Non Store Retailing & Franchising

MINISTRY OF COMMERCE & INDUSTRY
GOVERNMENT OF INDIA
B DESIGN – Fashion Merchandising and

Retail Management
SEMESTER – III
Non Store Retailing and Franchising
HANDBOOK
PREPARED BY: MS. AASTHA GARG

REVIEWED BY:
HOD: MR. A K SHARMA
FDDI/B.Des FMRM/TTLM/BES 307 Page - 1

FDDI SCHOOL OF RETAIL MANAGEMENT
CONTENTS
Sr. No. Content Page Number
1 Non Store Format Vs. Store Retailing 3
2 Direct Marketing 6
3 Case Study On Direct Marketing 29
4 Direct Selling 32
5 Multi-Channel Marketing 45
6 Introduction To Franchising 51
7 Basics Of Franchising 69
8 Developing A Franchising Business 79
9 Franchisee Perspective 89
10 Evaluation And Selection Of Franchisee 96
11 Franchising Agreement 103
12 Franchisee Regulations 109
13 International Franchising 121
14 Territory And Co-Branding 129
15 Bibliography 135

UNIT 1 NON STORE FORMAT VS. STORE RETAILING
Introduction
Non store retailing is a form of retailing in which sales are made to consumers without using
physical stores. The non-store retailers are known by medium they use to communicate with
their customers, such as direct marketing, direct selling, vending machines or e-tailing. Non
store retailing is patronized to time conscious consumers and consumers who can’t easily go to
stores, or compulsive buyers. Most non-store retailers offer consumers the convenience of
buying 24 hours a day seven days a week and delivery at location and time of their choice.
Non store sales are now growing at a higher rate than sales in retail stores. The high growth
rate is primarily due to the growth of electronic retailing. The growth of catalogue retail sales
and sales in other non-store retailing formats such as TV home shopping, direct selling, and
vending machines are slower.
The non-store distribution channel can be divided into direct selling (off-premises sales) and
distance selling, the latter including all forms of electronic commerce. Distance selling includes
mail order, catalogue sales, telephone solicitations, and automated vending. Electronic
commerce includes online shopping, internet trading platforms, travel portals, global
distribution systems and teleshopping. Direct selling includes party sales and all forms of selling
in consumers’ homes and offices, including even garage sales.
The non-store distribution channel is marked by low entry thresholds. Compared to store
retailing that requires a retail outlet, inventory, cash flow to hire staff and advertising, non-
store retail start-ups usually have to invest little to reach out to potential buyers of the goods
and services they offer. Non-store retailing is therefore not only used by established brick and
mortar business retailers who develop an online bricks and clicks business model presence, but
also by the individual pure play, often him- or herself a consumer, to create an E-Shop or to run
sales parties.
Web definitions
Non-Store Retailing is the selling of goods and services outside the confines of a retail facility.
It is a generic term describing retailing taking place outside of shops and stores (that is, off
the premises of fixed retail locations and of markets stands).
en.wikipedia.org/wiki/Non-Store Retailing
(Non-store retailers) Included are sales of food through mail-order houses, vending machines,
home delivery sales, door-to-door sales, and electronic shopping. Direct sales of food by
farmers, manufacturers, and wholesalers to consumers are also included.
www.ers.usda.gov/Briefing/FoodMarketingSystem/foodretailing

The merchandising of goods by means other than retail shops; merchandising by mail order,
vending machines, telephone, door-to-door, etc.
www.buseco.monash.edu.au/mkt/dictionary/nnn.html
Form of retailing independent from the existence of a store, i.e. conducted through vending
machines, direct sales and marketing, party-based sales, direct mail, catalogs, television
programming, telemarketing and internet.
www.shopic.com/retail/supplier/glossary.php
Store Based Retailer vs. Non-Store Retailing
There are both advantages and disadvantages to non-

store retailing. The primary advantage of this industry is
its freedom from a physical retail presence. The high
fixed costs of operating retail outlets are eliminated.
The breadth of customer coverage is considerably wider

than is possible with an individual retail location. Also
avoided are the high costs associated with expansion
and growth. Companies do not have to spend large sums
or dilute stock building new locations, or acquiring them. Amazon.com has increased sales by
more than 300% in the last year, a figure that would be almost unattainable by building new
locations.
With the centralized structure, operating costs remain flatter than with physical stores. Once
the distribution and promotional network has been established, and operating costs covered,
most all further gross profit falls immediately to the bottom line, boosting net profits in a way
difficult to achieve with physical retail outlets.
Non-store retailers also have an advantage in flexibility. If sales in a certain geographic area are
sluggish, they can just cease marketing there, and avoid the expensive charges necessary to
close a store. Seasonal products can also be pushed more efficiently, because there is no need
to expand retail space to fit them for a short selling season.
Advantages of Traditional Store selling:
A storefront affords you a host of merchandising options from

 Working display models to signage
 The customer can actively look at a variety of merchandise
 Sales assistance
 A measure of brand or service legitimacy
 Goods can be touched and tried out
 A leisure activity or diversion

 Store environments are interesting and
stimulating
 It’s a social activity
Disadvantages of Traditional Store selling:

 Overhead in a storefront can be
extensive
 Rent, utilities, taxes and maintenance
costs associated with a storefront must be added to the cost of your product when
determining your breakeven point
 Depending on size and location, these factors can be cost-prohibitive.
 Can be crowded and time spent queuing, lack of privacy -changing room
 Parking charges
 Physically demanding
Advantage of Non Store retailing:
 Its freedom from physical retail presence

 The high costs of operating retail outlets are eliminated
 The breadth of customer coverage is considerably wider than it is possible with an
individual retail location
 Companies do not have to spend large sums or dilute stock building new locations or
acquiring them
 It gives a non-store retailer a global market from a cheap, centralized location.
 Can be performed at any time of the day
 Comfort factor is higher
 Increased privacy for personal purchases
 Less physically demanding
Disadvantages of Non Store retailing:
 Fear of credit card misuse and mail fraud both retailed

to the sense of detachment that not holding a
prospective purchase brings
 One might have to face the problem of poor connection.
 Usually relies on representation rather than actual product
 Unsatisfactory products have to be repacked and posted
 Postage and packing charges extra
 Some formats do not allow interaction with sales personnel for additional information.

UNIT 2 DIRECT MARKETING
WHAT IS DIRECT MARKETING?
According to the official definition of the Direct

Marketing Association (DMA), direct marketing is an
"interactive system of marketing which uses one or
more advertising media to effect a measurable response
and/or transaction at any location." While there are
many other definitions of direct marketing, the DMA
definition captures four basic concepts of direct
marketing.
In direct marketing, the transaction may take place at

any location and is not limited to retail stores or fixed
places of business. The transaction may take place in the
consumer's home or office via mail, over the phone, or through interactive television. It may
also occur away from the home or office, as at a kiosk for example.
Direct marketing attempts to acquire and retain customers by contacting them without the use
of an intermediary. The objective is to achieve a direct response which may take one of the
following forms:
 A purchase over the telephone or by post;

 A request for a catalogue or sales literature;
 An agreement to visit a location/event (e.g. An exhibition);
 Participation in some form of action (e.g. Joining a political party);
 A request for a demonstration of a product;
 A request for a salesperson’s visit.
Direct marketing, then, is the distribution of products, information and promotional benefits to
target consumers through interactive communication in a way which allows response to be
measured. It covers a wide array of methods, including the following:
 Direct mail;
 Telemarketing (both inbound and outbound);
 Direct response advertising (coupon response or ‘phone now’);
 Electronic media (internet, interactive cable tv);
 Catalogue marketing;

 Inserts (leaflets in magazines);
 Door-to-door leafleting;
 Text messaging
Direct Mail
Electronic Tele-
Media marketing
Direct
Marketing
Direct
Catalogue
Response
Marketing
Advertising
Inserts,
Leafets,text
Messages
Business Advantages:
1. Many costs are reduced-

a. low startup cost are possible
b. Inventories are reduced
c. No display is needed
d. Prime location is not necessary
e. Sales force may not be needed.
2. Possible to have lower prices than the store based retailers
3. Customers shop conveniently, without crowd, parking congestion, etc. no concerns
about the shopping hours.
4. Specific consumer segments are pinpointed through targeted mailing
Limitations:
a. Products cannot be examined before purchase.

