

2. The franchisor exercises significant assistance in, the franchisee's method of

operation.

3. The franchisee is required to make a payment to the franchisor or a person affiliated

with the franchisor at any time before to within six months after the business opens.

Product & Trade Name Franchising

Product and trade name franchising generally is associated with industries such as

automotive, petroleum and soft drink. This type of franchising does not include royalty fees.

The franchiser provides trademarks and logos, national advertising campaigns, but most

importantly, product.

This type, also offers three characteristics:

1. The franchisee sells goods or services which are supplied by the franchisor or a person

affiliated with the franchisor;

2. The franchisor assists the franchisee in any way with respect to securing accounts for the

franchisee, or securing locations or sites for vending machines or rack displays.

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3. The franchisee is required to make a payment to the franchisor or a person affiliated with

the franchisor at any time before or within six months after the business opens.

Franchising may seem like an easy way to start ones own business and many times it is just

that. However, investing in a franchise is no guarantee that you will be successful.

Thus, success in franchising will depend on three key factors; the ability to make the

investment to secure the franchise and open it for business, the care with which you select the

franchise, and most importantly the drive and ambition to make it successful.

What is a Franchise fee?

A fee paid by franchisee to a franchiser. US standard accounting practice requires that

franchise fee revenue should be recognized when all material service or conditions relating to

the sale have been substantially performed or satisfied by the franchiser. It is the royalties or

a certain fees paid to the franchisee by the franchisor in exchange of the rights to market the

product or the service. The principal fee in franchising—other than the franchise fee—is the

royalty fee or, in some systems, the continuing royalty. This refers to the checks that needs to

be sent to the franchisor on a routine basis throughout the term of the agreement. You pay

this for staying in the system. While it varies from franchisor to franchisor, the royalty is

typically calculated as a percentage of your sales. One may be required to send the payment

each month, each week or on some other regular schedule to the franchisor. Many franchisors

today don't even need to send them a check. When you sign the franchise agreement, you

give them permission to reach into your checking account and wire transfer the payment

directly to them.

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EMERGING TRENDS IN FRANCHISING

As well as developing into a truly international concept, business format franchising has

managed to extend its reach into many different industry sectors and this trend is set to

continue. Initially, the concept was the domain of fast-food operators. However, franchising

can easily be adapted to the needs of almost any industry sector that requires an effective and

efficient distribution channel. Today, a large variety of business sectors are expanding

successfully under the umbrella of franchising.

Other trends are emerging that will affect all franchisors, no matter which industry sector

they belong to. Some of these are discussed below.

1. Technology

A relatively new impetus for franchising comes from the need to keep up with technological

advances. In addition to issues involving management control and internal communications,

IT is becoming increasingly important in the field of Web-based selling.

2. Growth prospects continue to look bright

Although franchising is extremely well established in the USA, observers report that the

sector is at the threshold of a new growth spurt. This is a clear signal that other countries,

where franchising has not reached even a third of the penetration levels recorded in the USA,

can expect to see franchising take off like never before.

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3. Shift towards services

Populations in many of the more developed countries experience a shift towards 'rich in

assets, short on time'. This drives the development of personal services franchises, from pizza

delivery to home cleaning, home repair services and even care for the bed-ridden or aged.

4. Franchise legislation

One major change that has taken place in franchising worldwide is in the field of legislation.

While most countries initially accepted that franchising could be controlled through a

combination of existing contract law and self-regulation, an increasing number are now

moving towards specific franchise legislation.

This has become necessary because the well-documented success of franchising has attracted

a number of reckless or even fraudulent operators.

The USA was the first country to introduce specific franchise legislation. More recently,

Australia and several countries within the European Union followed suit, although it must be

said that their legislation is less severe than that introduced in the USA.

5. Franchisee profile

In the past, franchisors preferred to attract franchisees who would be content to operate one

unit hands-on. Many franchisors continue along this path but there is pressure on them to

change their approach. With the notion of a job for life becoming increasingly obsolete,

corporate managers are entering the franchise arena as prospective franchisees. These

individuals want a larger piece of the pie than one unit can offer them, and they have the

expertise and the funds to support this.

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Franchisors have been quick to realize that it is easier to grow the brand with the help of a

smaller group of aggressive franchisees rather than with a large number of yesteryear's

franchisees who were content to look after one unit as long as it earned them a reasonable

living. This change in attitude creates significant new challenges.

Not every type of business lends itself to multi-unit ownership. Unless systems,

processes and workflows can be standardized, an absentee-owner could soon lose

control. In effect, the franchise network would soon find itself in a similar situation to

a branch operation that depends on salaried managers.

Not every franchisee is cut out to be a multi-unit owner. This demands advanced

management skills and the willingness to play for high stakes. Individuals must be

carefully assessed to ensure successful placement.

Not every franchisor can handle multi-unit franchisees effectively.

The calibre of franchisee who qualifies for multi-unit ownership is likely to be a no-

nonsense person who expects 'top service plus' from the franchisor. This helps drive

the growth of the brand but franchisors need to be adequately prepared for the

challenges it poses.

The danger exists that a very strong multi-unit franchisee begins to exert undue

influence on the network's strategic direction. The franchisor must be on the lookout

for this and reassert his/her leadership position the moment a challenge is presented.

Another important trend in franchising is the inclusion of individuals who tended to

play a lesser role in franchising in the past. Women are still a minority but catching

up fast. In South Africa, the black majority which was formerly excluded from the

economic mainstream is assuming an ever-increasing role. Franchising is the ideal

vehicle for the implementation of sustainable BEE initiatives.

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6. Fickle consumers

Traditionally, consumers expected branded offerings to be standardized and predictable and

essentially, this has not changed. However, a new generation of consumers is emerging that

expects a customized approach. For example, franchisors moving into foreign countries can

no longer rely on blind acceptance of their standard offering by local consumers. To maintain

brand consistency under these circumstances can be extremely difficult. A middle-of-the road

approach is usually best, but this requires careful testing of every aspect of image, product

range and delivery mechanisms. This route is not recommended for the faint-hearted.

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EVOLUTION OF FRANCHISING IN THE WORLD

Franchising is a term that comes from the French language and means `to be free from

servitude'. It was developed as a business method in the United States in 1850s. But there are

some historians who argue that as a method of licensing, franchising developed much earlier

in feudal times when the head of the Roman Catholic Church gave his clergy the right to

collect church taxes locally.

Franchising is a low-capital rapid growth market share gaining option. The goal of a

franchisor is to provide a consistent product and consumer experience 'indirectly' through a

franchisee.

This is achieved through operational processes that are transferred to the franchisee

organization, and managing them for performance.

An organization that does franchising is required to develop systems, structures, and

processes for inter-organizational collaboration focused upon accountability and control of

performance of an 'external' business.

Franchisees, view themselves as independent business people, and see their relationship with

the franchisor as one between business partners.

By the very nature of the franchising process, it is a business method more suited to generic

services that evolve around a recognized brand, a basic standardized process capable of

delivering a consistent product or service through a wide network of operational units.

