Date post: | 30-May-2018 |
Category: |
Documents |
Upload: | saptarshi-bagchi |
View: | 215 times |
Download: | 0 times |
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 1/27
11
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 2/27
2
The general concept
In simple terms it is the granting of ceanother (the franchisee) in return for a sthose rights under the guidance of the fr
The consumer's perception should be tcontrary, there is no difference betweenfranchised one. The decor of the shop pr the goods or services and uniforms of town outlets. The franchisor is rentingformat; hence the name 'business formbusiness format is for a limited period of actual ownership of the format or associthose of a tenant when leasing a house.full enjoyment of the demise, but the dayover the property at all.
r
tain rights by one Party (the franchisor) toum of money. The franchisee then exercisesnchisor.
hat, save for any express statement to thene of the franchisor's corporate outlets and a
emises, the livery of vehicles, the selection of e staff should be identical to the franchisor'she franchisee the right to use its businesst franchising'. However that right to use thetime. The franchisee gains no interest in theted marks. The rights he enjoys are similar toDuring the period of the lease the tenant hasafter the expiry of the lease he has no rights
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 3/27
3
The commercial bargain
In crude commercial terms thefranchisee entering into a contramake a profit. The franchisee maor services to the customer. Thefranchisee to use its package orights. The bargain is struck betwsupposedly equal bargaining psuccessful and established the
the franchisee and the wider thfranchisor enjoys. To obtain anowadays a major achievement.
r
eason for both the franchisor andtual relationship with each other is tokes a profit from supplying the goodsfranchisor makes it from allowing the
know-how and intellectual propertyeen two independent legal entities of wer. In reality however, the moreranchise becomes, the more eager
choice of potential franchisees thecDonald's franchise for example is
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 4/27
4
Creation of a new business specifically for franchisors
An entirely new product or service can be createbusinesses such as Snappy Snaps in the UK - whassociated products such as picture frames and tit operates a contract cleaning business. Ver franchised concept in another market such as thown jurisdiction.
Development of an existing business
This is perhaps the most usual way of evolvingdeveloped by use of the franchising method. Sbusiness, the restaurant businesses and so on.
Conversion of existing business to the franchise format
Sometimes an established business can decide tThresher off-licence chain in the UK is a good exaof a desire to accelerate growth and reduce overh
Importation
This is a very common method of evolving a fragreat exporter of franchise concepts around thePizza Hut and McDonalds are all American expor has established itself around the world.
d
specifically for franchising. This has been done withich provides 1 hour film processing services and retailse like in the high street. Dublcheck is another example,
often a local businessman identifies a successfule USA, and decides to create a similar concept in his
a franchise. An existing product or service is further uch businesses include the Dyno-rod drain cleaning
convert its managed outlets to franchised outlets. Themple of this. Such decisions are usually taken becauseads without sacrificing quality control.
chise in the specific territory. The United States is theorld. Brands such as KFC, Holiday Inns, Hilton Hotels,ts. Body Shop is an example of a British franchise that
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 5/27
5
Automotive products and services
Automotive supplies, tyres, parts, tools, etc.,
systems, rust proofing, sun-roofing fitting, tax
cleaning, vehicle rental, vehicle repair, vehi
repair, chauffeur hire.
Business aids and services
Accountancy, bookkeeping, advertising serv
centres, business brokerage, business couns
and debt counselling, job recruitment, tem
services, tax services, word processing bureau
Construction, home improvement and maintenanc
Air conditioning services, bathrooms and b
cleaning, chimney lining, heat and energy c
domestic boiler servicing, double glazing, dr
environmental cleaning, fireplaces, fitted kitch
other doors, gutters, insulation, loft conversion
concrete, roof insulation and repair, tiles, timb
x
le alignment, car valeting, engine tuning, exhaust
hire, transmission repairs, tyre remoulding, vehicle
le security, windscreen replacement, windscreen
ices, information bureaux, display cards, postal
lling, computer bureaux, data processing, financial
orary staff, office communications, photographic
x.
products and services
th renovations, brick and stone pointing, ceiling
nservation, condensation control, damp proofing,
ught exclusion, drain cleaning, electrical services,
ns, flooring materials and laying, garage doors and
, pavement surface repairs, plumbing, ready-mixed
r preservations, water softening equipment.
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 6/27
6
Education services
Educational tuition, kindergartens, management s
Entertainment, recreation, etc.
Hotels, whirlpools, adventure games indoors and
Fast foods, restaurants and takeaways
Chicken, coffee, croissants, hamburgers, ice creasandwiches, steaks, general restaurants.
Food stalls
Baked goods, confectionery, convenience stores,fresh juices.