b. The range of the purchased items is more limited than in the stores
c. Need to have liberal return policies to attract and keep customers
d. Prospective firms may underestimate costs.
a. Catalogs can be expensive
b. Computer system required to track and monitor

c. 24 hr phone staff may be required
e. Even successful catalogs often draw purchases from less than 10% of the recipients
f. Printed catalogs are prepared in advance, causing difficulties in price and style planning.
g. Price change and new products can be announced only through supplementary catalogs
and brochures.
GROWTH OF DIRECT MARKETING
Despite these and many other successes, direct marketing did not come into its own as
marketing discipline until the 1970s. It's interesting to note that the successful introduction of
bank credit cards, including Visa and MasterCard, in the 1960s and 1970s was conducted using
direct marketing methods to persuade consumers, merchants, and banks to accept the cards.
From the many factors contributing to the growth of direct marketing and mail-order catalogs,
direct marketing expert Jim Kobs selected four as, the most important.
1. Changing lifestyles were an important factor in the acceptance of direct marketing

among consumers. The number of women working outside the home jumped from 42
to 58 % between 1980 and 1990. This was a trend that began at least a decade earlier
and contributed to the growth of direct marketing. Direct marketing extends this
convenience beyond mail-order shopping to consumers receiving all kinds of offers in
the home, either via mail or commercial television, as is common today, or via home-
shopping networks and interactive television.
2. Another factor contributing to the growth of direct marketing was the increased cost
associated with personal sales calls. By the end of the 1970s, the average cost of a single

sales call was estimated to be about $137. By the end of the 1980s, the cost had risen to
more than $250 per call.
3. Technological growth in general, and computer-based technologies in particular, have

played an important role in many areas of direct marketing. New computer technologies
have allowed direct marketers to be more precise in the analysis of results, in the
targeting of messages based on more complex psychographics and demographics, in
developing more sophisticated customer and prospect databases, and even in the
creative execution of direct-mail packages.
4. Increased consumer acceptance of the telephone as a way to place orders has also
helped direct marketing achieve phenomenal growth. Coupled with telephone-based
ordering are faster order fulfillment and the elimination of delays previously associated
with mail order.

DATABASE MARKETING
Much direct marketing activity requires accurate

information on customers so that they can be
targeted through direct mail or telemarketing
campaigns. This information is stored on a
marketing database which comprises an
electronic filing cabinet containing a list of
names, addresses and transactional behaviour.
Information such as types of purchase, frequency

of purchase, purchase value and responsiveness
to promotional offers may be held in the
database. This allows future campaigns to be
targeted at those people who are most likely to
respond.
For example, a special offer on garden tools from a mail order company can be targeted at
those people who have purchased gardening products in the past. Another example would be a
car dealer, which by holding a database of customer names and addresses and dates of car
purchases could direct mail to promote service offers and new model launches.
Database marketing is defined as an interactive approach which uses individually addressable

marketing media and channels (such as mail, telephone and the salesforce) to:
a. Provide information to a target audience;

b. Stimulate demand;
c. Stay close to customers by recording and storing an electronic database memory of
customers, prospects and all communication and transactional data.
Typical information stored on a database includes the following:
1. Information on actual and potential customers. Basic data such as names, addresses and
telephone numbers enable customers to be contacted. This may be supplemented by
psychographic and behavioural data. In business to business markets, information on key
decision-makers and their choice criteria may be held.
2. Transactional information. Such information as frequency of purchase, when the customer

last bought and how much was bought for each product category may be stored. Cross-
analysing this type of data with customer type can throw light on the customer profile most
likely to buy a particular product and communications can be targeted accordingly.

3. Promotional information. Data covering what promotional campaigns have been run,
customer response patterns and results in terms of contact, sales and profiles can be stored on
a marketing database.
4. Product information. Information relating to which products have been promoted, how,
when, where and associated responses can be held.
5. Geodemographic information. Information about the geographical areas of customers and

prospects and the social, lifestyle or business categories to which they belong can be stored. By
including postcodes in the addresses of customers and employing the services of an agency that
conducts geo demographic analysis a customer profile can be built up. Direct mail can then be
targeted at people with similar geo demographic profiles.
FORMS OF DIRECT MARKETING
The direct marketer has a range of media that can be used to reach target audiences. Direct
mail, telemarketing, direct response advertising and catalogue marketing will now be analysed.
DIRECT MAIL
Direct mail is material sent by post to a home or

business address with the purpose of promoting a
product and/or maintaining an ongoing
relationship. An important factor in the
effectiveness of a direct mail campaign is the quality
of the mailing list. List houses supply lists on a rental
or purchase basis. Since lists become out of date
quickly it is usually preferable to rent.
Consumer lists may be compiled from subscriptions to magazines, catalogues, membership of

organisations, etc. Alternatively, consumer lifestyle lists are compiled from questionnaires. The
electoral roll can also be useful when combined with geo demographic analysis.
For example, if a company wished to target households living in modern private housing with
young families, the electoral roll can be used to provide names and addresses of people living in
such areas. Business to business lists may be bought from directory producers, trade magazine
subscription, or from exhibition lists. Perhaps the most productive mailing list is that of a
company’s own customers which is known as the house list. This is because of the existing
relationship that a company enjoys with its own customers.

Also of use would be names of past buyers who have become inactive, names of enquirers and
of those who have been ‘referred’ or recommended by present customers of the company. It is
not uncommon for a house list to be far more productive than an externally compiled list.
Customer behaviour such as the products purchased, most recent purchase, frequency of
purchase and expenditure can also be stored in an in-house database.
The management of direct mail involves asking five questions:
Who: Who is the target market? Who are we trying to influence?
What: What response is required? A sale, an enquiry?
Why: Why should they buy or make an enquiry? Is it because our product is faster,
cheaper, etc.?
Where: Where can they be reached? Can we obtain their home or working address?
When: When is the best time to reach them? Often this is at the weekend for
consumers, and Tuesday, Wednesday or Thursday for business people. (Monday can
be dominated by planning meetings, and on Friday they may be busy clearing their
desks for the weekend.)
Elaborate personalisation is possible and the results directly measurable. Since the objective of
direct mail is immediate – usually a sale or an enquiry – success can easily be measured. Some
organisations such as the Reader’s Digest spend money researching alternative creative
approaches before embarking on a large-scale mailing. Such factors as type of promotional
offer, headlines, visuals and copy can be varied in a systematic manner and by using code
numbers on reply coupons, responses can be tied to the associated creative approach.
The effectiveness of direct mail relies heavily on the quality of the mailing list. Poor lists raise
costs and can contribute to the criticism of ‘junk mail’ since recipients are not interested in the
contents of the mailing. Initial costs can be much higher than advertising in terms of cost per
thousand people reached and the response can be low (an average response rate of 2 % is
often quoted).
Added to these costs is the expense of setting up a database. In these terms direct mail should
be viewed as a medium- to long-term tool for generating repeat business from a carefully
targeted customer group. An important concept is the lifetime value of a customer which is the
profit made on a customer’s purchase over their lifetime. In summary, direct mail can be very
cost-effective at targeting specific segments of the population, but its critics point to low
response rates, the existence of junk mail, the fact that personal information can be sold to

mailers without the knowledge of the subject, and the fact that some companies persist in
sending mail even when they have been asked to stop.
TELEMARKETING
Telemarketing has been around for a number of years, but still remains a very powerful lead
generation and sales tool, if it is done well. Telemarketing can give immediate results and can
be used to reach a wide range of objectives; whether it is lead generation, appointment setting,
attendees to seminars, customer surveys or data cleansing. It is a chance to talk to other
businesses in a non-threatening, non-sales environment. Telemarketing is, quite simply,
marketing through telecommunications.
What is telemarketing?
While telemarketing tends to be most strongly associated with thick skinned individual
hammering their way through a list in search of sales leads, it is actually a very broad term that
applies to a multiplicity of both inbound and outbound telephone marketing. The oft quoted
growth in telemarketing is due largely to the huge increase in the number of call centres
handling high volume inbound and outbound business/consumer calls. This work includes for
example, handling responses to an advertising campaign, or calling existing customers to offer
additional services. Generally a differing set of skills are required for inbound and outbound
telemarketing, but this article concentrates on the latter, which tends to involve a wider range
of selling skills.
Importance of Telemarketing
Very few companies can survive without sales and for many companies telemarketing is, or
should be, the first stage of the sales process. It can be used for database building, lead
generation, customer retention, cross selling and market research, the list of the benefits of
telemarketing is long. There are also many downsides to telemarketing if it is done badly,
expensive, high staff turnover, poor results and ultimately brand damage and lower sales.
Telemarketing delivers reliable information quickly, allowing your sales team to make the most
effective use of their time. Telemarketing gathers the specifics that your field sales team need
in a non-threatening, non- sales environment. Telemarketing identifies the needs and exact
requirements of your customers and prospects. The results of telemarketing are completely
measurable, accurate and immediate. You will always get a response, whether you make the
sale or not, which helps with data gathering and data records. Records of these responses will
aid when planning your customer relationship management.

