Franchising is the marriage of both the franchisor and the
franchisee.-Dwarika Prasad Uniyal Asst, Prof., Retail Management,
Mudra Institute of Communication, Ahmedabad.
Presented by: Ram Niwash Singh Yadav Rol 21, FMS 1
Franchising overview Retail Franchising Retail Franchising in
India Franchisor-Franchisee Relationship Franchising case study:
Levis Strauss & Co.
It is the granting of certain rights (commercial, technical,
nontechnical & intellectual knowhow) 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.
Franchisor This is the proprietor/owner of the franchised
system. It owns the know-how of the concept and the brand name. It
grants franchises to third parties. Franchisee This entity is
granted by the franchisor the right to carry on business using the
franchisor's know-how under the franchisor's brand.
Ranking 1 2 3
Value Proposition (Franchisors View) Brand Name Economies of
Scale Proven Business Format
Value Proposition (Franchisees View) Brand Name Economies of
Scale Proven Business Format
Source: Annual Surveys of the Indian Franchise Sector, conducted
by FirstFranchising
Ranking Value Proposition (Franchisors View) 1 2 3 Local Market
Knowledge Business Experience / Background Investment / Real
Estate
Value Proposition (Franchisees View) Investment / Real Estate
Business Experience / Background Local Market Knowledge
Source: Annual Surveys of the Indian Franchise Sector, conducted
by FirstFranchising
CUSTOMER RELATIONSHIP MANAGEMENT
SUPERIOR LEADERSHIP
BUSINESS AND FINANCIAL PLANING
EXCELLENT FRANCHISES
OPERATING SYSTEM THAT MANAGE RESULTS
EFFECTIVE MANUALS
EXCELLENT FRANCHISOR FRANCHISEE RELATION
FOCUS FIELD STUFF
EFFECTIVE TRAINING PROGRAMME
Model Player Input Premises Interiors Equipment Stocks
Management Franchisee s Returns
Pure Franchise Franchisee Franchisor
Management Contract Franchisee Franchisor Franchisee
Hybrid* Franchisor
D
U U U U U
U U
U U U
(50%) (50%) U
U (50%) (50%) U
(Consignment)
Margin on Sales
Rent + %age of Sales
Higher of Minimum Guarantee or Margin on Sales
*many more varieties of the hybrid model exist.
Evaluation
of own skills, interests, and financial
situation Research of opportunities Research of the market
Selection of prime location Securing of financing and choosing a
franchise Attending training/hiring staff Collecting the necessary
permits and insurance
International soft drink and hotel franchises arrived in India
as early as in 1960s But in 1977 the Government of the day had
expelled foreign brands from India. The foreign brands started
returning gradually from the mid 80s. In 1990s as the market
opened, foreign franchises started coming in gradually, and faced
many difficulty along the way especially KFC, Schweppes etc.
Pepsi, Coke, Baskin Robbins, Movenpick, Subway, McDonalds, TGIF,
Geoffrey's, Taco Bell, Pizza Hut, Pizza Piazza, Dominos Pizza, KFC,
Schweppes, OBrians Sandwich Bar, Ruby Tuesdays & Barista, Levis
Strauss Co., PUMA, Marks & Spencer, West Side, Evita Peroni,
Pepe Jeans and Adams, Reebok, Air Action and DHL
Approximately 600 franchisors spread across industries like
education, retailing, professional services, healthcare etc Over
40,000 franchisees Annual turnover from Franchising anywhere
between Rs.8000-Rs.10,000 crores Total investments made by
Franchisees over Rs.5000 crores Over 300,000 people directly
employed by franchised businesses Variety of hybrid formats in
practice Number of International franchises already existing, more
coming in Acceptability growing by the day Fairly conventional
industry spreadSource: Annual Surveys of the Indian Franchise
Sector, conducted by FirstFranchising
The Education sector dominates the Indian franchising scenario,
although Retail is fast catching up Most of the franchisors are
relatively new and small Several large Indian corporates are also
going the franchising way Newer & innovative concepts being
introduced Substantial interest from international franchisors as
well as Indian business houses for master franchises
Positive
Factors
Huge consuming class Fast-growing consumerism Shift towards
Services from Agriculture &
Manufacturing Franchising has already proven to be successful in
several sectors Large entrepreneurial pool
Negative
Factors
Lack of regulatory framework Financing mechanisms not in place
Skewed real estate markets
Herd mentality both franchisors as well as franchisees Several
wrong standards of franchisors as well as franchisees To an extent:
many franchisees commitment to service quality is
missing many franchisors commitment to provide the promised
support to their franchisees is in doubt
Result a tense relationship, which doesnt help anyone
Financing for franchises is a problem area with financial
institutions soft expenses not recognised as part of project cost
by
many institutions
Legal & disclosure framework for franchises is not in place
increases chances of fraud by fly-by-night franchisors
makes it difficult to resolve disputes
Real Estate markets completely unstructured & unrealistic
make Franchising unviable for start-up entrepreneurs
Need
for a Controlling Body on Franchising to identify problem and
decide solution for open norms & legal framework on the
regulatory side importantly, Franchisors as well as Franchisees
need to understand & honour promise & responsibilities
towards each other
Need
Most
Franchise
India Holdings Limited (FIHL) is Asias largest integrated
franchise and retail solution provider since 1999. Franchise India
is an authority on franchising, licensing, retail, real estate and
marketing.
Levi
Strauss Asia Pacific Division was established in 1995 Strauss
& Co.'s Asia Pacific Division is comprised of subsidiary
businesses, licensees and distributors throughout Asia Pacific, the
Middle East and Africa. division sources, manufactures and markets
Levi's, Dockers, and Levi Strauss Signature products through
affiliates.
Levi
The
Design developed in Europe
Asia-Pacific head choose design
Arrange fashion show in Mumbai & Delhi
Fashion show attended by Franchisor & Franchise
Franchisee like some product
Franchisee gives order based on sales data and forecasting
Franchisor, Asia division accepts and gives order to vendor
Franchisor source raw material & give to vendor
Vendor manufacture s & give to franchisor
Franchisor distribute product to franchise
Franchisee sell product and earn profit
Franchisee gives margin on sales to franchisor
