Franchising Business Model- Ratnendu Final

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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Franchising Business Model- Ratnendu Final

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