Franchise business in bangladesh

COMMUNICATIVE ENGLISH

Topic:

Scenario Of Franchise Business in Bangladesh

BY

S M MARUF SIDDIQE

BRIEF OUTLINE:

• What is franchising?

• Types of franchising

• Why franchise?

• Considerations for franchisor/franchisee

• Pitfalls/Be Careful

• Bangladesh Experience

WHAT IS FRANCHISING?

“A franchise operation is a contractual relationship between

the franchisor and franchisee in which the franchisor offers

or is obliged to maintain a continuing interest in the

business of the franchisee in such areas as know-how and

training; wherein the franchisee operates under a common

trade name, format and/or procedure owned or controlled

by the franchisor, and in which the franchisee has or will

make a substantial capital investment in his business from

his own resources.”

- Definition by International Franchise Association

WHAT IS FRANCHISING?

“Franchising is more than distributorship”

• Extends to an entire operation or method of business

• Greater assistance, control and longer duration

• Distributor merely re-sells products to retailers or

customers

TYPES OF FRANCHISE

3 main types of franchise:

• Product distribution franchise;

• Business format franchise and

• Management franchise.

PRODUCT DISTRIBUTION FRANCHISES

• A product distribution franchise model is very much

like a supplier-dealer relationship.

• Typically, the franchisee merely sells the

franchisor’s products. However, this type of

franchise will also include some form of integration

of the business activities.

PRODUCT DISTRIBUTION FRANCHISES

Examples of famous product distribution franchise:

BUSINESS FORMAT FRANCHISING

• In a business format franchise, the integration of the

business is more complete.

• The franchisee not only distributes the franchisor’s

products and services under the franchisor’s trade

mark, but also implements the franchisor’s format

and procedure of conducting the business.

FAMOUS EXAMPLES:

MANAGEMENT FRANCHISE

• A form of service agreement.

• The franchisee provides the management expertise,

format and/or procedure for conducting the

business.

WHY FRANCHISE?

Franchises offer important pre-opening support:

• site selection

• design and construction

• financing (in some cases)

• training

• grand-opening program

WHY FRANCHISE?

Franchises offer on-going support

• training

• national and regional advertising

• operating procedures and operational assistance

• supervision and management support

• increased spending power, access to bulk

purchasing and economies of scale

FRANCHISOR–FRANCHISEE RELATIONSHIP

Regulated by contract which usually covers:

• Initial fee

• Royalty fee/Management fee

• Capital required from franchisee

• Territory/Area of operation

• Duration of license and renewal

• Termination

COMMON MISTAKES OF PROSPECTIVE FRANCHISEES:

• Not seeking sound legal and financial advice

• Not verifying oral representations of franchisor

• Not analysing the local market in advance

• Not analysing the competition

• Not making thorough due diligence of the franchisor

• Not choosing the right location

FRANCHISEES IN BANGLADESH

• Generally young and well educated

• 62% below 40 years old

• 37% had post-secondary education

• 32% own their own outlets

• 46% occupy the outlets as tenants

REASON FOR FRANCHISING

• 2/3 of franchisees felt that economies of scale in bulk

purchasing encouraged them to consider franchising

• People are more interested in some popular brands

than others.

• Easy to earn more money.

CONCLUSION

• Franchising – a great model for SMEs

• Proven formula for success

• Due diligence

• Central role of IPRs

• Avoidance of dispute