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The importance of franchising as a potential business option can be assessed based upon

research in 1997 that estimated that nearly 40% of all retail sales reached consumers through

the franchise route. The hospitality industry has traditionally used the franchise route for

international growth. The importance of the franchising process is reflected in the retail and

hospitality industries where nearly every retailer (in malls) and every major hotel are

franchisees of international as well as major national chains. Internationally, Franchising is

very well accepted and is entrenched deeply within USA & Western Europe.

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EVOLUTION OF FRANCHISING IN INDIA

In India, acceptability is growing by the day and it has a fairly conventional industry spread.

Approximately 600 franchisors spread across industries like education, retailing, professional

services, healthcare etc. There are close to over 40,000 franchisees, with an annual turnover

anywhere between Rs.8000-Rs.10, 000 crores from franchising. It is estimated that the total

investments made by Franchisees is over Rs.5000 crores and over 300,000 people are

directly employed by franchised businesses.

Opportunities in Franchising in India exist in the following areas like Beauty Salons &

Supplies, Business Services, Clothing, Computer & Internet, Consultancy, Consumer

Services, Education & Training, Entertainment, Financial Services, Florists, Food and

Beverages, Health Care & Fitness, Immigration Services, Interiors, Jewellery, Play School &

Activity Centre, Retail and Travel.

Retail franchising within India, grew initially in the apparel & footwear sectors and has

gradually grown to cover a wide variety of sectors including food, consumer durables,

jewelry, books, home décor etc. in this type of business model, there are two varieties of

Retailers.

The first ones are the manufacturer-retailers - typically Product Distribution Franchises and

other ones are the aggregators – typically Business Format Franchises. Substantial action is

also happening in non metro locations, thereby spreading organized retailing over a larger

footprint.

Franchising affords India an opportunity to build its commercial infrastructure and develop

its domestically oriented businesses in an efficient, profitable and pan-national manner. It

also offers India the opportunity to import and develop foreign concepts in a way, which

ensures that the equity of the business remains in India, so avoiding the politically

undesirable situation whereby successful domestic businesses are owned by foreign

corporations.

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The key attractions of franchising in India are as follows:

1. Lower Capital Requirements – Franchising is an excellent way for both Indian and

foreign corporations to expand their businesses and make their brand names known

in India without having to risk large sums of money by way of direct investment.

The franchisees finance the expansion of the business in India. In return they have

the opportunity to make substantial income and capital profits.

2. Geographical extent of the country – Franchising can enable a company to take

advantage of the vast Indian market of over 1000 million people and growing at a

rate of 1.9% p.a. There is an ever-growing demand of goods and services such as

fast food and beverages, clothing, electronic goods, computer hardware and software

and professional services. The infrastructure is poor, however, and operating a

corporately owned distribution system that fully exploits the geographical expanse

of the country is extremely difficult and inefficient. Empowering participants in the

distribution system by granting them an equity interest in it (i.e. by granting a

franchise) can substantially improve the efficiency in the distribution system.

3. Cultural Empathy – Franchising well suits the entrepreneurial side of Indian culture.

Indian business people are fiercely proprietary and feel a need to have ownership

and control over their business operations which they can pass on to future

generations. However, at the same time they are keen to benefit from the goodwill

and technology that can be provided by the foreign franchisor. Franchising allows

them to reconcile these conflicting ambitions.

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4. Harnessing local market knowledge – Indian master franchisees offer the foreign

franchisors direct access to substantial market knowledge and a considered and

sophisticated approach to its exploitation. A company needs a great deal of

knowledge of the different regional markets in India. What holds good for Punjab

may not be relevant for Kerala. Franchising provides a sure and easy way of

accessing the right level of relevant local market knowledge.

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THE 4 R’s OF FRANCHISING

American corporate history is replete with instances of franchising’s outstanding

success and also many failures. Learning from them, franchising can succeed if the

franchisee has a right combination of the four R’s prescribed. These are:

1. Realism – The franchisee should be very realistic in assessment of his business

strengths and weaknesses. Certain key areas where realism is a must while deciding

to go into franchising includes questions like are you prepared for the financial

insecurity, are you capable of developing a frame of mind when you can smile and

be cordial even when the customer is totally wrong. More important is the need for

realism in evaluating the products and services offered by the franchisor.

2. Resources – Many franchisees, during the early periods of their business when

resources constraints are common, tend to sometimes overlook sending in the

royalty cheques to the franchisor. Franchisors keep feeling and rightly so that their

royalty is as much a key business expenditure of the franchisee as payment for

purchases or payroll is and any delay in handling this area would lead to unfortunate

consequences of a long term nature. Therefore, while planning resources on a

periodic basis, consider the payments that are to be made to franchisor. Another area

where most franchisees have problems is to manage their resources while living

within the franchising system. The franchising agreement, in most cases, clearly

indicates systems, procedures and methods of managing the resources. The

franchisee will do well to either be mentally prepared to accept the resource

management terms of the franchisor or make it clear at the beginning that he needs

the requisite leeway to manage his own resources.

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3. Research – Research on the franchisor is a must for the success. Various published

sources also provide fairly detailed information on most of the franchises that are on

offer but to what extent that will suffice for the Indian conditions needs serious

examination. Whatever be the methodology, the prospective franchisee will do well

to build comprehensive information on the franchisor, the products or service of

offer, competing and substitute products and services before he makes any move

committing his financial resources on a long term basis.

4. Resolve – Resolve to be part of the franchising system. The problem starts when a

person gets into franchising only because he has an entrepreneurial instinct but the

instant he becomes a franchisee, the true entrepreneur in him starts resenting the

shackles that are imposed by the franchising system. The options are clear – either

stay within the system and fully learn the nuances of the business and prosper or try

one’s fledging entrepreneurial talent and get into trouble.

Franchising Framework

The three elements of the product, branding and the system integrate together to form the

franchising network.

The franchisor invests in the R&D, marketing [brand building] and is responsible for quality

operations control and expansion. The franchisee sells and delivers the product to the

customer and provides after sales service.

The franchisee invests in the outlet including manpower and equipment.

The diagram is given as follows:

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The system ensures that there is a flow of royalty and feedback to the franchisor. It also

ensures that the franchisee receives the product, know-how and training. The system

incorporates control mechanisms and feedback systems to allow the franchisor to monitor the

latter.

The franchisor has to define all the parameters mentioned in the framework so that the three

elements of franchising take shape. By defining these parameters, the franchisor is able to

prepare an offer document that can form the basis of the understanding between the

franchisor and the franchisee.

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THE OFFER DOCUMENTTHE OFFER DOCUMENT

The franchisee offer document gives comprehensive information to the prospective

franchisee. On the basis of the franchising framework, the offer document is filled. The

contents of the documents have to be organized under various heads as explained below.

1. Details of the franchisor

This includes the franchisor’s registered key address, type of company, history, business,

markets etc.

2. Experience

This documents the experience the company or the employees of the company have in the

conduct of the business. This part reinforces the legitimacy of the franchisor’s claim of

having a franchisable product.

3. Franchise fees

In business format franchising, there is an initial fee which gives rights to the franchisee for a

given period of time to operate in a certain territory using the know-how from the franchisor.

