Franchising

Students Roll No

Khan Razique 2015

Adal Godavari 2001

Rajesh Nagraj 2020

Khan Aqib 2002

The concept of Franchising as we know today 1st started in Germany in 1840.

In 1851, Singer Sewing Machine Co. began granting distribution franchises for its sewing machines. Thus began the modern concept of franchising.

The root word “Franchise” comes from old French meaning privilege/ freedom. In middle ages a franchise was a privilege/ a right.

Essentially a marketing concept, Franchising is an innovative method of distributing goods and services.

Evolution of Franchising

Legal definition of Franchise:

Black’s Law Dictionary 7th edition 1999 defines Franchise as, “the sole right granted by the owner of a trademark or trade name to engage in business or to sell a good or service in certain area.”

Side Selection Overseas and approves, Choose side with may choose side Franchiser’s approval Design Provides prototype Hires, manages, and fires design employees

Products & Services Determines product Modifies with only or service line Franchiser’s approval

Price Can only recommend Sets final price priceAdvertising Develops & Coordinates Pays for national ad national ad campaign campaign

Element The Franchiser The Franchisee

RELATIONSHIP BETWEEN FRANCHISER AND FRANCHISEE

Quality Control Sets quality standards Maintain quality and enforces them with standard ; trains Inspection employees to implement quality systems Support Provides support & Operates business on a through an established day-to-day basis with business system franchiser’s support

Element The Franchiser The Franchisee

.There are approximately 1150 national and international business format franchise systems in India in 2012.

Around 8 to 10 per cent Indian franchise systems have entered international markets.

There are an estimated 70, 000 units operating in business format franchises.

The growth rate in franchised units from 2010-11 to 2011-12 was 30 to 35 per cent for the last 4-5 years.

Some 500000 persons are employed in business format franchise organizations.

Franchising contributed less than 4 per cent to India’s Gross Domestic Product (GDP) in 2012.

Annual turnover is approximately us$ 4 billion

FRANCHISING BOOM IN INDIA

Franchising and the law Uniform Franchise Offering Circular

(UFOC) • Requires franchisers to disclose to

potential franchises information on 23 important topics

• Idea is to give franchises the information they need to protect themselves from dishonest franchisers and to make good investment decision

CAREFUL THINGS IN FRANCHISING

The franchisee is not completely independent.

In addition to the initial franchise fee, franchisee must pay ongoing royalties and advertising fees.

Franchisee must be able to balance restrictions and support provided by the franchisor with their own ability to manage the business

A damaged image or franchise system can result if other franchisees perform poorly or the franchisor has financial problems.

The duration of a franchise is usually limited and the franchisee may have little or no say concerning termination

ADVANTAGES OF FRANCHISINGYour business is based on a proven idea. You can check how successful

other franchises are before committing yourself.

You can use a recognized brand name and trade marks. You benefit from any advertising or promotion by the owner of the franchise - the 'franchisor'.

The franchisor gives you support - usually including training, help setting up the business, a manual telling you how to run the business and ongoing advice.

You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.

Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.

DISADVANTAGES OF FRANCHISING Costs may be higher than you expect. As well as the initial costs of

buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor.

The franchise agreement usually includes restrictions on how you run the business. You might not be able to make changes to suit your local market.

The franchisor might go out of business.

Other franchisees could give the brand a bad reputation.

You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor.

All profits are shared with the franchiser

The Right Way to Buy a Franchise

Evaluate yourself – What do you like and dislike? Research your market. Consider your franchise your options. Get a copy of the franchiser’s Uniform Franchise

Offering Circular (UFOC) and read it. Talk to existing franchisees. Ask the franchiser some tou8gh questions. Make your choice.

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