Telemarketing is a completely interactive medium. It is an excellent way to speak to the right
people and let them know exactly who you are and what you do. Then when it comes to
contacting them in the future they will have a good awareness and understanding of
yourselves. Unlike mass marketing, there is no delay between the implementation and the
response; it is immediate. The communication is completely one-to-one and personalised.
Because it is so targeted you know exactly who you are contacting and therefore can refer to
them by their name and their past contact.
Personalisation is known to increase success rates by three times more than non personalised
messages. Also 80% of customers like to do business by phone. The marketer can tailor the
telemarketing script for the individual to encourage maximum success rates. For example,
special offers for new and valuable customers. Telemarketing’s characteristics allows
relationship marketing to occur and an increase in loyalty. You can get a lot of information
across if the script is properly structured. Telemarketing allows questions/queries to be asked
and answered during the conversation which establishes trust and understanding.
Telemarketing is very effective when integrated. Using telemarketing to follow up the leads
produced from an email marketing campaign or direct marketing campaigns will increase the
leads by at least ten fold.
Whilst using telemarketing, multiple objectives can be fulfilled at the same time. For example a
telemarketing team can ring a contact and check their data is correct in the system (data
cleansing) while doing this, they can then go onto making a sales call.
Telemarketing Procedure
Telemarketing may be done from a company office, from a call centre, or from home. It may
involve either a live operator voice broadcasting which is most frequently associated with
political messages.
An effective telemarketing process often involves two or more calls. The first call (or series of
calls) determines the customer’s needs. The final call to serious Prospective customers are
identified by various means, including past purchase history, previous requests for information,
credit limit, competition entry forms, and application forms. Names may also be purchased
from another company's consumer database or obtained from a telephone directory or another
public list. The qualification process is intended to determine which customers are most likely
to purchase the product or service.
Charitable organizations, alumni associations, and political parties often use telemarketing to
solicit donations. Marketing research companies use telemarketing techniques to survey the
prospective or past customers of a client’s business in order to assess market acceptance of or

satisfaction with a particular product, service, brand, or company. Public opinion polls are
conducted in a similar manner.
Telemarketing techniques are also applied to other forms of electronic marketing using e-mail
or fax messages, in which case they are frequently considered spam by receivers.
Call Centers – The Telemarketing Imperative
A call centre or call center is a centralised office used for

the purpose of receiving or transmitting a large volume of
requests by telephone. An inbound call centre is operated
by a company to administer incoming product support or
information inquiries from consumers.
Outbound call centers are operated for telemarketing,

solicitation of charitable or political donations, debt
collection and market research. In addition to a call centre,
collective handling of letter, fax, live chat, and email at one location is known as a contact
centre.
A call centre is operated through an extensive open workspace for call centre agents, with work
stations that include a computer for each agent, a telephone set/headset connected to a
telecom switch, and one or more supervisor stations. It can be independently operated or
networked with additional centres, often linked to a corporate computer network, including
mainframes, microcomputers and LANs. Increasingly, the voice and data pathways into the
centre are linked through a set of new technologies called Computer Telephony Integration
(CTI)
A contact centre, also known as customer interaction centre is a central point of any
organization from which all customer contacts are managed. Through contact centres, valuable
information about company are routed to appropriate people, contacts to be tracked and data
to be gathered. It is generally a part of company’s Customer Relationship Management (CRM).
Today, customers contact companies by telephone, email, online chat, fax, and instant
message.

Call Center Technology
Call centre technology is subject to improvements and innovations. Some of these technologies
include speech recognition software to allow computers to handle first level of customer
support, text mining and natural language
processing to allow better customer
handling, agent training by automatic mining
of best practices from past interactions,
support automation and many other
technologies to improve agent productivity
and customer satisfaction.
Automatic lead selection or lead steering is

also intended to improve efficiencies, both
for inbound and outbound campaigns,

whereby inbound calls are intended to quickly land with the appropriate agent to handle the
task, whilst minimizing wait times and long lists of irrelevant options for people calling in, as
well as for outbound calls, where lead selection allows management to designate what type of
leads go to which agent based on factors including skill, socioeconomic factors and past
performance and percentage likelihood of closing a sale per lead.
The concept of the Universal Queue standardizes the processing of communications across
multiple technologies such as fax, phone, and email whilst the concept of a Virtual queue
provides callers with an alternative to waiting on hold when no agents are available to handle
inbound call demand.
Premise-based Call Centre Technology:
Historically, call centres have been built on PBX

equipment that is owned and hosted by the call
centre operator. The PBX might provide functions
such as Automatic Call Distribution, Interactive
Voice Response, and skills-based routing. The call
centre operator would be responsible for the
maintenance of the equipment and necessary
software upgrades as released by the vendor.
Virtual Call Centre Technology: With the advent of the Software as a service technology
delivery model, the virtual call centre has emerged. In a virtual call centre model, the call
centres operator does not own, operate or host the equipment that the call centre runs on.
Instead, they subscribe to a service for a monthly or annual fee with a service provider that
hosts the call centre telephony equipment in their own data centre. Such a vendor may host
many call centres on their equipment.
Agents connect to the vendor's equipment

through traditional PSTN telephone lines, or
over Voice over IP. Calls to and from prospects
or contacts originate from or terminate at the
vendor's data centre, rather than at the call
centre operator's premise. The vendor's
telephony equipment then connects the calls
to the call centre operator's agents. Virtual
Call Centre Technology allows people to work
from home, instead of in a traditional,

centralised, call centre location, which increasingly allows people with physical or other
disabilities that prevent them from leaving the house, to work.
Cloud Computing for Call Centres: Cloud computing for call centres extends cloud computing to
Software as a service, or hosted, on-demand call centres by providing application programming
interfaces (APIs) on the call centre cloud computing platform that allow call centre functionality
to be integrated with cloudbased Customer relationship management, such as Salesforce.com
or Oracle CRM and leads management and other applications.
The APIs typically provide programmatic access to two key groups of features in the call centre
platform: Computer Telephony Integration (CTI) APIs provide developers with access to basic
telephony controls and sophisticated call handling on the call centre platform from a separate
application.
Configuration APIs provide programmatic control of administrative functions of the call centre
platform which are typically accessed by a human administrator through a Graphical User
Interface (GUI).
Advantages and Disadvantages of Telemarketing
Benefits of using Telemarketing: The main benefit of using telemarketing to promote your
business is that it allows you to immediately gauge your customer's level of interest in your
product or service. Additionally it allows you to do the following:
 provide a more interactive and personal sale service

 create an immediate rapport with your customers
 explain technical issues more clearly
 generate leads and appointments
 sell from a distance to increase your sales territory
 reach more customers than with in-person sales calls
 sell to both existing and new customers
 achieve results that are measurable.
Disadvantages of Telemarketing: There can be as many

negatives using telemarketing as there are positives. In particular, you need to consider that:
 telemarketing can be resented - particularly when dealing with business-to consumer

customers, and when calls are made in the evenings
 customer lists may not always be clean and opted-out - this leaves you with a potential
risk of breaking the law
 customer lists can be very costly

 telemarketing has a negative image that could damage your business' reputation - if
carried out poorly
 telemarketing has the potential to replace a sales team and this could lead to negative
feelings among employees
 training staff can be time-consuming and costly
 you may need to prepare a script
 an outside service provider can result in your losing control over your sales processes
because the people doing the work aren't your employees.
Success Factors of Telemarketing
A useful set of guidelines for conducting a telemarketing call has been developed by the Bell
Telephone System of America:
1. Identify yourself and your company.

2. Establish rapport: this should come naturally since you have already researched your
potential clients and their business.
3. Make an interesting comment (e.g. to do with cost savings or a special offer).
4. Deliver your sales message: emphasise benefits over features (e.g. your production people
will like it because it helps to overcome down-time through waiting for the material to set).
5. Overcome objections: be skilled at objection-handling techniques.
6. Close the sale: when appropriate do not be afraid to ask for the order (e.g. ‘Would you like
to place an order now?’) or fulfil another objective (e.g. ‘Can I send you a sample?’).
7. Action agreement: arrange for a sales call or the next telephone call.
8. Express your thanks.