This franchisee fee also covers the cost of training of the franchisee and his personnel at the

time when the unit starts the business.

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4. Royalty and other payments

Normally, it is the percentage of the gross revenue of the unit. Maximum businesses also fix

a minimum royalty fee per annum. The percentage of the royalty varies with the industry and

type of product and is dependant upon the norms prevalent in the industry for discounts to

dealers and distributors.

Under this head, it is also necessary to record any other fees that the franchisor will charge to

cover the costs of other services like visits by specialists, additional training and any

material, replacement fees for manuals, promotional literature and media expenses. Renewal

of the agreement at the expiry of the franchise term is normally done by charging the

franchisee a nominal renewal fee.

5. Franchisee’s initial investment

Initial investment includes all the expenses incurred on real estate, interiors, machinery,

equipment, furniture and fixtures, working capital, initial training, insurance, promotional

investment, obtaining licenses from regulatory bodies etc. Since the costs vary from location

to location, a range indicating the normal costs maybe given for all the items.

6. Sourcing of raw materials, promotional materials and other services

Normally the franchisor gives clear specifications of all materials required for the operation

of the unit and conduct of the business. If the franchisor wants to put any restrictions on the

procurement of these, those can be mentioned here.

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7. Obligations of the franchise

A clear list of obligations of the franchisee needs to be made. This would include acquisition

and obtaining licenses, recruitment, training, customer service, insurance, maintainance of

records, audit requirements, expense on promotion etc all of which need to be covered in

detail.

8. Franchisor’s obligations

Similarly the franchisor has to give certain rights to the franchisee for the use of the brand

name in a given territory, accord approvals for sites, manpower and interiors, provide

specifications for equipment and signage, procure material and create advertising

programmes. Details of the training provided visits made to the franchisee’s unit etc also

need to be included under this head.

9. Renewals, termination, transfer, dispute resolution

These need to be explained along with the situations and conditions under which they will

become applicable.

This offer document should be properly created with utmost care as this is the main

document which the franchisee will use as a basis for deciding whether he wants to take up

the franchise or not and which the franchisor will use as the basis of the formal franchise

agreement.

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MODES OF FRANCHISING

There are following methods of international franchising mediums stated below-

1. Direct Franchising – Under this system, the franchisor grants franchises to

individual franchisees in the foreign country through the execution of an

international contract. The main problems associated with this type of franchising is

the difficulty of franchisors to control the performance of the franchisees as these are

located in another country, the assistance to be provided to the franchisee during the

operation of the contract. The question of intellectual and industrial property rights

in the foreign country also needs to be considered. Taxation is another issue which

receives due consideration. Furthermore, how the franchise arrangement is

structured that direct franchising is not used extensively internationally.

2. Subsidiary or Branch Office – Franchising through a subsidiary or a branch office

are two methods which are often treated together, although there are differences

which derive from the fact that a subsidiary, albeit controlled by the franchisor, is a

separate legal entity whereas a branch office is not. Whatever be the difference, an

advantage of this approach is that the franchisor is present in the foreign country as a

corporate body. The contract will in this case be a domestic contract and thus subject

to local legislation.

The problems associated with this type are similar to direct franchising. In addition,

the franchisor will be required to send his personnel to the foreign country for the

start up operations thus involving work permit and residence formalities.

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3. Area Development Agreements – Such agreements traditionally involved an

arrangement whereby the developer is given the right to open a multiple number of outlets

to a predetermined schedule and within a given area. These arrangements in the past have

been used mostly in domestic franchising, but are now being used increasingly in

international franchising.

Items that are to be considered here include the number and density of the outlets to be

opened, detailed development schedule and the consequence of non-complying of the

schedule. In such arrangements, the developer will need to have substantial financial

resources so as to be able to open the required number of outlets.

4. Master Franchise Agreements – In the international scenario, this is widely used. In

respect to such agreements, the franchisor grants a person in another country, the sub-

franchisor, the exclusive right within a certain territory to open franchise outlets itself

and/or to grant franchises to sub-franchisees.

In this case, there are two agreements involved: an international agreement between the

franchisor and the sub-franchisor (the master franchise agreement) and a national franchise

agreement between the sub-franchisor and each of the sub-franchisees (the sub-franchise

agreement). The franchisor transmits all its rights and duties to the sub-franchisor, who

will be in charge of the enforcement of the sub-franchise agreement and of the general

development and working of the network in that country. All the franchisor will be able to

do is to sue the sub-franchisor in case of breach of obligation to enforce the sub-franchise

agreement as laid down in the master franchise agreement.

The advantages of this system are that the sub-franchisor is familiar with the local habits,

tastes, culture and laws of its country and that it will know ways about the local

bureaucracy for necessary permits as and when necessary. The disadvantages include that

the financial returns of the franchisor will be reduced by the amount due to the sub-

franchisor and also that the franchisor will have to rely on the sub-franchisor for the

performance of the franchise system.

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5. Joint Ventures – In the case of joint ventures, the franchisor and a local partner create a

joint venture. This venture then enters into a master franchise agreement with the

franchisor, and proceeds to open franchise outlets and to grant sub-franchises just as a

normal sub-franchisor would do.

An arrangement such as this will have to consider legislation on joint ventures in addition to

all the other legalities that are involved. Problems may also arise with the fact that the double

link may create conflicts of interest for the franchisor. The advantages accruing from this

arrangement may include that it could be a way to solve the problem of financing franchise

operations in countries where financial means are scarce.

6. Miscellaneous forms – There is no limit to the refinement that can be made to the above

forms of franchising to accommodate the differing demands of potential franchisor and / or

franchisee. New forms of franchising, or combinations of different forms of franchising,

appear at regular intervals. Examples of these are stated as follows:

-Multi-unit Franchising

-Affiliation or conversion Franchising

-Franchise within a Franchise

-Subordinated Equity Arrangements

-Management Agreement

-Franchise Buy-ins

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ADVANTAGES & DISADVANTAGES OF FRANCHISING

6

The many advantages and disadvantages of owning a franchise should be carefully evaluated

before deciding to purchase one.

ADVANTAGES:

1. “Owning a franchise allows you to go into business for yourself, but not by yourself.”

2. A franchise provides franchisees with a certain level of independence where they can

operate their business.

3. A franchise provides an established product or service which already enjoys widespread

brand name recognition. This gives the franchisee the benefits of customer awareness which

would ordinarily take years to establish.

4. A franchise increases your chances of business success because you are associating with

proven products and methods.

5. Franchises may offer consumers the attraction of a certain level of quality and consistency

because it is mandated by the franchise agreement.

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6. Franchises offer important pre-opening support:

• Site selection

• Design and construction

• Financing (in some cases)

• Training

• Grand-opening program

7. Franchises offer ongoing support

• Training

• National and regional advertising

• Operating procedures and operational assistance

• Ongoing supervision and management support

• Increased spending power and access to bulk purchasing (in some cases)

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Disadvantages:

1. The franchisee is not completely independent. Franchisees are required to operate their

businesses according to the procedures and restrictions set forth by the franchisor in the

franchise agreement. These restrictions usually include the products or services which can be

offered, pricing and geographic territory. For some people, this is the most serious

disadvantage to becoming a franchisee.