Health, medical and beauty care Acupuncture and hypnotherapy, ambulance ser
hairdressing, optical goods, skin care, fitness equi
Household services
Carpet cleaning, curtain design and fitting, domfurniture stripping and restoration, upholstery and
i
ll training, secretarial training.
utdoors.
m, orange juice, pancakes, pizzas, popcorn, potatoes,
dairy produce, eggs, fish, grocery stores, health foods,
ice, beauty centre, fitness health clubs and studios,ment.
estic cleaning services, furniture and fabric cleaning,inyl repair.
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 7/27
7
Retailing (products and services not
Aquatic centres, bag stores amaternity wear, fashion wear, spand for hire, computer hardware
products, dry cleaning, giftware,wools, instant print and copying sbadges, picture framing, photogsewing machines, telephones anand equipment, window blinds.
Miscellaneous Driving schools, equipment le
publishing, local newspapers, ethire and instant accommodatiosupport services, wholesaling of equipment, will writing and storag
specified elsewhere)
d luggage, batteries, bridal wear,orts wear, ties, formal wear for saleand software, cosmetics and beauty
housewares and furnishings, knittinghops, linen, original art, personalisedaphic development, family histories,d car telephone services, video films
asing and hire, estate agencies,., security equipment services, tent
n hire, travel agencies, veterinaryarpets, biscuits, electrical and video
e.
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 8/27
Very well accepted Entrenched deeply withi Fairly well structured in t
In USA:¾ $1 Trillion is spent ea
outlets¾ One out of every 12 b
business¾ A new franchise busin
business day
¾ 50% of retail trade is thr High growth areas are S
Middle East US franchisors lead the
USA & Western Europeerms of framework
h year on goods bought at franchised
usiness establishments is a franchised
ess opens every 8 minutes of every
ugh franchised outletsouth-East Asia, Latin America & the
ay in International expansion
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 9/27
9
International soft drink and hotelin the 1960s, but in 1977 theforeign brands from India. Thgradually from the mid µ80s. In
foreign franchises started comhiccups along the way especially
The well-known franchises relatior restaurants include Pepsi,Subway, McDonalds, TGIF, GePiazza, Dominos Pizza, O¶Brian¶Barrista. Retail franchises includPeroni, Pepe Jeans and Adamand DHL are there along wifranchises. The Government hasin relation to the retail industry an
ranchises arrived in India as early asovernment of the day had expelled
foreign brands started returningthe 1990¶s as the market opened,
ing in gradually, and faced manyKFC, Schweppes etc.
g to soft drinks, ice-cream parloursoke, Baskin Robbins, Movenpick,ffry¶s, Taco Bell, Pizza Hut, Pizza
s Sandwich Bar, Ruby Tuesdays andMarks & Spencer, West Side, Evita
. Courier companies like Air Actionh computer and software relatedliberalised the rules and regulations
d a boom in this sector is on its way.
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 10/27
Acceptability growing by th Fairly conventional industr Approximately 600 franc
education, retailing, profes
Over 40
,000
franchisees Annual turnover from FraRs.10,000 crores
Total investments made by Over 300,000 people direc Variety of hybrid formats in Number of International fr
in
Source: Annual Surveys of the Indian Franch
e dayspread
hisors spread across industries likesional services, healthcare etc
chising ± anywhere between Rs.8000-
Franchisees ± over Rs.5000 crorestly employed by franchised businessespracticenchises already existing, more coming
ise Sector, conducted by FirstFranchising
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 11/27
Positive Factors
¾ Huge consuming class
¾ Fast-growing consumeri
¾ Shift towards Servi
Manufacturing
¾ Franchising has alread
several sectors
¾ Large entrepreneurial p
m
es from Agriculture &
proven to be successful in
ol
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 12/27
Negative Factors
¾ Lack of regulatory frame
¾ Financing mechanisms
¾ Skewed real estate mar
work
ot in place
ets
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 13/27
The Education sector doscenario, although Retail i
Most of the franchisors are
Several large Indianfranchising way
Newer & innovative conce
Substantial interest from inas Indian business houses
Franchising is now spreaproviding opportunities to
inates the Indian franchisingfast catching up
relatively new and small
orporates also going the
ts being introduced
ternational franchisors as wellfor master franchises
across the country, therebyntrepreneurs everywhere
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 14/27
Franchising allows the
¾ Have greater access to
¾ Expand rapidly
¾ Save operating costs
¾ Capitalise on the
entrepreneurs
ranchisor to:
apital
abilities of independent
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 15/27
Franchisees joining a f following benefits:
¾ Backing of a bigger orga
¾ Shorter learning curve
¾ Established trade mark
¾ Economies of scale
¾ Joint advertising and pr
¾ Transfer of managemen
¾ Training & support from
anchise system enjoy the
nisation
r service mark
motion
expertise
he franchisor
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 16/27
Grew initially in the appare Has gradually grown to c
food, consumer durables, j Two varieties of Retailers:
¾ the manufacturer-retailershave been around for a whi
¾ the aggregators ± typicallbeginning to show up
Existent & likely to be succ Substantial action also ha
¾ Thereby spreading organis
Has had to contend with tmarkets¾ Result ± MG (Minimum Gu
l & footwear sectorsver a wide variety of sectors including
ewelry, books, home décor etc
± typically Product Distribution Franchises ±ley Business Format Franchises ± only now
essful only in smaller formatspening in non metro locationsd retailing over a larger footprint
e peculiarities of the Indian real estate
rantee) has become the key driver
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 17/27
Model Pure Franchise Management Contract Hybrid*
Player Franchisee Franchisor Franchisee Franchisor Franchisee Franchisor
Input
Premises D U U U Interiors U U (50%) (50%) Equipment U U (50%) (50%) Stocks U U U
(Consignment )
Management U U U Franchisees
Returns Margin on Sales Rent + %age of Sales Higher of Minimum Guarantee or
Margin on Sales
Model Pure Franchise Management Contract Hybrid*
Player Franchisee Franchisor Franchisee Franchisor Franchisee Franchisor
Input
Premises D U U U Interiors U U (50%) (50%) Equipment U U (50%) (50%) Stocks U U U
(Consignment )
Management U U U Franchisees
Returns Margin on Sales Rent + %age of Sales Higher of Minimum Guarantee or
Margin on Sales
*m any m ore varieties of the hybrid m odel exist.
