AGENDA

Agenda Introduction What is it ? Examples Top Rated Franchise Sucess Rate Industry overview Suitability

• Revenue Streams• ROI• Types• COMMON FACTORS• Is it a Good Time?• Summary• Questions & Answers• THANK YOU!

INTRODUCTION

FRANCHISE SYSTEM = FRANCHISE + FRANCHISOR + FRANCHISEE

INTRODUCTIONo A franchise is a license granted by a

business to another business to make and sell goods/services.

o A franchisor is the owner of the business who grants the license.

o A franchisee is the person who purchases the business name.

WHAT IS IT

Normally referred to as“Business Format Franchising”

A contractual long-term relationship Grant of a licence to franchisee Franchisee gets:

Tried and tested product/service Profitable proven business model to follow Experience and know-how of the franchisor Entitlement to use the trade name / mark Entire package

EXAMPLES

EXAMPLES

TOP Rated Franchise ( 2009 )

Industry Overview

At the end of 2007 in the UK: Industry worth £12.4bn

806 franchise systems Property services 202 Personal services 159 Business and commercial services 156 Hotels and catering 115 Store retailing 101 Transport and vehicle services 73

Industry Overview

Regional Distribution of Franchised Units (%), 2005 – 2007 South East 20 South West 13 London 12 North West 10 East Midlands 8 Scotland 8 Yorkshire 8 West Midlands 7 North/North East 5 Wales 5 East Anglia 3 Northern Ireland 1

SUITABLE?

1. Is it a financially viable business? - Would it still be viable with an additional 15% costs?

2. Is there long-term and widespread demand for your product / service?

3. Can you prove that it can work in other parts of the country and without your skills and ability?

4. Are the business processes easily replicable?5. Can an unskilled person easily be trained

to run the business / sell the productor service?

NOT SUITABLE

A business that is failing Low gross margins

(e.g. newspaper delivery) Where product range has short life-cycle

(e.g. toy) Geographically defined market - no potential to

repeat in other places (e.g. Tower of London gift shop)

High technical skill levels required (e.g. brain surgery)

Not proven (e.g. only been trading for 3 months old)

YET!

TYPES Investment Franchise

Investment franchises are operated by the fast-food and restaurant chains, as well as by some well-known hotels. The franchisee has overall control of the business Employs his or her own senior management and staff.

Executive Franchise Involves the provision of professional services, Financial advice, legal services or recruitment assistance.

TYPES Retail Franchise

The franchisee runs the outlet, employs staff and displays goods approved by the franchisor.

Distribution Franchise A distribution franchise permits the franchisee to operate from a depot or central office that is usually owned by the franchisor.

Depot Franchise The franchisee is the operator and sole occupant of the

depot. This type of franchise is generally available to courier companies and parts suppliers, for whom a depot is an essential part of the business.

TYPES Job Franchise

Usually a one-person business, operated by the franchisee from home. Home-delivery operations, such as lawn care, car repairs or furniture refurbishing, are examples of job franchises.

Management Franchise A management franchise is where the franchisee will be

responsible for both running the franchise and employing and managing a team of operatives.

REVENUE STREAMS Initial Franchise Fee

Average cost is £52,500 On-going Fees

Management Services Fee (Royalty) Average 7.5% of Gross turnover (never profit)

National Marketing Levy Average 1.9% of Gross turnover

Mark-up on Goods Service Fees

Training Fee Others: e.g. re-sales (transfer fees)The franchisor should not be looking to make a profit from the initial fee.

Source: (Nat West Survey 2008)

R.O.I

Example Return on Investment - Smith & Jones Ltd

£0£5,000

£10,000£15,000£20,000£25,000

£30,000£35,000£40,000

£45,000£50,000

1 2 3 4 5 6 7 8 9 10 11 12

Costs

Income

COMMON FACTORS

Successful Franchises View franchising as a long term partnership Provide comprehensive training Undertake ongoing research & development Franchisors income linked to the success of the

franchisees

COMMON FACTORS

Failed Franchises View franchising as an income stream to prop up a

failing business The business is not proven The business has limited longevity After initial training, they leave the franchisee on their

own Have little or no financial incentive in the success of

their franchisees Do not undertake ongoing research & development

IS NOW A GOOD TIME?

People being made redundant, have a pay off and its difficult to find new jobs

Businesses have less money to expand using company owned expansion

The success rates are higher for both franchisors and franchisees than for non franchise businesses

For Franchising to succeed still need to apply proper / sound business practices

IS NOW A GOOD TIME?

Your Local Business with National Backing

45% of People would prefer to buy from a franchise businessSource: bfa Franchise Awareness Survey 2006

SUMMARY A well established industry Create a national or international

brand Cost Effectively Quickly

A number of elements to developing a ‘successful’ franchise

Sources of Help and Advice

Do you Do you have any have any questions?questions?

!!!!!!!!!!!!!!!!!

For More HelpContact-ROHIT VARSHNEY+91-9911158061