2. In addition to the initial franchise fee, franchisees must pay ongoing royalties and

advertising fees.

3. Franchisees must be careful to balance restrictions and support provided by the franchisor

with their own ability to manage their business.

4. A damaged, system-wide image can result if other franchisees are performing poorly or the

franchisor runs into an unforeseen problem.

5. The term (duration) of a franchise agreement is usually limited and the franchisee may

have little or no say about the terms of a termination.

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ISSUES IN FRANCHISING IN THE INDIAN MARKET

International franchising is here to stay, a larger number of multinational corporations are

seeking entry into emerging and developing markets of the world including China, India,

Latin America and other Asian countries. However, they haven’t been successful as they did

not take any adequate precautions before entering into the markets. If an organization wants

to penetrate into India using the franchising method, he should keep in mind the following

aspects:

1. Copyright Protection

In most of the emerging markets, the intellectual and copyright protection laws are

inadequate. However countries like India and China, which are serious about attracting

foreign investments have amended many of their existing laws and provide reasonable

protection. The corporation has to understand these laws and make the statutory applications

under trademark, copyright and patent laws of the country to protect its rights. Legal help

from local counsel has to be taken in these matters.

2. Royalty

Many countries have strict foreign exchange laws that restrict the payments of royalties to

parent organizations. This type of law existed in India too but royalties are not allowed now.

Many countries have an upper cap on the percentage of royalty that can be charged from the

franchisees.

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3. Legal Recourse

It is necessary for corporations to check the effectiveness of the legal system prevailing in the

country. Many countries which do not have a well developed legal system may not be

suitable for an international organization to venture in. India has an elaborate legal system,

but there are delays in system which the franchisor should be aware of so that incase of legal

disputes, the implications and method of action are clearly understood and implemented.

4. Cultural issues

India is a sensitive market especially if it’s related to culture and religion. The franchisor has

to ensure that no action taken by the franchisee with respect to the advertising, promotion etc

should hurt these sentiments. The franchisor also has to take care while designing the

product.

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FRANCHISE LAWS IN INDIA

A healthy legal environment is of great importance for franchising and should include

provisions pertaining to all areas that fall within the ambit of franchising. This includes, inter

alia, commercial law relating to contracts and joint ventures and intellectual property law for

protection of trade marks and know-how. Franchise arrangements are subject to an array of

laws and regulations in addition to those regulating commercial contracts and intellectual

property rights. There are no specific laws governing franchising in India. As a result a

franchise agreement may be governed by different laws.

Primarily a franchise agreement is a contract between the franchisor and the franchisee. The

first law which comes into the picture is the Contract Act 1872 which governs contracts in

India. A franchise agreement will be governed by the Indian Contract Act, 1872 and the

Specific Relief Act, 1963 which provides for both specific enforcement of covenants in a

contract and remedies in the form of damages for breach of contract. If a party to the

franchise agreement commits a breach of contract, the aggrieved party has the option to

initiate a suit for specific performance in Indian courts and apply for relief in the form of a

temporary or permanent injunction, which may be granted at the discretion of the court

considering the balance of convenience and the interests of justice. An order granting or

rejecting an injunction may be appealed by an aggrieved party.

Laws relating to taxation, property laws, insurance law and labour laws also apply to

franchise transactions. Additionally, laws and regulations applying to specific sectors of

goods and services will also apply depending on the franchised laws.

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The following are the reasons why a comprehensive franchise law is required in India:

1. Application of Multiple Legislation

A well-defined legal structure is indispensable for the effective functioning of any

business operation. The international business environment demands a well-defined

suitable legislation that is complete in all respects. The lack of a comprehensive

legislation on franchising in India leads to the applicability of multiple laws to a

franchise transaction.

This poses the following problems:

a. Complexities: Parties to a contract normally prefer agreements with a simple

approach and encompassing all the required law procedures and rules required to be

complied with. However the application of different laws to one agreement makes it

complex to decide various issues arising from the agreement.

b. Ambiguities: Due to the necessary application of multiple legislation, ambiguities

are created as to certain issues. For example, a franchisor would imagine that a certain

issue is the franchisee’s responsibility under one law, whereas the franchisee would

think the opposite based on a different law.

c. Time-Consuming: Referring to multiple laws consumes a lot of time at the initial

stages of a transaction as well as other points of time when the agreement is sought to

be enforced. This proves to be detrimental to the smooth functioning of franchising

operations in India and also makes time-bound operations involving new enterprises

difficult.

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2. Absence of Disclosure Requirements

Countries with specific franchising legislation make it imperative for parties to a franchise

agreement to disclose certain factual information pertaining to the business of the parties.

This ensures transparency and facilitates an informed decision. A franchisor should be

required, by law, to make certain disclosure to the prospective franchisee wherein he is

supposed to reveal detailed information regarding himself, his litigation and bankruptcy

history, his financial position, the facilities he offers etc. In India, in the absence of effective

disclosure norms, a prospective franchisee is rendered helpless as the franchisor is under no

statutory obligations to make disclosures.

In the absence of a specific statute governing the franchise agreement, the franchisor refrains

from providing any information that is likely to prejudice or make a franchisee reconsider the

business proposition of the franchisor. The lack of proper disclosure requirements provides a

golden opportunity to a franchisor to abuse his position of importance as he is virtually under

no statutory obligation to make the requisite disclosure.

3. Applicability of Laws of other Countries

Normally, the absence of franchise laws enables foreign franchisors to make the laws of their

own country applicable to the agreements entered into with the franchisees in India. The

same is the case with franchisors who enter into franchising agreements with franchisees

from other countries. This proves to be an additional burden on the parties, particularly the

franchisee.

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4. Lack of Proper Format for Franchising Agreements

Due to lack of a specific format, franchisors from other countries draft agreements which are

in the same format as is approved or followed in their countries. Such agreements are made

to suit the specific environment of their respective countries and hence are not suitable for

Indian environment.

5. Liability of Parties Uncertain

Due to the lack of specific legislation, the liability of either party is either determined by the

agreements entered into between them or on the basis of general prevailing law. The liability

clause is different in different countries, and this leads to a great discrepancy among the

courts which try such disputes on liabilities.

Now with all the details of Franchising given, below is a huge, massive and successful

franchising company in the world known to be the largest ice cream franchisor in the world

with more than 2700 outlets in USA and around 3100 outlets internationally, Baskin

Robbins. Baskin Robbins has its global presence felt all over the world and the term ice-

cream is synonymous to Baskin Robbins.

Talking about its presence in the Indian market, Baskin Robbins is one of the fastest growing

food brands in India. Currently there are more than 290 franchised outlets across the nation.

More than 100 franchisees are multiple franchisees who own more than one BR store. This in

itself ratifies the kind of confidence BR generates in the franchising world. Baskin Robbins is

renowned for its World Class Ice Creams, Sundaes, Beverages and Ice Cream Cakes.