MOBILE MARKETING
Mobile marketing (the sending of short text messages direct to mobile phones) is extremely
successful. Every month in Britain over a billion chargeable text messages are sent. Marketers
have been quick to spot the opportunities of this medium to communicate, particularly to a
youth audience.
Marketers now send out messages to potential customers via their mobile phones to promote
such products as fast food, movies, banks, alcoholic drinks, magazines and books. A new
acronym, SMS (short messaging service), has appeared to describe this new medium, which is
available on all mobile phones that use the global system for mobile communications (GMS),
which dominates the second generation (2G) standard.
The advantages of this approach for marketers are as follows.
 Cost effective: the cost per message is

between 15p and 25p compared with 50p to
75p per direct mail shot, including print
production and postage.
 Personalised: like direct mail each message is
sent to individuals, in contrast to traditional
advertising.
 Targeting: given that SMS use among 15–25-
year-olds is 86 per cent, and 87 per cent
among 25–34-year-olds in Britain, mobile
marketing has high potential as a youth
targeting tool.
 Interactive: the receiver can respond to the

text message, setting up the opportunity for two-way dialogue.
 Customer relationship building: by establishing an ongoing dialogue with consumers it
can aid the relationship-building process.
 Time flexible: unlike direct mail, mobile marketing can be sent at various times of the
day, giving greater flexibility when trying to reach the recipient.
 Immediate and measurable: the results of the mobile campaign can be immediate (for
example, the number of people taking up an offer) and measurable.
 Database building: creative use of mobile marketing allows marketers to gather
consumer information, which can be stored on a database.
Mobile marketing does have certain limitations though. These are as follows.
 Short text messages: the number of words in a text message is limited to 160
characters. Future technological advances may remove this limitation.
 Visually unexciting: 2G systems do not permit picture messaging. Although multimedia
messaging services and 3G technology allow picture messaging, the extra cost may
deter its widespread use. Wear-off: while mobile marketing is still novel, response rates
are good, but sceptics argue that once the novelty has worn off and consumers receive
more and more advertising/promotion-related messages, the effectiveness of the
medium will wane.
 Poor targeting: as with poorly targeted direct mail, ‘junk’ text messages cause customer
annoyance and lead to poor response rates. At the moment, mobile marketing is not
just acceptable, it is actually popular. Research by the Mobile Marketing Association
showed that 68 per cent of consumers would be likely to recommend the service to
their friends, and 43 per cent said they would respond to messages positively, perhaps
by visiting a website or viewing an advertisement.

TELEVISION:
Direct marketing on television is increasing. It has undergone an

evolution from the early days when products for the home were sold
on television by carnival-like pitchmen giving lengthy product
demonstrations. Television viewers are also familiar with direct-
response advertisements for products such as knives, garden tools,
exercise equipment, records, and books, which ask them to call in and
order a specific product.
Direct response advertising appears in the prime media such as

television and the press but is different from standard advertising since
it is designed to elicit a direct response such as a request for further
information, an enquiry or an order. Usually a freefone telephone number is provided so that
interested parties can contact the company. In this way, broadcast media are used to reach
large numbers of consumers and direct marketing techniques are employed to allow a fast
response by both consumers and the company.
Direct response television (DRTV) – or teleshopping as

it is sometimes called – is slowly gaining in popularity
and comes in many formats. The most basic is the
standard advertisement with telephone number. Other
variants are the 25-minute product demonstration
(often called infomercials) and live home shopping
programmes broadcast by companies like QVC.
In Europe a wide range of products is promoted (such

as leisure products, household goods, books and
beauty care products) through pan-European satellite channels such as Quantum International,
Super Channel and NBC. Four factors tend to raise the probability of DRTV application and
success:
1. Products that require a demonstration or a service that needs to be explained.

2. Products that have mass appeal (although single interest channels provide a medium for
specialist products).
3. An effective DRTV promotion must make good television to attract and maintain the
interest of the target audience.
4. A successful DRTV promotion is usually supported by an efficient telemarketing
operation to handle the response.

CATALOGUE MARKETING
Catalogue marketing is the promotion and sale of goods through catalogues distributed to
agents and customers by mail or at outlets if the catalogue marketer is a store owner.
Traditionally catalogue marketing was a form of mail order where agents passed the catalogue
to relatives and friends who ordered through the agent. A key benefit to customers was the
credit facility of weekly payment.
More recently companies such as Next and Trois Suisse moved catalogue marketing more
upmarket by targeting busy, affluent consumers who valued the convenience of choosing
products at home. A major UK success story has been Argos, which has built its business
entirely on catalogue marketing. A wide range of products such as cameras, jewellery, toys,
mobile phones, watches, household goods and gardening equipment is sold through their
catalogues.
A customer selects at home and then

visits a town centre Argos store to
purchase goods. Argos’s success is
built on this convenient form of
shopping, plus low prices and an
efficient service, and an inventory
system that controls costs and ensures
a low out-of-stock situation.
Catalogue marketing can provide a

convenient method of shopping, a wide range of products, low prices and, sometimes, credit
facilities. When the operation is centralised the expense of town centre locations is avoided.
However, catalogues are expensive to print and require regular updating.
The internet is a much cheaper way of displaying products to consumers. Like the internet,
catalogues do not allow products to be tried (e.g. a hi-fi system) or tried on (e.g. clothing)
before purchase. Furthermore there can be differences between the colour displayed in the
catalogue and that of the product when it is delivered. This can be an important issue for
products such as home furnishings.
Catalogues are also important in business to

business markets, acting as a continual sales aid
which allows customers to order at their
convenience. More and more companies are
moving to internet-based catalogues which are
cheaper to produce and easier to update.
Business to business catalogues often contain vast

amounts of information including product

specification and prices. Direct mail and telemarketing campaigns can be used to remind
customers to buy from their catalogues. For many companies supplying other organisations
such as component and office supply firms, the catalogue is an important marketing tool.
DIFFERENT TYPES OF CATALOGS
The three major categories of catalogs are

 business-to-business catalogs,
 consumer catalogs,
 Catalog showrooms.
Business-to-business catalogs are those that

provide merchandise to be used in the course
of business, including everything from office
supplies to computers. In industrial settings
business-to-business catalogs are used to sell
everything from heavy machinery to hand
tools. Business-to-business catalogs are
mailed to individuals at their place of
business, with most purchases being made on
behalf of the business rather than the
individual.
Consumer catalogs are mailed to consumers at home. Unaffiliated catalogs are stand-alone
ventures whose primary purpose is to
sell merchandise by mail. These
independent catalogers are not affiliated
with any retailer or manufacturer.
While the stores of unaffiliated

catalogers were originally designed to
sell only remaindered and unsold
merchandise, some successful
independent catalogers have opened
their own retail outlets to take
advantage of the consumer recognition
their catalogs have built.
Consumers are also quite familiar with retail catalogs identified under three types:
 traffic generators,
 independent profit centers,
 Combination of the two.

Catalogs that retailers produce as traffic generators are
designed to build store traffic rather than to generate mail-
order sales.
A type of consumer catalog is the manufacturer-supported

catalog. These may be designed to generate mail-order sales,
build store traffic, or simply create an image.
Incentive catalogs offer consumers discounted name-brand

merchandise with some type of proof of purchase of a
particular product or use of a particular credit card.
Consumer catalogs issued by nonprofit organizations represent

yet another type of consumer catalog. Museums have
successfully used catalogs to increase sales of gift-shop items.
Co-op catalogs are used to highlight merchandise from a
variety of companies. Co-op catalogs are relatively cheap to
produce and are often found in nontraditional channels of
distribution such as bookstores and newsstands.
Catalog showrooms are a category of consumer catalogers

who combine retail marketing with catalog marketing. A
catalog showroom is essentially a retail outlet.
The catalog, usually quite large, serves primarily to build traffic

in the showroom. The trend in catalog showrooms has been to
de-emphasize the mail-order aspect of the catalog and present
the showroom as a retail outlet with the added benefit of
being able to place catalog orders from the showroom.
Elements Of Catalog Marketing
A successful catalog operation is built on several key elements, including the right personnel,
merchandise, catalog design and format, sales promotion, mailing lists, and order processing
and fulfillment.
1. Catalog Personnel
Many of the functions necessary to maintain a catalog operation can be fulfilled either by
employees or outside services. Within the company individual employees can be assigned to
handle more than one function. Key functional areas include merchandising, catalog design,
marketing and production, office services and data processing, warehouse operations,

