franchising business model- ratnendu final
TRANSCRIPT
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8/8/2019 Franchising Business Model- Ratnendu Final
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TANMAYTANMAY DUTTADUTTA
SAIKATSAIKAT HAZRAHAZRA
ASHIRBADASHIRBAD BHOWMIKBHOWMIK
AVRAAVRA KUMARKUMAR MAJUMDERMAJUMDER
RATNENDURATNENDU DASDAS
CONTRACTUAL MARKETING SYSTEM: FRANCHISING
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Franchising is a marketing system revolving around a two-party
legal agreement, whereby the franchisee conducts business according
to the terms specified by the franchisor
It is a business system where under the franchisor grants a license tothe franchisee to use the franchisors diverse intellectual property
rights, namely, know-how, designs, brands, trade marks, patents, and
trade secrets along with the franchisors proven name, reputation and
marketing techniques to market the franchisors products or services in
return for a sum of money. The franchisor provides training and
continuous assistance to the franchisee.
In simple terms it is the 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.
FRANCHISING BUSINESS MODEL: DEFINED
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Why
FranchiseVs
Traditional
Methods ?
Economies of Scale
A Proven System Established Brand Awareness
Independence
Control/ Autonomy
Faster ROI
Training/ Franchisor support
Peer Support Product/ Service selection
Site selection
Culture fit
Exit strategy/ Resale value
Legal procedure
Marketing assistance
Speedy market entrance and penetration
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Franchisee
An entrepreneur whose power is limited by a contractual agreement with
a franchisor.
Franchisor
The party in the franchise contract that specifies the methods to be
followed and the terms to be met by the other party.
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The legal agreement between franchisor and franchisee
The consumer's perception should be that, save for anyexpress statement to the contrary, there is no difference betweenone of the franchisor's
corporate outlets and a franchised one.
The decor of the shop premises, the livery of vehicles, the selection ofthe goods or services and uniforms of the staff should be identical tothe franchisor's own outlets. The franchisor is renting the franchiseethe right to use its business format; hence the name 'businessformat franchising'. However that right to use the business format isfor a limited period of time. The franchisee gains no interest in the
actual ownership of the format or associated marks. The rights heenjoys are similar to those of a tenant when leasing a house.During the period of the lease the tenant has full enjoyment of thedemise, but the day after the expiry of the lease he has no rightsover the property at all.
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Education services
Educational tuition, kindergartens, management skill training, secretarial training.
Entertainment, recreation, etc.
Hotels, whirlpools, adventure games indoors and outdoors.
Fast foods, restaurants and takeaways
Chicken, coffee, croissants, hamburgers, ice cream, orange juice, pancakes, pizzas, popcorn, potatoes, sandwiches,
steaks, general restaurants.
Food stalls
Baked goods, confectionery, convenience stores, dairy produce, eggs, fish, grocery stores, health foods, fresh juices.
Health, medical and beauty care
Acupuncture and hypnotherapy, ambulance service, beauty centre, fitness health clubs and studios, hairdressing,
optical goods, skin care, fitness equipment.
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Automotive products and services
Automotive supplies, tyres, parts, tools, etc., axle alignment, car valeting, engine tuning,exhaust systems, rust proofing, sun-roofing fitting, tax hire, transmission repairs, tyreremoulding, vehicle cleaning, vehicle rental, vehicle repair, vehicle security, windscreenreplacement, windscreen repair, chauffeur hire.
Business aids and services Accountancy, bookkeeping, advertising services, information bureaux, display cards,
postal centres, business brokerage, business counselling, computer bureaux, dataprocessing, financial and debt counselling, job recruitment, temporary staff, officecommunications, photographic services, tax services, word processing bureaux.