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HISTORY OF BASKIN & ROBBINS

Three-quarters of a century ago, two brothers-in-law shared a dream to create an innovative

ice cream store that would be a neighborhood gathering place for families. Burton [Burt]

Baskin and Irvine [Irv] Robbin had a mutual love of old-fashioned ice cream and the desire

to provide customers a variety of flavors made with ingredients of the highest quality in a

fun, inviting atmosphere.

As a teen, Irv worked in his father's ice cream store. During World War II, Burt was a

Lieutenant in the U.S. Navy and produced ice cream for his fellow troops. When the war was

over, the two entrepreneurs were eager to capitalize on America's love of ice cream.

They started out in separate ventures at the advice of Irv’s father. In 1945, Irv opened

Snowbird Ice Cream in Glendale, California. His store featured 21 flavors and emphasized

high-quality ice cream sold in a fun, personalized atmosphere. A year later, Burt opened

Burton's Ice Cream Shop in Pasadena, CA. By 1948, they had six stores between them. This

concept eventually grew into Baskin-Robbins.

As the number of stores grew, Burt and Irv recognized that to maintain the high standards

they set in the beginning, each store would require a manager who had an ownership interest

in its overall operation. Even though they didn't realize it at the time, the two founders had

pioneered the concept of franchising in the ice cream industry.

In 1949, there were more than 40 stores in Southern California when Burt and Irv purchased

their first dairy in Burbank. This business decision allowed them to have complete control

over the production of their ice cream, and the development of new ingredients and flavors.

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It wasn’t until 1953 that the ice cream chain dropped the separate identities of Snowbird and

Burton's and became Baskin-Robbins. A local advertising agency, Carson/Roberts, advised a

uniform identity and image under the name Baskin-Robbins 31 Ice Cream. Their

recommendations included the "31" logo to represent a flavor for every day of the month,

Cherry (pink) and Chocolate (brown) polka dots to be reminiscent of clowns, carnivals and

fun and lastly, the use of cartoons to bring their flavors alive with personality to graphically

highlight the name and delicious ingredients. With this over-arching branding, Baskin-

Robbins' iconic pink spoons were created with the belief that people should be able to try any

of their many flavors without cost.

In 1954, Baskin-Robbins put their product on the line against their competitors at the Los

Angeles County Fair. That year they won their first Gold Medal and set the pattern for

county and state fair participation, earning Gold Medals for Baskin-Robbins Ice Cream every

year since that first contest.

"Not everyone likes all our flavors, but each flavor is someone's favorite."

— Irv Robbins

Baskin-Robbins continued to expand, and by the mid-1960s, the company had become an ice

cream empire with more than 400 stores throughout the United States. In the 1970s the chain

went international, opening stores in Japan, Saudi Arabia, Korea and Australia.

The franchise model created by Burt and Irv decades ago is still used by Baskin-Robbins

today. We are 100% franchised, with each owner holding a stake in the business' success,

while product development and merchandising are handled at Baskin-Robbins headquarters.

This hands-on, small business approach allows franchisees the ability to create a strong

presence in local communities all over the world. Through this franchise business model, we

continue to provide innovative, high-quality ice cream treats to more than 150 million

customers worldwide. And as a result, Baskin-Robbins has grown to become the world's

largest chain of ice cream specialty stores, with more than 2,800 locations throughout the

United States and 5,800 around the globe.

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Since 1945, we've introduced more than 1,000 unique, fun and delicious ice cream flavors.

Our original top-selling flavors like Mint Chocolate Chip and Pralines 'n Cream continue to

delight millions worldwide. Still, we continue to consistently introduce new, exciting flavor

combinations, as well as ice cream industry-leading innovations such as hand-packed ice

cream quarts, a unique flavor ribbon technique, the use of traditional dessert ingredients and

the introduction of mousse-textured ice creams. From our introduction of signature ice cream

cakes and the growing line of beverages, including our signature Cappuccino Blast, our

commitment to creating new and exciting products is unsurpassed in the industry. It’s all part

of our mission to make the Baskin-Robbins neighborhood a tasty, fun place for our

customers.

"In the moments of greatest pride, Baskin-Robbins is composed of those who contribute in a

special way to our fellow humans—helping to nourish that quality of childlike enjoyment,

which is perhaps the most precious and hopeful part of our humanity."

America's Favorite Neighborhood Ice Cream Shop

There are many forms of enjoyment in life: there’s spontaneous pleasure, anticipated

pleasure, there is long-term happiness and there are spur-of-the-moment joys. For people

everywhere, ice cream has probably generated each of those types of pleasure.

Baskin-Robbins has long been dedicated to making the experiences of eating ice cream an

enjoyable one. “America’s Favorite Neighborhood Ice Cream Shop" is a philosophy at

Baskin-Robbins shared by everyone. Each employee, store owner and corporate team

member is proud of our heritage, and they are dedicated to upholding the flavor, the fun, and

the local, neighborhood feel that make the experience unique to Baskin-Robbins. There is

nothing quite as thrilling as the face of a child enjoying his favorite ice cream flavor, or the

delight of a mother surprised with an ice cream cake on Mother’s Day in a store you call “my

Baskin-Robbins”.

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From the ages of one to ninety-nine, people visit Baskin-Robbins anticipating the pleasure of

enjoying their favorite ice creams served any way they want. Because of our dedication to

being “America’s Favorite Neighborhood Ice Cream Shop”, Baskin-Robbins stores are

visited by over 300 million happy customers year after year. A number that continues to

grow as Baskin-Robbins spreads throughout the world.

The original flavors when baskin-Robbins first opened in 1945 were:

Banana Nut Fudge

Black Walnut

Burgundy Cherry

Butterscotch Ribbon

Cherry Macaroon

Chocolate

Chocolate Almond

Chocolate Chip

Chocolate Fudge

Chocolate Mint

Chocolate Ribbon

Coffee

Coffee Candy

Date Nut

Egg Nog

French Vanilla

Green Mint Stick

Lemon Crisp

Lemon Custard

Lemon Sherbet

Maple Nut

Orange Sherbet

Peach

Peppermint Fudge Ribbon

Peppermint Stick

Pineapple Sherbet

Raspberry Sherbet

Rocky Road

Strawberry

Vanilla

Vanilla Burnt Almond

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MARKETING STRATEGIES OF BASKIN & ROBBINS

The last three years Baskin & Robbins have really seen our economy go into an overdrive.

What they were witnessing now is only a preview of larger things to come in the next couple

of decades. While their stunning strides in the IT business have been largely responsible for

driving our growth, they could see more and more industries and services joining the curve.

Typically, one will always see between one and three growth engines on any growth curve,

but what really excites them is their potential for so many different growth leaders in this

phase.

One key problem with the growth over the past 50 years has been the complete lack of focus

on infrastructure development, something that has propelled China to where it is today. But

again this is something any Government or people can only ignore for so long at their own

peril. They believe that in the coming years, infrastructure development will become the

most important engine in our economy.

Growth prospects in India in general are tremendous. With the size and population, there is

very little danger of the traditional fear of slowdown in demand. Even as saturation starts to

build up in the metros, there are hundreds of small cities and towns that aspire to be metros in

the future and step in to provide new markets. The telecom revolution in this country is a

case in point.