customer relations, and administrative areas covering office operations, personnel, legal affairs,
and finance. In addition, most operations require some type of administrative support
personnel.
2. Merchandise
Merchandising involves selecting the appropriate items for the catalog. Catalogs affiliated with
retailers or manufacturers typically include merchandise that is also sold by the retailer or
manufacturer through a store or other channels
3. Catalog Design And Format
Once the merchandise has been selected, it is necessary to determine how it will be presented
in the catalog. Catalogs come in a variety of sizes, shapes, and overall general appearances. A
cataloger must select a design concept for its catalog that is appropriate for its company.
Catalog carrying discounted merchandise should look like a sale catalog. Catalog carrying high-
end merchandise should have a quality look and feel about it. In the hands of a consumer it is
the catalog that presents the image of the company.
Keys areas that catalog marketers focus their attention on when designing a catalog include
page layout and design, space allocation for various products, the front cover, the back cover,
sales copy, headlines, and the sales letter. The inside and outside of both covers as well as the
center of a catalog are considered "hot spots" that have a disproportionally large influence on
sales generation and how the prospect responds to the catalog.
4. Sales Promotion
The order device is also an important "hot spot" in any catalog. Sales can be won or lost with
the order form, so most catalog marketers regard it as an important sales tool. The key to a
successful order form is making it easy to use. Whether the order is placed by mail or a toll free
telephone call, a well-designed order form can facilitate the sale.
In addition the order form usually carries other information that is designed to overcome any
reservations that prospects might have about ordering merchandise through the mail or over
the telephone. Customers usually look to the order device or pages surrounding the order form
to include information about warranties and guarantees, customer service, and any
promotional incentives that might be offered.
5. Mailing Lists And Databases
As with all types of direct marketing, a key factor in a successful catalog marketing campaign is
being able to reach the right audience. Catalog marketers acquire customers by renting mailing
lists, and then they build in-house databases based on customer histories. Response lists
contain the names of prospects who have responded to the same offer. These typically contain
individuals who share a common interest. Response lists are not usually rented; rather, they are
an in-house list compiled by a particular business.

Direct-marketing databases are similar to mailing lists in that they contain names and
addresses, but they are much more. They are the repository of a wide range of customer
information and may also contain psychographic, demographic, and census data compiled from
external sources. They form the basis of direct-marketing programs whereby companies
establish closer ties and build relationships with their customers.
6. Order Processing And Fulfillment
Catalogers who seek to build relationships with their existing customers and acquire new
customers must have an efficient system of fulfilling orders in a timely and accurate manner.
Nothing turns a customer off more than receiving the wrong merchandise or receiving it too
late for the purpose for which it was originally ordered. In some cases catalogers may have
their own warehousing operation that is involved in picking, packing, and shipping orders. In
other cases merchandise may be drop shipped from another location, or the entire order-
fulfillment process may be handled by an outside service bureau.
In addition to efficiently fulfilling orders, catalogers capture order information to build their in-
house customer databases. Such databases typically contain information concerning the
amount of the purchase, what items have been purchased, and the dates purchases were
made. Armed with this data, catalog marketers can more effectively target future mailings to
customers based on when, what, and how much they have ordered in the past.
The catalog must deliver the right offer at the right time to the right person in the right way.
The target audience must be correctly identified. The offer must be made in the best possible
way, and the catalog must employ the most effective creative execution to present the
merchandise offered for sale. At its most effective, catalog marketing is an ongoing process of
communication to maintain relationships with existing customers and build relationships with
new ones.
DIRECT MARKETING SUCCESS FACTORS
There are certain situations where direct marketing is more likely to work than others. The
direct marketer must be able to identify the target audience in terms of shared characteristics.
Are they likely to read a particular magazine? Live in a certain geographic area? Have a certain
minimum income? Be a certain age or gender? The more characteristics of the target audience
that can be identified, the more likely a direct marketing campaign targeted to those individuals
will work. Since direct marketing relies on one-on-one communications and motivating the
recipient to act, it is essential to be able to reach the target audience. It's no use identifying a
target market if there's no mailing list or print or broadcast medium available to reach them.
Some other situations in which direct marketing works well are when there's a lot to say about
a product or service; when the product or service has the potential for repeat sales; and when
there's a need to have greater control over the sales message.

The success of a direct marketing program depends on delivering the right offer at the right
time to the right person in the right way. Direct marketing is a complex discipline that requires
expertise in several areas to achieve success. It involves identifying the target market correctly
and selecting the appropriate media and/or lists to reach it. The offer must be presented in the
best way, and direct marketers must use the most effective creative execution to successfully
motivate customers and prospects. At its most effective, direct marketing is an ongoing process
of communication to maintain relationships with existing customers and build relationships
with new ones.

UNIT 3 CASE STUDY- KETTLE FOODS
Kettle Foods has discovered that its Chips brand does not need advertising support. Might this
be a problem now supermarkets are promoting their in-house brands?
Kettle Chips were the first

‘designer crisps’ to come to
Britain in the late 1980s in
upmarket wine bars and
delicatessens. Now they are
everywhere. They are never
advertised on television, the
printed media or on poster sites,
yet annual sales turnover of this
type of snack in the UK is now
almost £50 million.
In the UK, the snack market is worth around £3 billion a year, of which potato crisps forms one-
third. This has remained steady for about ten years with the exception of the premium hand-
cooked chips market (principally occupied by Kettle Chips) which is growing at 30 per cent per
year. Kettle Chips are never advertised, so what is the secret of their success?
Cameron Healy had no working capital when he founded Kettle in Oregon in 1978. He
contended that customers with sufficient discretionary income would be prepared to pay
around £2 for a top quality packet of crisps. His idea turned out to be correct and he developed
Kettle Chips. By 1982 they were the only hand produced potato crisps in the USA. He came to
Britain in 1987 to research ‘natural foods’ and set up crisp production with Tim Meyer in
Norwich in 1988 and moved to larger premises in 1998. Since then year-on-year growth has
been over 30 per cent and exports to Europe have grown at an even faster rate.
Josh Layish, joint Managing Director at Kettle, contends that company growth has been a direct
result of not targeting a mass market. He says: ‘Financial discipline is essential, but it cannot
form the vision and direction for the company. We’re not a volume driven business.’ As Kettle is
not a public company it has the managerial independence to make such decisions. Being a high-
quality premium product encourages loyal consumers. ‘Our customers are prepared to pay for
premium products,’ explains Layish. ‘They’re ABs – foodies and prosperous. Typically they
haven’t yet had kids, or they’re older and their kids have left home and they want to be
communicated with intelligently.’

The policy of not advertising was intuitive, based on the notion that in this way people could
‘discover’ the brand. ‘We do a lot of communication with our customers,’ says Layish. ‘Any firm
with a message like ours has to communicate it, but that’s not the same as advertising in the
30-second commercial sense.’
Their communication strategy has the following components:
• Direct mail that extends to a database of 40,000 names obtained from customers who
register at food fairs, county shows, English Heritage concerts, the BBC Good Food Show and
such events as the National Wedding Show.
• A website that features a recipe book, plus a quarterly booklet for those who request it, as
well as a free 0800 telephone facility.
• A PR strategy managed by Communications Plus which specialises in food and drink.
Kettle wants major sales through supermarkets, but it does not necessarily want this to be the
first place where customers discover the brand. Originally it was marketed through
delicatessens, but now it is offered in upmarket settings such as Coffee Republic, All Bar One
and Ha Ha’s as the only hand-cooked crisp on offer.
When asked about competition from supermarket own brands, Layish responded: ‘We are
conscious of this, but we believe we can stay ahead on quality and innovation. Our seasonings
are second to none.’ Competition from own-label intrusion suggests a harder hitting marketing
approach than Kettle has previously adopted. With 30 per cent growth from a firm that seems
satisfied, what else can Kettle do?
Phil Teer, head of planning at St Luke’s Communications Consultancy, argues that although
Kettle Chips is perceived to be an innovative product with a modern pack design, we live in
dynamic times and trends can quickly go out of fashion. With Kettle, they have successfully built
an intense relationship between the brand and its customers, but he questions how strong that
bond will be in two or three years. He suggests building a strong online community similar to
the Friends Reunited website, as well as branding a TV programme. Teer contends that Kettle
could create a strand of programming around its brand of crisps or its target market in the form
of a deli-culture.
Teer says: ‘I associate Kettle with the home . . . Kettle parties or events at high profile venues
would enhance its out-of-home role and deepen the relationship in a contemporary way. You’d
look to ensure that Kettle is a part of people’s lives in a way that reflects how they’re living it.
People are smart. They look behind the brand and see that it’s not some big corporation, but a
small team who believe in what they do. That’s a marketable quality.’