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 18/27
Comprises of sectors
Beauty and Profession
Is widely practiced acountry
Differs from Retail fra
importance given to th
Pure franchises /
followed
like Education, Health &
l Services
d accepted across the
nchising in terms of the
location
Management contracts
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 19/27
IT Education ± Down for tlikely to re-emerge through
Retail ± Going strong butreal estate markets
Vocational / Preparatorystrong because of hugecompetition in public exami
F&B ± Low level of activitterm potential
Professional Services ± Lbut attractive long-term pot
e moment but surely not out;IT Enabled Services
getting hurt because of the
Education ± Fundamentallypopulation base and high
nations
currently but attractive long-
ow level of activity currentlyential
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 20/27
Ranking Value Proposi
(Franchisors
1 Brand Name
2 Eco nomies of S
3 Prove n Busine s
Source: Annual Survey s of the I ndian F ranch i
tion
iew)
Value Proposition
(Franchisees View)
Brand Name
ale Economie s of Scale
F ormat Prove n Busine ss F ormat
ise Se ctor, conduct e d by F irstFranch ising
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 21/27
Ranking Value Proposi
(Franchisors
1 Local Marke t K
2 Busine ss Expe ri
Background
3 I nve stme nt /
Re al Estat e
S ource: Annual S urvey s of t he I ndian F ranch i
tion
iew)
Value Proposition
(Franchisees View)
owle dge I nve stme nt /
Re al Estat e
e nce / Busine ss Expe rie nce /
Background
Local Marke t K nowle dge
ise Se ctor, conduct e d by F irst F ranch ising
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 22/27
Ranking Factors
1 A We ll Estab lish
2 Constant Ne w P
3 I nnovative Prod
4 Quality of Franc
5 Transpare ncy
6 Re turn on I nve s
Source: Annual Surve ys of the I ndian Franchise Se ctor,
e d Busine ss Ne twork
roduct De ve lopme nt
ucts / Se rvice s
hisee s
tme nt to Franchisee s
onduct e d b y FirstFranchising
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 23/27
Ranking Causes of Fric
1 Transpare ncy
2 Training and S
3 Re ve nue Sharin
4 Product / Se rvi
Source: Annuals Surve ys of the I ndian F ranc
tion
pport
g
e De live ry
ise Se ctor, conduct e d b y F irst F ranchising
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 24/27
Herd mentality ± both franchis
Several wrong precedents of f
To an extent:¾ many franchisee¶s commitment
¾ many franchisor¶s commitmentheir franchisees is in doubt
Result ± a tense relationship,
rs as well as franchisees
anchisors as well as franchisees
to service quality is missing
to provide the promised support to
hich doesn¶t help anyone
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 25/27
Financing for franchises isinstitutions¾ soft expenses not recognis
institutions
Legal & disclosure frameplace¾ increases chances of fraud b
¾
makes it difficult to resolve di
Real Estate marketsunrealistic¾ make Franchising unviable f
a problem area with financial
d as part of project cost by many
ork for franchises is not in
y fly-by-night franchisors
sputes
ompletely unstructured &
r start-up entrepreneurs
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 26/27
Need for a Working Gr Franchising to identify cothem
Need for disclosure nor regulatory side
Most importantly, Fr Franchisees need to ucommitments & responsi
oup / Regulatory Body onrrect priorities and lobby for
s & legal framework on the
anchisors as well asnderstand & honour their bilities towards each other
8/9/2019 India Retail Franchising
http://slidepdf.com/reader/full/india-retail-franchising 27/27
2727