However, history will not necessarily support this viewpoint given that over the past few

years, the ice cream industry has never really grown faster than 10% per annum. But this

time the demand will big because of product as well as the change in the retail landscape,

which will provide more opportunities for sellers and buyers to our model is tailor made to

take advantage of the boom in the retail.

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One disadvantage about meet in a better environment. This is true not only of ice creams but

also of practically every food category that can deliver on product, quality and service. Ice

creams has been that it is treated largely as an impulse purchase in this country. While that

perception will not change easily, the development of new consumption drivers like malls,

hypermarkets, multiplexes, etc opens up new avenues for this company.

-Demand Drivers

Growth of malls and multiplexes across the country is boon for Baskin Robbins to access

good locations and tap the ready consumers. There is an increase in customers who demand

the best without compromises. People are very happy to pay more if they are given a quality

product at par with the best available internationally. Also, burgeoning disposable incomes

lead to increased consumption.

-Trends

There is an increase in tilt towards premium products (as opposed to expensive), where one

pays a price but gets quality and service. You will see more and more companies heading

into the hinterlands in an attempt to penetrate the smaller towns and rural belts, as they

promise to offer the next surge of growth.

-Issues and Concerns

For the ice cream industry, development and availability of a good cold chain covering the

country is essential without which they cannot reach the market target. Another issue of

concern is escalating price of real estate.

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The reasons for this might vary, but the single undeniable fact is that real estate prices are

reaching levels that can no longer be termed as only a bubble. In fact a bubble might be

welcome if it helps bring prices down to realistic levels, but unfortunately there is no sign of

it happening.

If this trend continues, retail business is going to find it increasingly hard to deliver returns.

Lack of quality and increase in prices are the biggest concern threatening to throw all growth

plans completely out of gear for Baskin Robbins.

-Outsourcing/Logistics

Baskin Robbins ice creams for the entire South Asian market are manufactured in their

factory in Pune. They have opted for outsourcing as a better business model. One of their

best decisions, which has paid them a handsome dividend over the past few years, has been

their move to outsource their distribution and logistics to core players. Cold chain logistics is

central to the ice cream business but the irony here was that it was not their core competency.

As a result when they operated it, they were expending valuable resources to conduct this.

Five years ago they decided to completely outsource this part of their business (from factory

to the last mile). This has helped them immensely in allocating valuable resources to more

gainful activities.

Over the past 13 years, the Baskin Robbins brand has grown rapidly in the country to become

the single largest premium ice cream brand and today it operates over 200 franchised stores

in 35 cities.

While technological advances do help in delivering greater customer satisfaction, it is

definitely not easy managing the very technology. Given the rapid changes and strides in

technology, it is a difficult task to continuously keep oneself abreast of the latest

developments, evaluate their relevance to their business and manage the cost/benefit matrix-

not to speak of the implementations.

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They have embarked upon an ambitious plan to link all their stores through a comprehensive

computerization initiative, which will include a point-of-sale solution for the customer at the

front end. Once completed, they hope to have seamless flow of information/MIS in real-time

across all verticals. This will create value right from marketing to production to inventory

planning to distribution.

They have a current IT workforce of five. Head office forms the point of control from where

all information is disseminated as well as collected, compiled and analyzed. The regional

MIS/IT guys are points of coordination for all our franchisees in the respective areas. Their

role involves implementation, training and offering back up and trouble-shooting.

-Focusing on the Customer

As part of their customer satisfaction efforts, they have created an internal call center for

their home delivery service in Mumbai. This was a decision they took after trying third party

call centers to handle incoming calls from customers using their Single Number Dial-in

service. Over time, they realized that in order to truly deliver the right experience to the

customer calling online, it was necessary to have people who understood the ice cream

business from within. As a result we decided to create our own call center with our staff

trained completely in all aspects of the business.

They wanted to ensure that the customer who calls gets the same service over the phone as

they would expect when walking into one of their 200 outlets nationwide. Bandwidth has

been an issue for several enterprises. While nowhere near the speed seen in the West, they

are getting there slowly but surely. Efficiency is a bit of a problem, but again there are

teething issues, which will get sorted out as the market matures.

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-Future plans of Baskin Robbins

Overall, as they said they would target the Tier-II cities as well, Baskin Robbins is now

planning to ramp up its store count in smaller cities seeing a rise in demand and consumer

spending. In the next two years, the company aims to double its number of stores across the

country from 300 by increasing the store density in tier-II cities. Prior to 2000, the average

size of its stores was 1,000 sq ft. In 2002, the company consciously adopted a strategy to

compress its store size. In 2005, the average size of its store dropped to 250 sq ft.

Interestingly, its strategy of going to smaller cities would enable it to have bigger stores,

taking the average size of its stores to 400 sq ft. Getting the right franchisees would also be

crucial to its success as it will not market its ice cream range through the mom and pop

stores. However, growth in modern retail, multiplexes and fine-dining have helped generate

demand for its brand. The ice cream maker is looking at tie-ups with airlines as well.

Since Baskin Robbins imports most of its vital ingredients, such as chocolate and other

flavours,the company hiked prices by 10 per cent in April on the back of a rise in commodity

prices. With a turnover of nearly Rs 60 crore in FY08, the company is growing at the rate of

35 per cent a year as compared with the industry average of 12 per cent.

The ice cream chain spends 8 to 9 per cent of its revenues on advertising each year which

includes more advertisements based on hoardings, banners, word-of-mouth and unlike other

brands, have kept the Television advertisement absolutely nil.

A few years ago, they were reducing the size of their formats, but in the past six-eight

months, they have been aggressively ramping up because there's great potential for eat out

today.

Hence in such a scenario, presentation and packaging is key. Thus, their future plans involve

better packaging efforts and giving the customer reasons for coming back by retaining classic

favorites and experimenting with new flavors constantly. Also, they are going to undergo

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flavor revamping. So now we would not just get the regular variants like chocolate,

strawberry and vanilla, but also green apple, bubblegum and blue mint and couple of other

fruit flavors also in the near future.

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COMPETITORS AND PROMOTIONS OF BASKIN ROBBINS

Even though when Baskin Robbins penetrated in India in the 2000’s, initially it was quoted

to be an expensive ice cream joint. The quality was up to the mark and traditionally as the

name suggested of having 31 flavors, each for each day of the month clearly didn’t carry out

the sparks in the Indian market scenario. There were many issues related to this. Baskin

Robbins became a brand that could be afforded only by the cream society. When they entered

the market with their price point at around Rs.60 per scoop, it didn’t get the much awaited

response by the Indian customers. A scoop of Baskin Robbins ice cream was compared to

that of a 500 gm pack of local ice cream like Amul or Kwality Walls. Also, there were local

Indian players apart from the much renowned Amul, Kwality Walls, Vadilal, Naturals

etcetera present then. Thus, after a rigorous market survey and brand revamping, more than

half of the Baskin Robbins outlets were closed down and a complete overall change was

brought in. The logo of Baskin Robbins got changed from

to the current new one i.e

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Also, there was a major shuffle in the flavoring section as they got done with the

conventional vanilla, chocolate, strawberry flavors and brought in flavors with a zing like

World Class chocolate, Almond praline etcetera. Not only this, Baskin Robbins also has

promotional offers that usually include like ‘Flavor of the Month’ or Flavors adopted from

the recent movie flicks or current trends floating in the market. One such example can be

given as during the release of Spiderman 3, Baskin Robbins introduced three new flavors

paying a tribute to the superheroes who come to life on the giant screens. Following were the

flavors influenced by the characters of the famous movie.