Layish is not persuaded with this view when he states: ‘There is potential for a more targeted
message, but we believe it is not a sufficiently rich message. We communicate a lot of
information, but the more we have pulled back from volumechasing promotional activity, the
faster our acceleration in growth has been. We’ve seen real organic growth. If you have people
who are passionate about natural products or the ethics of a company, it becomes a natural
network.’
Source: Wynn, S. (2002) ‘Crisp Growth Without Paying for the Ads’, Management Today, May, pp. 70–2
Discussion Questions:
1. Which view is the more convincing – Teer’s or Layish’s? Give reasons to justify your answer.
2. Suggest ways in which Kettle Foods can surmount the threat from own-label brands, with
particular reference to direct marketing.
3. How might Kettle sustain or even increase its 30 % year-on-year growth?

UNIT 4 DIRECT SELLING
What Is Direct Selling?
Direct selling refers to the selling of goods and services to consumers who are away from a
fixed retail outlet, generally at their homes, workplace, etc., through an explanation, and
demonstration of the product by sellers. It is one of the oldest modes of sales, and is similar to
the traditional consumer goods retail model.
History And Evolution Of Direct Selling
The modern direct selling industry can be considered to have pioneered in the USA, with the
establishment of Avon in 1886. With the success of this model, involving lower sales, and
distributions costs and greater direct interaction with the consumer, the portfolio of products
swelled to include cosmetics, personal care, household goods, accessories and other products,
over time. The movement was supported by the engagement of women as direct sellers, who
considered this opportunity as a means of empowerment and self-reliance.
The introduction of the multi-level marketing compensation plans (MLM plans) opened another
chapter in the evolution of direct selling. Introduced in the mid-twentieth century, the plan for
the first time enabled consumers to benefit from the success by providing them the option to
become a direct selling partner of the business. MLM plans became widely accepted and a large

number of companies adopted the same including global majors like; Avon, Tupperware and
Amway.
Today, direct selling is a US167 billion (2012) industry globally, engaging over 89 million direct
sellers. Asia-Pacific forms the largest direct selling market with a share of 44 per cent followed
by North America, Central and South America (20 per cent share, each) and Europe (15 per
cent).
Direct Selling In India
Modern direct selling can be considered to have been kick-started in India in 1980s. The
industry witnessed major growth post-liberalisation with
many global players entering the Indian market. Amway
was one of the first major global direct selling companies
to enter India in the year 1995, which was followed by
companies like; Avon, Oriflame and Tupperware in 1996.
Around the same time Modicare was one the first few
Indian companies to adopt this channel of distribution.
Today, the direct selling market in India is estimated to be

around INR72 billion. Interactions with industry
stakeholders suggest that the industry has also created a
positive impact on several other social and economic
parameters:
a. Additional income opportunities: Direct selling

provides additional income opportunities to a large
number of people and promotes micro-
entrepreneurship. Currently, over 5 million direct
sellers are estimated to be engaged with the industry,
and are projected to grow further with the growth of
the industry. In addition to providing income
opportunities, direct selling also imparts transferable
skills in sales and management, which can be used
outside the direct selling industry, as well.
b. Women empowerment: Direct selling offers self-

employment opportunities to a large number of people,
especially women. Direct selling gives women the flexibility to manage their time and balance
their work and personal lives. The industry in FY13 is estimated to have provided self-

employment to 3.4 million female distributors. Many companies work towards the
empowerment of women.
c. Development of the SME sector: Many direct selling companies rely on SMEs for
manufacturing their products. In a lot of cases, the direct selling companies impart the
manufacturing know-how, technology and processes to enable the SMEs to produce excellent
products. Many direct selling companies also invest in providing the right equipment and
machines to the SMEs for production. Driven by these initiatives, several SMEs have now
developed capabilities to cater to the needs of other MNCs and have commenced supplying to
them, in the process promoting India as a manufacturing destination.
d. Employment generation: Besides providing

additional income opportunities to direct sellers,
the industry also generates a large number of
jobs. Majority of the direct selling companies
outsource production, packaging and distribution
of their products, thus generating direct
employment across the value chain.
e. CSR initiatives: In terms of responsibilities

towards society, direct selling companies have
been in the forefront. Many of the companies
involved in direct selling actively contribute
towards social activities. Avon’s Breast Cancer
Crusade and Amway’s Sunrise project for
education are well known for their social impact.
f. Contribution to the government exchequer: The

operating model for direct selling generates tax
contributions to the government across its value chain.
Total tax contribution by the direct selling industry to the
government in FY13 alone is estimated to be INR10 billion.
This includes direct and indirect tax contributions through
corporate income taxes, import duties and VAT.
Going forward, the industry has the potential to create a

significant social and economic impact in India. Our
estimates suggest that the industry has the potential to reach a size of INR645 billion by 2025,
driven by growth in consumer markets and increase in the penetration of direct selling to

globally comparable levels. This could however be contingent on creating an enabling
environment for the industry, and mitigation of some of the challenges it is facing today.

Difference between Direct Selling And Direct Marketing:
Global Direct Selling Market Evolution:
Direct selling started with hawkers and peddlers, who travelled great distances to sell
unbranded products and services. Doorbells, catalogues and purchase orders were centuries
away from the early direct seller who relied on his instincts and common sense to make a living
through selling. The early direct seller exchanged pottery, stone weapons, tools, agricultural
products and raw materials with people from other lands. They later evolved into independent
salesmen who went from door to door and house to house selling branded products in an
urbanised environment.
Beginning in the mid to late 1800s, direct selling companies were formed in USA offering
various products directly to the final consumer. Avon, which today is one of the largest direct
selling companies, was established in 1886, initially represented a means for women to earn
money and work outside their homes, and by 1920 topped its revenue at USD1 million.
Global Direct Selling Market Size Direct selling is a USD 167 billion industry globally. While the
industry grew at a low rate of 5.4 per cent in 2012, over 2011 (growth rate of 19.7 per cent),
due to global economic slowdown, the long term growth prospects of the industry remain
robust.

Number of Direct sellers: The direct selling industry tends to benefit from in-person contact for
the demonstration and sale of products, and therefore provides business entrepreneurship
opportunities for a large
number of people.
The opportunities in the

industry has more than
doubled over the last 11 years
(2001-2012), and the number
of direct sellers have increased
to 89.7 million direct sellers in
2012 from 43.8 million direct
sellers in 2001.
Gender-wise participation in
the Industry As of 2012, 75 per
cent of females were part of
the industry.
Direct selling has given many

women, who found it difficult
to work away from home, an
alternative earning
opportunity in their homes.
Thus, enabling them to
maintain a work-life balance.

Product Categories
Companies around the world use the direct selling channel to promote, demonstrate and sell a
wide range of products across various categories. There are more than 10 different categories
of products sold by the global direct selling industry. With time, there has been an evolution in
the spending trends globally in favour of cosmetics & personal care products, and the industry
has seen tremendous growth.
This has also led to increase in sales through the direct selling channel. Cosmetics & personal
care is the largest direct selling segment capturing a market of USD 58 billion in 2012 and with a
35 per cent share of the industry revenue, followed by wellness products with a share of 25 per
cent and a market size of USD 42 billion.
These products benefit from the personal touch offered by direct sellers who are able to
demonstrate and explain the benefits of these products. Household goods & durables and
clothing & accessories are also significantly large product categories generating revenues of
approximately USD 23 billion and USD 15 billion from direct sales globally.
Home improvement, utilities, books & stationary are smaller segments, with each of them
capturing a market of close to USD 3-5 billion. All these segments have witnessed double digit
growth over the three years from 2010 to 2012.