Construction, home improvement and maintenance products and services
Air conditioning services, bathrooms and bath renovations, brick and stone pointing,ceiling cleaning, chimney lining, heat and energy conservation, condensation control, dampproofing, domestic boiler servicing, double glazing, draught exclusion, drain cleaning,electrical services, environmental cleaning, fireplaces, fitted kitchens, flooring materialsand laying, garage doors and other doors, gutters, insulation, loft conversion, pavementsurface repairs, plumbing, ready-mixed concrete, roof insulation and repair, tiles, timberpreservations, water softening equipment.
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Retailing (products and services not specified elsewhere)
Aquatic centres, bag stores and luggage, batteries, bridal wear, maternity wear, fashion
wear, sports wear, ties, formal wear for sale and for hire, computer hardware and software,
cosmetics and beauty products, dry cleaning, giftware, housewares and furnishings, knitting
wools, instant print and copying shops, linen, original art, personalised badges, picture
framing, photographic development, family histories, sewing machines, telephones and car
telephone services, video films and equipment, window blinds.
Household services
Carpet cleaning, curtain design and fitting, domestic cleaning services, furniture and fabric
cleaning, furniture stripping and restoration, upholstery and vinyl repair.
Miscellaneous
Driving schools, equipment leasing and hire, estate agencies, publishing, local newspapers,
etc., security equipment services, tent hire and instant accommodation hire, travel agencies,
veterinary support services, wholesaling of carpets, biscuits, electrical and video equipment,
will writing and storage.
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Creation of a new business specifically for franchisors
An entirely new product or service can be created specifically for franchising. This has been done with businessessuch as Snappy Snaps in the UK - which provides 1 hour film processing services and retails associated products such
as picture frames and the like in the high street. Dublcheck is another example, it operates a contract cleaning
business. Very often a local businessman identifies a successful franchised concept in another market such as the
USA, and decides to create a similar concept in his own jurisdiction.
Development of an existing business
This is perhaps the most usual way of evolving a franchise. An existing product or service is further developed by useof the franchising method. Such businesses include the Dyno-rod drain cleaning business, the restaurant businesses
and so on.
Conversion of existing business to the franchise format
Sometimes an established business can decide to convert its managed outlets to franchised outlets. The Thresher off-
licence chain in the UK is a good example of this. Such decisions are usually taken because of a desire to accelerate
growth and reduce overheads without sacrificing quality control.
Importation
This is a very common method of evolving a franchise in the specific territory. The United States is the great exporter
of franchise concepts around the world. Brands such as KFC, Holiday Inns, Hilton Hotels, Pizza Hut and McDonalds
are all American exports. Body Shop is an example of a British franchise that has established itself around the world.
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Product and Trade Name Franchise
Grants the right to use a widely recognized product or name
Business Format Franchise
Provides an entire marketing system and ongoing guidance from the franchisor
Piggyback Franchising
The operation of a retail franchise within the physical facilities of a host store
Master Licensee
An independent firm or individual acting as a sales agent with the responsibility forfinding new franchises within a specified territory
Multiple-Unit Ownership
Holding by a single franchisee of more than one franchise from the same company
AreaDevelopers
Individuals or firms that obtain the legal right to open several franchised outlets in agiven area
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Advantages Disadvantages
Formalized training
Financial assistance
Proven marketing
methods
Managerial assistance
Quicker startup time
Overall lower failure
rates
Franchise fees
Royalties
Restrictions on growth
Less independence in
operations
Franchisor may be sole
supplier of some
supplies
Termination/renewal
clauses
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CRITICAL SUCCESS FACTORS FOR A FRANCHISE SYSTEM
Ranking Factors
1 A Well Established Business Network
2 Constant New Product Development
3 Innovative Products / Services
4 Quality of Franchisees
5 Transparency
6 Return on Investment to Franchisees
Ranking Causes of Friction
1 Transparency
2 Training and Support
3 Revenue Sharing
4 Product / Service Delivery
CAUSES OFFRICTION BETWEEN FRANCHISORS & FRANCHISEES
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Herd mentality both franchisors as well as franchisees
Several wrong precedents 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 tenserelationship, which doesnt help anyone
Financing for franchises is a problem area with financial institutions
soft expenses not recognized 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
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