International Business Method

FRANCHISING

Institute of Business and Information Technology

GROUP MEMBERS

Maria Iqbal F07B110

Maleeha Ghaffar F07b117
Anum Shehzad F07b120
Nayab Nasir F07b127
Saher Javed F07b131

Institute of Business and Information Technology

 Background

 Singer sewing machine (1850)

 Coca-Cola

 Fast food establishments (1933)

 What is Franchising

 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.

 The agreement is governed by a contract,

the Franchise agreement, which runs for a
defined period of time, generally renewable and
ranging from five to 20 years.
 Franchising

 Use of franchisor’s trade name, format, system

and/or procedure under license
 Means to raise capital and expand quickly
 Assistance to franchisee
Marketing, management, advertising, store
design, standards specifications
 Payment by franchisee by way of royalty,
licensee fee or other means
 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:

1. Product distribution franchise;

2. Business format franchise; and
3. Management franchise.

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 1. 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
 EXAMPLES

 Examples of famous product distribution

franchises :
 1. PRODUCT DISTRIBUTION
FRANCHISES

Produces the
syrup
Sells the syrup concentrate
concentrate

FRANCHISEE Produces the final

drink

Retail Stores
Restaurants & Vending Machine
F&B Outlets Operators
 2. 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.
EXAMPLES
 3. MANAGEMENT
FRANCHISE

 A form of service agreement.

 The franchisee provides the management

expertise, format and/or procedure for
conducting the business.
EXAMPLES
 Advantages of Franchising

 Buying a name/reputation
 Established markets
 Technical/management assistance
 Standardized procedures
 Quality standards
 Selection of location
 Facility design
 Quicker cash flow
 Disadvantages of Franchising

 Loss of independence
 High initial fees
 High royalties and advertising allowances
 Contractual restrictions
 Inapplicable advertising
 Termination clauses
 Not receiving promised help
 Unsuitable products
 Lack of competitive advantage of parent company
 Franchise Your Business Successfully

To franchise your business in a fruitful manner, just get

answers to some questions such as :
• Do you have a successful business?
• Do you wish to see its branches in different corners of

the nation?
• Do you want to increase your brand visibility?
• Is franchising right for you? Is your business
expandable?
• Will the target audience like your products or services?
• Well, to achieve all this why don’t you franchise your
 BE CAREFUL

 The franchisee is not completely independent.

 In addition to the initial franchise fee, franchisee

must pay ongoing royalties and advertising fees.

 Franchisee must be able to balance restrictions

and support provided by the franchisor with their
own ability to manage the business
 BE CAREFUL

 A damaged image or franchise system can

result if other franchisees perform poorly or the
franchisor has financial problems.

 The duration of a franchise is usually limited and

the franchisee may have little or no say
concerning termination
 Common Mistakes of Prospective
Franchisees

 Not reading, understanding and/or asking

questions about the franchisee agreement
and other legal documents
 Not understanding the responsibilities of a
franchisee and the rights and obligations of a
franchisor
 Not seeking sound legal and financial advice
 Not verifying oral representations of franchisor
 Common Mistakes of Prospective
Franchisees

 Not analyzing the local market in advance

 Not analyzing the competition
 Not making thorough due diligence of the
franchisor
 Not choosing the right location
FRANCHISING IN PAKISTAN

Reason for Franchising

2/3 of franchisees felt that economies of scale in

bulk purchasing encouraged them to consider
franchising

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 FRANCHISING IN PAKISTAN

Pakistan has a viable middle-class with ample purchasing power.

Pakistan offers good opportunity
international firms seeking to establish franchise operations in the
country.

In Pakistan the concept of franchising was introduced as far back as in

early 1950's when soft drinks, such as Coca-Cola, were introduced by
local bottlers who manufactured under a license from their foreign
principals.

No government restriction on investors who wish to establish a

franchise in the country.
U.S. FRANCHISE OPERATIONS IN PAKISTAN

1.Restaurant:  McDonald's, Kentucky Fried

Chicken, Pizza Hut, Subway
2.Hotel/Motel:    Sheraton, Marriott, Best
Western, Ramada
3.Security:         Brinks, Wackenhut
4.Car Rental:        Avis
5.Printing:            Alpha graphics
6.Mineral Water:   Culligan
U.S. FRANCHISE OPERATIONS IN PAKISTAN

7.Soft Drinks:  Pepsi-Cola, Coca-Cola,

Seven-up,
8.Courier Service:    DHL, TNT Skypak,
Federal Express
9.Apparel:              Walt Disney, Jockey,
Hang Ten
10.Footwear:            Hush Puppies, Caterpillar
11.Entertainment:     Time Warner
12.Consulting Services:      Dunn & Bradstreet
NON-U.S. FRANCHISE OPERATIONS IN PAKISTAN

1. Apparel:              Benetton (Italy), Schieser

(Germany)
2. Hotels/Motels:     Serena Group
3. Restaurant:         Pizza Express (U.K.)
4. Education:           Asia Pacific Institute of
Information Technology
(APIIT) of Malaysia
 Conclusion

 Franchising – a great model for

minimizing risks and maximizing returns
 Proven formula for success ready and
waiting to be adopted by the new
entrepreneur.
 Provides proven operating systems, solid
research and development, established
marketing methods and instant credibility,
plus extensive training and support -