Methods for Direct Selling
While some direct sellers maybe employees of a direct sales company, authorised to act for the
company in business matters, most direct sellers are independent business operators or
selfemployed. They enjoy the advantage of deciding when and how much time will be devoted
in selling the company’s products. Traditional Direct selling methods include:
 Person To Person Marketing

 Party Plan Groups. Person to Person is the most popular amongst direct selling
companies followed by Party Plan Groups.
Successful direct selling requires a combination of skills including interpersonal, presentation,

product knowledge and closing.
 Interpersonal
Direct selling simply will not work if you do not have adequate interpersonal
communication skills. Before you can consistently get customers to buy your products, they
must trust you and connect with you as a salesperson. This is especially true if the products
you sell through direct selling are higher priced and you must convince the prospect of their

value. Direct sellers need to have a friendly
demeanor and build trust quickly to get
invited into a home or business.
 Presentation
Many direct selling jobs involve presentation

skills. Sometimes, you have to stand in front
of a group of prospects and present the
merits of your company and its products or
services. Tupperware is commonly sold through in-home parties with presentations of the
products made to people invited to the gathering. Product demonstrations are also
common. Door-to-door vacuum sellers often spend a couple hours in a prospect's home
demonstrating the product and explaining its benefits at the same time.
 Product Knowledge
Product knowledge is critical in direct

selling. Since you often sell one specific
product or a line of related products, you
need to come across as the expert in your
product category. This establishes your
credibility as the salesperson and helps
maintain the credible reputation of the
brand you sell. Top direct sellers spend
hours, days or weeks learning their
products before making the first call or
knocking on the first door.
 Closing
Closing a sale is important in any selling format, but it is necessary in direct selling. Some
companies heavily emphasize assertive closing techniques. The close is the point at which
all key concerns of the prospect are addressed and you need to persuade him to finalize the
purchase. Confidence, persuasiveness and a certain amount of courage are keys to
effectively closing deals. Some direct selling companies maintain strict quotas or
conversation ratios to hold sellers accountable for closing deals.
Disadvantages:
A number of disadvantages come with direct selling, which can include both face-to-face and
phone sales. These disadvantages can pertain to the associated costs of direct selling,
shortcomings of the method itself or its overall effectiveness. Small companies are usually

aware of these disadvantages and try to offset them with advertising, direct mail and other
promotions.
 Expensive
Direct selling is relatively expensive compared to other forms of marketing. Each direct sales
call can cost over $300 in some industries, according to "Know this" online, a reputable
business reference site. Companies that sell directly must hire sales reps. hence, the sales
reps' salaries and benefits must be factored into the costs of all sales appointments. Sales
reps must also be trained in classrooms and on the job before they can even call on
customers. These training programs often last several weeks, which can get expensive. Sales
reps also incur expenses traveling by air or car as not all customers are local.
 Time Consuming
Sales calls can be time consuming. A sales rep may spend an hour or more introducing the
features and benefits of her products. During this process, she may need to ask questions,
overcome objections and try to close the sale. Moreover, reps may take several visits or
calls to actually make sales. Some consumer or business clients need to think about their
purchasing decisions. Also, the decision maker or owner may not even be available at the
time of the sales call. Sales reps can only make one sale at a time. Contrarily, an online
marketer may receive several sales in the same time period.
 Limited Coverage
Small companies have limited coverage when they sell to clients directly. In other words,
they can only cover one or more markets at a time, depending on the number of sales reps
they employ. For example, yellow pages sales reps may spend 3 to 6 weeks in one market to
visit all advertisers. They may then move on to a contiguous market and complete coverage
for the next directory. Contrarily, companies using advertising or online sales methods can
cover entire regions or the national market with single promotions.
 Inconvenient or Obtrusive
Direct selling can also be inconvenient or obstructive for business clients or consumers.
Sales reps often appear at times that are inconvenient for business owners or managers.
These individuals may be having relatively busy days, or they may have crucial deadlines to
meet. Consequently, the last thing they want to do is make a buying decision. Small
company sales reps may get around the inconvenience factor by leaving brochures or
business cards with web addresses. Those way customers can study the information at their
convenience.

Challenges Faced In Direct Selling In India
Similar to the traditional consumer industries, the direct selling industry faces challenges in
setting-up manufacturing facilities, dealing with import duties, etc. A daunting challenge for the
direct selling industry in India is lack of regulatory clarity.
Due to this, often direct selling companies are mistaken for fraudulent pyramid/ ponzi schemes.
States like; Andhra Pradesh, Kerala, Sikkim and union territories like Chandigarh, have on
several occasions mistook legitimate direct selling companies with fraudulent players because
of absence of required regulatory clarification.
Such uncertainty is likely impeding the growth and reputation of direct selling companies in
India. In many cases, due to absence of clarity, representatives of the direct selling companies
have been harassed by the local police and state governments. Such incidences tend to hinder
the growth of the industry and can have an adverse effect on consumer confidence.

UNIT 5 MULTICHANNEL MARKETING
Multi-channel retailing involves using a variety of engagement points to create a seamless

shopping experience for customers. Those engagement points include:
 Brick-and-mortar stores
 Websites
 Tablets
 Kiosks
 Smartphones
 Digital signage
 Call centers
 Social media
Over the past few years, multi-channel retailing has received growing attention as customers
increasingly turn to a range of different channels as part of the buying process. Recognizing this
86 percent of retailers now include URLs in catalogues, 80 percent use email to promote store
or catalogue sales, and 87 percent accept in store returns of online purchases.
According to Shop.org, 34 percent of consumers today use at least three channels when
shopping. Research has found them to spend up to 10 times more, to generate 25 to 50 percent
more profit and demonstrate greater loyalty than their single-channel counterparts.
Demographically, multi-channel consumers also differ in certain respects to those of a single-

channel. What is important to understand is that other channels may not replace traditional
stores, but are a vital point-of-contact and research tool for consumers – prompting them to
visit a store if the experience is positive. If all channels do not work together then consumers
will not be converted into “buyers”.

The frequently expressed concern that the application of multiple retail channels is associated
with cannibalisation effects has proven to be unfounded. Indeed, the appropriate degree of
similarity, consistency, integration and agreement achieves the exact opposite. Effective multi-
channel retailing entails customer management, consistency across channels, integration across
channels and information systems, and multiple pick-up or delivery options regardless of which
channel is used to make a purchase. Retail organisations that can integrate their channels to
deliver these capabilities will create a sustainable competitive advantage well into the future.
“Today the customers expect that if they order an item online, they can return it in the store,
that kind of thing. It’s up to retailers to make sure that expectation is met.
BENEFITS OF MULTICHANNEL RETAILING
Multi-channel retailing also offers plenty of benefits to retailers, benefits that make investing in
the strategy worthwhile.
Improved customer perception
“Channels are disintegrating for customers,” said Jeremy Gustafson, vice president at KSC
Kreate, a digital commerce agency based in Hollywood, Fla. “People are watching television and
using their tablet at the same time. They expect the same
kind of integration with their shopping experience.”
Brands who don’t provide that kind of experience, he said,

are likely to lose customers, especially as the digital
generation gains even more buying power. Stores who do
create a seamless experience that integrates all different
forms of technology, however, can gain significant
customer loyalty.
Those brands are perceived as forward-thinking and

responsive to customer’s needs — qualities that will keep
customers coming back. That improved perception offers
another advantage, as well. In a world of big-box stores
and online shopping, finding the best price is easier than
ever for customers.
A store that is perceived as responsive to customer needs

and gives customers easy access to a variety of channels
can differentiate itself in a crowded field. That allows the

brand to compete on the experience offered, rather than just price. Customers might be willing
to pay a little more for the convenience, and will come back repeatedly, and brands don’t have
to slice their profits just to keep up.
Increased sales
The primary driver for a retailer adopting any strategy is, of course, increasing profit, most
frequently by increasing sales. Multi-channel retailing, by offering a variety of engagement
points for the customer to make a purchase, increases the convenience and ease of sales, thus
boosting profit. A customer who thinks about buying a pair of pants, for example, may not want
to drive to the mall, park, walk to the store, find the pants and try them on.
For that customer, she can go online at home and order the pants from the store’s website.
Another customer, however, might be in the store trying on the pants and decide she’d like
them in a different color. In that case, she can use an in-store kiosk to find the pants in the
preferred color, order them and have them delivered to her home.
Still another customer can use her smartphone to take a picture of the pants, send it to a friend
and discuss whether to purchase them or not. Having a variety of engagement points gives
retailers more tools to make a sale.
Better data collection
Knowing the customer is a key tenant for successful retailing, and multi-channel engagement
points provide more opportunities to gather information about customers. There are two
benefits to the data collection offered by multi-channel retail:
First, the possibility for gathering more information exists, and the information can be used
more effectively. “People usually are more comfortable entering information themselves,
rather than giving it to a salesperson,” said Steve Deckert, marketing manager for Sweet Tooth,
a Toronto-based provider of loyalty programs to retailers. “So they are far more likely to enter
their email address into a kiosk than give it to a cashier.
At the same time, by having that information available across a variety of channels, the retailer
has more opportunities to capture the information, and more of it.” If a retailer can track what
a customer is purchasing, and where, more targeted marketing can be introduced. Someone
who tends to browse online and then purchase in-store, for example, can be emailed an
invitation to a private showing in a store, and the list of products to be shown can be sent
before the event, increasing the likelihood of purchase.
Not only is it more likely that the customer will provide important information, but if all the
different channels are communicating, then the information only needs to be entered once. “If