-Web-slinger: A tempting combination of blueberry and strawberry sorbets

-Green Gobbler: Twin flavored pistachio and vanilla ice creams.

- Sandstorm: Smooth silky honey butterscotch ice cream

Similarly during the reality show ‘Kya Aap Panchvi Pass Se Tez Hai’, Baskin Robbins tied

up with Star Plus in a joint promotion and came up with its special flavor known as ‘Panchvi

Pass’ flavor which was chocolate fudge brownie ice cream with fudge brownie pieces and

roasted almonds. Not only this, on the purchase of every scoop, a scratch coupon was

presented and had daily gifts like quiz books, DVD etcetera. Plus, the bumper prize was to

meet Shah Rukh Khan, the host of the show or to be an audience member in the hit reality

show. This way, Baskin Robbins tried as always to target its best audience i.e children to

promote the program as well as attract customers to its outlet. This was indeed a successful

effort.

Talking about competitors, Baskin Robbins does face competition from local, regional ice

cream brands such as Naturals, Amul, Kwality Walls, Gelatos etc.

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Baskin Robbins being a quality tastemaker and its price points over and above the rest of the

brands have made it difficult in the initial years when it kick started its business in India. But

after years, and the taste of an Indian consumer changing overtime, and international ice

cream brands like Gelato Italiano arriving in the Indian scenario, Baskin Robbins were now

more easily accessible by the consumer. This was due to the usual brands becoming common

to their taste buds and the zest for trying some new brands led to the slow and rising success

of Baskin Robbins. Gelato, a type of an ice cream which is said to be originated in Italy is

known to be low-fat calorie ice cream popular for calorie conscious people. Hence, their

target audience was minimal in the Indian market as a normal consumer here, buys an ice

cream to seek pleasure and not worry about its other factors. As it was fat-free ice cream, the

price range of gelatos was higher than that of Baskin Robbins. This led to the consumer shift

its focus to now a cheaper ice cream brand, Baskin Robbins.

Sales rose after the Gelatos entered the Indian market. But till now, apart from other ice

cream brands, what remains Baskin Robbins main competitor would be local coffee cafes

like Barista, Mochas, Café Coffee Day as they offer the pleasure to sit and talk over a cup of

coffee. Hence, due to the attractive ambience, a large number of average Indians prefer

spending their time in these cafes rather than a Baskin Robbins kiosks. Thus, in future they

do have plans to tie up with some major café dealers to set up mini Baskin Robbins with

popular flavors in their café itself. This will definitely widen scopes for Baskin Robbins

future growth.

The average annual expenses that Baskin Robbins initiates for advertisement in form of print,

media etcetera sums up to around Rs. 2 crore. Baskin Robbins operates its business by

having outlets in malls, kiosks or standalone stores and recently introduced Lounge formats.

The capital raised for the lounge formats is much more than that of the standalone stores.

Given below is the details needed to set up a Baskin Robbins franchisee.

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Baskin Robbins is one of the fastest growing food brands in India. Currently we have more

than 290 franchised outlets across the nation. More than 100 franchisees are multiple

franchisees who own more than one BR store. This in itself ratifies the kind of confidence

BR generates in the franchising world. Baskin Robbins is renowned for its World Class Ice

Creams, Sundaes, Beverages & Ice Cream Cakes.

Unit:

Investment: Rs. 8,50,000 - Rs. 16,00,000

Master:

Investment: -- Countries Available: India

Multi Units:

Investment: -- Countries Available: India, What areas are availablefor Unit franchise?:

Nationwide

North West East South Central

New DelhiHaryanaHimachal PradeshJammu and KashmirPunjabUttaranchal

GujaratRajasthanMaharashtraGoa

AssamMeghalayaMizoramTripuraArunachal PradeshManipurNagalandWest BengalSikkim

KeralaKarnatakaOrissaTamil Nadu

ChhattisgarhMadhya PradeshBiharJharkhand

Union Territories:Andaman & NicobarPondicherryChandigarhLakshadweepDaman and Diu

Is there a unit franchise fee included in this figure?

Yes Extra Amount : Rs 3,00,000

How much working capital is required in unit franchise addition to this?

Rs.50,000 – Rs.100,000

Is there exclusive territorial rights given to a unit franchise? No

Are any performance guarantees

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given to unit franchisees?No

What is the anticipated percentage return on investment?

30 - 35 %

What is the likely pay back period of capital for a unit franchise? 2-3 years

Are there other investment requirements? No

Property Details:

What type of property is required for this franchise opportunity? Café, Parlor, Kiosks

Floor area requirement:400

Preferred location of unit franchised

outlet:

200 SFT and above for Cafes & Parlors 64 SFT and above for Kiosks in Malls

Other Details:

Do you have a standard Franchise Agreement?

Yes

How long is the franchise term for? 3 years.

Is the term renewable? Yes, 3 years.

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Case Study- The Loot Stores

Loot Stores buoyed by the enthusiastic customer response to his ‘more for less’

value deals that run throughout the year, the company’s managing director, Jay

Gupta, now hopes to touch the magic figure of Rs 100 crores and 100 outlets

by 2009

Gupta is in fact in a buoyant mood. And for good reason! His chain of stores is

on a strong growth curve and has recently added 12,000 sq.ft. of retail space

with the opening of three new 4,000 sq. ft. outlets at Mumbai’s Malad, Mahim

and Sion suburbs in quick succession, taking their tally of outlets to 30. Not

bad for a company that had opened its first outlet just four years ago in 2004.

So what is The Loot all about? Explains Gupta, “The Loot is a multi-branded

discount store that offers its customers a wide range of merchandise with

discounts ranging between 25% and 60% throughout the year. The Loot’s

strength as a retailer lies in proper procurement and excellent supply chain

management system which helps in getting better pricing from the

manufacturer and thereafter passing the benefit on to the consumer. We

currently offer the perfect mix of unisex clothes in semi-formal, formal,

casuals, sports apparel, kids wear, footwear, accessories etc.”

Already a popular shopping destination for people keen on flaunting the latest

brands at a price that suits their pockets, The Loot stocks a slew of reputed

foreign and Indian brands that includes big names like Kappa, Bossini,

Addidas, Nike, CAT, ID, Spykar, Tuscan Verve, Bus Stop, W, Welspun,

Puma, Reebok, Eccentrics, Fila, Umbro, New Balance, Van Huesen, Mercedes,

Allen Solly, Allen Solly – women, Arrow, Lee, Lee Cooper, Wrangler, Pepe

Jeans, Parx, Park Avenue, Blackberry’s, Rifle, Ragz jeans, Recap and SF jeans

at heavily discounted prices 365 days of the year.

