RETAIL

FRANCHISEE
Agend
a
Concept of Franchising

Evolution of Franchising

Types of Franchising

Advantages & Disadvantages of Franchising

Franchising in India
Concept of Franchising
A franchise is the agreement or license between
two legally independent parties which gives:

 The trademark of another business.

Operating methods of the franchisor.

Obligation to pay the fee for these rights.

Obligation to provide rights and support to
franchisees.
Concept of Franchising
Evolution of Franchising
“franchise” derived from liberty.

Franchising has promoted economic liberation,
synergy, and opportunity.

The desire to expand and control.

Limitations on human and financial capital.

The need to overcome great distances.

Early Franchise Entrants

1898 - Automobile Manufacturers

Division of responsibilities:
 - manufacturers - design & production
 - dealers: sales & service
Coca Cola Company

1886 : coca-cola invented

1899 : Thomas & Whitehead 600-word
contract
 promised to open a bottling plant
• 1901 : no capital to open the bottling
plant …?
• 1919 : 1,000 franchised Coca-Cola
bottlers
Gas Stations

1930’s - Depression Era Franchising

First example of Conversion Franchising
Taxation of all company-owned gas
stations
Why pay that? …. let’s FRANCHISE
Also quicker local response to price
Fast Food Fifties
Harlin Sanders - gas station
closed pumps: 142 seat
restaurant
1950’s: turned down $164,000
1960 (200) 1980 (6,000)
2007: 13,433 KFC’s world-wide


• San Bernardino, CA 1940

• Dick & Mac McDonald
• inspired by Henry Ford’s
assembly line
• Ray Kroc - multi-mixer
salesman
• world’s largest chain of FF-
1960’s, 1970’s, 1980’s,
1990’s
Franchising Timeline
Kings, Courts and Lord – Franchising
Pre-1800.

Drinks, Cars and Sewing Machines
--1800 to 1900.

A Period of Steady Growth – 1901 to
1950.

Franchising Timeline…

Build Along the Highway – 1951-1969.

New Regulation and an Oil Embargo –
1970 to 1985.

The Current Status and Reasons for New
Growth – 1996 to the Present



Types of Franchising
Business to Business service.

Retail Franchise.

Investment Franchise.

Management Franchise.
Types ……
Single operator Franchise.

Executive Franchise.

Sales and Distribution Franchise.


Advantages of
Franchising
Branding.

Advertising.

Name Recognition.

Reputation.

Support.
Advantages ….
Expansion .

Legal considerations.

Operational Considerations.

Bulk purchasing power.




Disadvantages of
Franchising
Their way or the Highway.

Ongoing costs

Ongoing support.

Cost


Disadvantages……
Price

Conflicts

Control

Shark - Infested waters.


Franchising in India

VIBRANT ECONOMY


 GDP GROWTH RATE OF OVER 8% OVER LAST THREE

YEARS.


 AIMING FOR A FURTHER RISE IN GDP.



a.
 CONTINUING PROCESS OF SUSTAINABLE REFORMS
 TO LIBERALIZE ECONOMY.
a.

 CHANGING INDIAN
LIFESTYLE


 LARGE & INCREASING CONSUMER BASE WITH DISPOSABLE

INCOME.


 RAPIDLY INCREASING INDIAN MIDDLE CLASS SEGMENT WITH

 GOOD PER CAPITA INCOME & PURCHASING POWER.


 RAPIDLY INCREASING DEMAND FOR BRANDED & IMPORTED

 PRODUCTS & SERVICES.


 REDUCTION IN INTEREST RATES BY BANKS.



 IMPLICATION OF VAT (VALUE ADDED TAXATION).

RECENT POSITIVE
FACTORS


 RAPIDLY GROWING ORGANIZED RETAIL.




 51% FDI IN SINGLE BRAND RETAIL.


 LARGE CONSUMER BASE.


Franchising current
scenario
 While Franchising has been growing rapidly over the last 4-5
years , it is now at a take off stage. Currently Franchising
accounts for just over 4% of the country’s gross domestic
product, Franchising is a sector that is waiting to happen.


 Industries such as clothing, footwear, computer education,

F&B, healthcare, entertainment, beauty, fashion & fitness,
distribution, automotive and many more have already
found their presence in the Indian Franchise arena.


 Currently there are more than 750 Franchise system

operating in India, which includes both national &
International Franchisors.


 There are over 50,000 franchisees (across sectors) in India

today.


 The Franchise industry has been growing at a rapid pace of

Annual Turnover from
Franchising
Annual Turnover from Franchising

More than 500

50 - 100 crores
100 - 500 crores crores
4% 5% 2%

20 - 50 crores
11%
Les s than 5
crores
5 - 20 crores
54%
24%
AND DON'T FORGET…

… d in o sa u rs so m e tim e s