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“Each Loot store is designed around a centralized theme that advertises the

bargain or steals that are up for grabs by their customers,” Gupta adds. “The

scandalous décor of the stores displaying the vacuum pick up on the entrance

doors to the jailor cells changing rooms. The central grab your weapon display

in each store further establishes the criminal feel of stealing from the brands

via the Loot.” And if that’s not enough to convince you, there is the ‘Bad Man

of Bollywood’, Gulshan Grover, who endorses the chain, staring down at you

from strategic nooks and corners of every outlet.

Franchise network

A firm believer in the franchise business model, The Loot has a network of 12

franchised stores in cities like Bangalore, Mysore, Jabalpur, Raipur, Mumbai

(Chembur & Hughes Road), Surat, Ahmedabad, Aurangabad, Jalandar and

Amritsar of the 30 they operate pan-India. “At The Loot, we strongly believe

that our franchisees are not merely franchisees but our partners,” says Gupta,

further stating that “we started as a franchisee ourself with 12 super-brands and

understand the entire journey of the franchisee. Our franchisee model has been

specifically designed keeping in mind all these factors.”

Elaborating, Gupta reveals that his company follows a unique franchising

system and offers facilities that no other retailer does. “We are the only retail

organisation that offers our franchisees a 100% buy-back on unsold stock.

Moreover, we also have higher sales per sq.ft., thereby increasing the

productivity of the franchisee. Furthermore, we do not charge anything by way

of franchising fees and we also do the interiors of our outlets, and help our

franchisees in staff and systems training,” he explains.

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With regular promotions and advertising initiatives playing a key role in

business development, Gupta is also quick to stress that The Loot does not

differentiate between its own company-owned stores and a franchise outlet,

with all the promotional activites being the same across all their outlets.

“On the advertising and PR front, all the national advertising efforts are done

by the company,” according to him. “These include things like introduction,

celebrity expenses, PR and launch-related expenses which are borne by the

company. Local advertising is done on a 50:50 ration by both the company and

the franchisee, but not exceeding 2% of the franchisee turnover.”

Franchisee Selection

Choosing the right franchisee is an area where due diligence is done. Gupta

stresses that “we consider our franchisees as our business associates and

partners rather than mere investors and thus the selection depends on factors

like entrepreneurial spirit, personal involvement in the store, relevant retail

experience if any.”

So what does he look for specifically before appointing a new franchisee?

“Well, the person has to show serious interest, have some basic fashion

knowledge and a demonstrated capability of handling a team of atleast 20

people. He need not be from the same industry, but should have good market

credentials. For example, Om Prakash who runs one of my most successful

franchise outlets at Mysore, has a background in the construction business and

is now planning on opening two more outlets in the city.” Asked about the exit

options for a franchisee, Gupta replies: “We buy back 100% of the

merchandise, which incidentally no other franchisor does. Hence the franchisee

has most no liability except the cost of the interiors which in any case is quite

basic. He also gets back his Rs.5 lakhs refundable deposit.”

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Gupta has more by way of information. He avers, “We have very clearly

defined and planned the geographies for our presence. We intend to open our

outlets in all cities that have an airport, and every state capital and all the cities

and towns with a population of more than seven lakhs. As The Loot offers a

wide range of price points and product categories, we are adaptive to operate in

almost all geographies in India. The Loot follows a ‘buy and sell’ franchisee

model. We are the only Indian retailer to have the biggest franchisee outlet

with an operational capacity of 15,000 sq. ft.”

The company offers five basic store formats that include: Xtra Small (500-

1,000 sq. ft category stores), Small (1,000-2,500 sq. ft.

Men’s/Footwear/Accessories), Medium (2,500-4,000 sq. ft.

Men’s/Women’s/Footwear/Accessories), Large (4,000-8,000

Men’s/Women’s/Kids/Footwear/Accessories) and Xtra Large (8,000 sq. ft. +

Mens/Womens/Kids/Lifestyle Products/Coffee Shop and space for shop-in-

shops).

Journey So Far

It was in 1996, after completing his post-graduation from Mumbai’s S.I.E.S

College, that Gupta began his mission to set up a thriving business. A dream

that he pursued by opening franchisee stores for brands like Color Plus,

Adidas, Nike and Weekender. However, it wasn’t long before Gupta had to

fight a growing feeling of not being able to provide his customers with a

satisfying shopping experience, compounded by an increasing number of

complaints from customers about the lack of choice at affordable price points.

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It was this feeling of dissatisfaction that acted as a catalyst for the launch of the

first The Loot outlet in the year 2004, positioned as a ‘Value Retail’ store. This

was a move that has since been followed up with the launch of 30 outlets.

It’s clearly been a satisfying retail journey for Gupta thus far, one that has

brought a lot of accolades along the way. In 2005, The Loot was nominated in

the India Fashion Forum in the ‘Best Value Store in India’ category, and again

in 2006, when the company was re-nominated in the same category, this time

at the India Retail Forum (IRF). In the recent 2007 edition of the IRF, The Loot

bagged nomination in not one but three prestigious categories that included:

Most Admired Retailer of the Year: Retail Marketing Campaign, Most

Admired Retailer of the Year: Retail Design and Visual Merchandising and

Most Admired Retailer of the Year: Innovative Concept.

Way ahead

Already on a track to touch a total turnover of nearly Rs. 60 crores before the

end of this financial year, The Loot has now set its sights on achieving Rs. 100

crores by 2009. “We also hope to have 100 stores by then,” adds Gupta stating

that his unique business model is designed to succeed in any metro, tier-II and

tier-III town within the country. While acknowledging the cut-throat

competition in the branded apparel business, Gupta counters by saying that the

trick of survival in the face of increasing competition is to add USPs into your

own business plan. “It is this strategy that has made The Loot a distinct player

in the field of value retailing in the multi-branded store category,” he claims.

As for ensuring that his ambition future plans are met without a hitch, Gupta

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informs that the company has invested skillfully into IT, besides giving an

added focus on effective personnel training and cementing the back-end of

their operations. As for his success mantra, Gupta quips, “Life is always tough,

but one can make it easier by sharing one’s dreams and creating co-dreamers to

move up on the success path.”

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BIBLIOGRAPHY

I. Websites

www.franchiseindia.com

www.wikipedia.com

www.franchisebusiness.com.au

www.franchiseek.com

www.franchise-update.com

www.economictimes.indiatimes.com

www.franchisebusiness.in

www.fai.co.in

www.exchange4media.com

II. Books, Journals, Magazines

Pramod Khera, Franchising- The Route Map to Rapid Business Excellence

Economic Times

Business Outlook - Edition II – Issue date May 2008

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http://www.exchange4media.com/

http://www.fai.co.in/

http://www.franchisebusiness.in/

http://www.economictimes.indiatimes.com/

http://www.franchise-update.com/

http://www.franchiseek.com/

http://www.franchisebusiness.com.au/

http://www.wikipedia.com/

http://www.franchiseindia.com/

Franchising in India W.R.T. Baskin Robbins Shiny

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