you’re going to ask someone for information about themselves, it needs to be available
whenever they come to you,” said Verizon’s Bagel. “Otherwise, it feels intrusive and annoying
to have to repeat the same information over and over again.”
Enhanced productivity
Multi-channel retailing offers benefits for more than shoppers. Workers, too, can benefit from
the use of new technology because it arms them with more information and increases their
efficiency. A tablet, for example, frees employees from the point-of-sale system, instead
allowing them to carry the register with them.
Employees can go directly to the aid of customers, helping them to find out what is in stock,
what is available at other stores and when new products might be launching. The tablet also
can contain information about the loyalty program, so a frequent customer can be given VIP
status. Then, when a purchase is ready to be made, the customer does not have to stand in line,
but rather can simply continue talking to the salesperson and make her purchase via tablet.
BEST PRACTICES
While every type of channel has its own unique set of challenges, there are some strategies that
are true across all engagement points.
Be consistent
Messaging across all channels should have the same look and feel; the customer should always
know exactly what brand she is interacting with. “Traditionally, retailers have approached each
channel individually,” said Gustafson. “What is needed, though, is to create a single marketing
message, and then figure out how to deploy it across all channels. The messaging doesn’t have
to be identical, but it all needs to be clearly related.”
Provide a value-add
Make sure each engagement point offers something to the customer. An in-store kiosk that
simply accesses the company’s website, for ex ample, is not bringing anything unique to the
customer; instead, she can check the website at home, on her own. The same is true of a tablet.
If the salesperson with the tablet does not have access to more or better information than the
customer can access via her own tablet or smartphone, the application will not bring much
value to the transaction.

Security
There is a fine line between being helpful and being

intrusive, and it’s a line that easily is crossed.
Customers are aware of security issues, and are
wary of providing too much personal information.
“There has to be a clear connection between the
information collected, how it’s used and what value
the customer receives from it,” said Bagel.
“Understand your brand strategy and what level of
intimacy is appropriate. Depending on your
clientele, privacy might not be as important —
digital natives tend to be far less concerned with
privacy than Baby Boomers, for example. But everyone wants to know that they will receive a
benefit from giving you information.”
Be committed
Multi-channel retailing requires an investment in time and money. There needs to be a clear
strategy across all teams, and cooperation is critical to success. “In order to have a totally
seamless solution, all stakeholders need to be involved, giving their insight and taking
ownership and having support and understanding as to what is being done, why and how,” said
Bowers. “This is not a sometime commitment; this is a total marketing strategy for the retailer
to invest in the future of the customer acquisition, retention process and loyalty programs.

UNIT 6 INTRODUCTION TO FRANCHISING
Franchising – the basics – how does it work?
In a basic franchising arrangement the franchisor has developed a system for conducting
business. The system has been found to be successful. The franchisor wishing to emulate the
success of that business system, usually in a different geographic area, establishes a blueprint
for others also wishing to emulate this success to operate the same business using the same
name and same systems.
DEFINITION OF FRANCHISING:
The Indian law does not define franchising. However, simplistically put, franchising is a
method of distributing products or services. In a normal franchise agreement, there are at
least two parties involved:
(a) the franchisor, who lends his trademark or trade name (or other intellectual property
rights) and the business system; and
(b) the franchisee, who pays a royalty and often an initial fee for the right to do business
under the franchisor’s name and business system.
Franchising may be defined as a business arrangement which allows for the reputation,
(goodwill) innovation, technical know-how and expertise of the innovator (franchisor) to be
combined with the energy, industry and investment of another party (franchisee) to conduct
the business of providing and selling of goods and services.
A franchise is the agreement or license between two legally independent parties which gives:
 a person or group of people (franchisee) the right to market a product or service

using the trademark or trade name of another business (franchisor)
 the franchisee gets the right to market a product or service using the operating
methods of the franchisor
 the franchisee has the obligation to pay the franchisor fees for these rights
 the franchisor has the obligation to provide rights and support to franchisees

Business Definition:
Franchising has been described as:

 A method of DISTRIBUTION of goods and services;
 A method of MARKETING;
 A method of GROWTH;
 A method of CAPITAL ACQUISION;
And increasingly, franchising has become:

 A method of EMPLOYMENT.
For a company wishing to expand to other locations, franchising offers the opportunity to have
branch locations operated by "dedicated" managers rather than company employees. A
franchisee is dedicated because it's his business (operating under the franchisor's name and
rules) and he's made an investment. A franchisee will sell more, service customers better, and
control costs more tightly than a company employee.
Why does franchising work?
The franchising model works because it provides a formula for operating a successful business
by delivering a uniform product and service to customers. It provides franchisors with the
capital they need, creates distribution channels, and gives consumers a recognized standard of
what to expect and a higher perceived value. Done right, it's a model that benefits business
owners, operators, and customers alike. As the French might say, "Vive La Franche!"
HISTORY OF FRANCHISING:
Franchising developed over time as an efficient way to do business and there were versions of
franchising employed in Europe centuries ago. The origin of the word franchise goes back to
Anglo-French, meaning freedom, liberty, and from Middle French, franchir, to free, and earlier
from Old French franc, free.
The franchise model has been called the greatest business model ever invented. It’s allowed
people all over the world who’ve wanted to own their own businesses do just that. But, how
did it begin? How did franchising start?

The Middle Age
The Middle Ages, as strange as it sounds, is where the

business model of franchising started to appear. In
those days, some of the local governments granted high
church officials (and others considered to be
important) a license to maintain order and assess
taxes.
Medieval courts (or lords) gave these individuals the
right to hold markets, and perform business-related
activities. These first franchisees paid a royalty to the lords in exchange for, among other things,
“protection” that was essentially considered to be a monopoly on commercial ventures. Over
time, the regulations that governed these first franchisees became a part of European Common
Law.
The Colonial Period

The next time period in which the concept of
franchising started to take hold was the
Colonial period. This period involved what
were called “Franchise Kings”. The local
sovereign/lord would authorize individuals to
hold markets, run local ferries, hold fairs, or to
even hunt on his land. This concept extended
to the Kings, who would grant a franchise for different types of business activities. European
monarchs (who were technically close enough to being Kings themselves) even bestowed
franchises upon local citizens who agreed to take on the risk of establishing colonies. Once a
colony was created, the founder was able to gain the protection of the “Crown” in exchange for
taxes or royalties.
The 1840s
During the 1840’s, there was a beer

brewer in Germany who granted certain
rights to several local taverns to sell
their beer. What’s interesting about this
is the fact that the tavern owners had to
use the beer brewer’s trade name. That
name: SPATEN. The tavern owners were

franchisees of sorts, because they had to pay for the right to use the trade name (a.k.a., the
brand name). By the way, the SPATEN trade name still exists today.
The 1880s
Isaac Singer was the founder of I.M. Singer & Company. He was the first person to patent a
practical, widely-used sewing machine. Singer’s sewing machines could sew 900 stitches per
minute, a lot more than any other sewing machines in existence at the time.
Because everything was stitched together by hand in the mid-1880’s, a faster sewing machine
was really big deal. At $120 each, Singer sewing machines were out of reach for most
Americans. But one of Singer’s partners
fixed that. He came up with what would
turn out to be the first-ever installment
plan. That’s right—everyday people
could purchase Singer’s sewing machines
and pay for it in installments. With this
plan in place, Singer was able to sell a lot
more machines. He just needed a better distribution method. And being the entrepreneur that
he was, he figured out just how to do it.
Singer and his partners would find businesspeople who were interested in owning the rights to
sell Singer’s sewing machines in specific geographical areas. Once they found parties that
wanted to become licensees, they would charge them an up-front fee—a licensing fee, for the
right to sell the machines. In addition, Singer required licensees to teach consumers how to use
the machines that they had just purchased. This arrangement was a win-win. The partners now
had money coming in from the licensing fees which enabled them to fund more
manufacturing. The licensees had businesses of their own, and were selling a product that
most households wanted.
The Turn of the Century
The creation—and ultimately, the mass-

production—of automobiles changed everything
in America. There was finally a way for people to
get from location to location quickly or at least
faster than with a horse and buggy. The
entrepreneurs who were producing automobiles

must have known that they had a life-changing product in their hands.
Automobiles were sold through mail-order catalogs! Some were even sold by salesmen who
traveled around the USA trying to find buyers. Those two distribution methods weren’t cutting
it, so Ford and other automobile manufacturers worked on other ways to distribute their
product.
In 1896, William Metzger built and opened the first independent automobile dealership in
Detroit, Michigan. He actually sold an electric automobile called a Waverly for around $1,000.
The second businessman to get involved was H.O. Kohller. He opened the first automobile
dealership in Pennsylvania. He sold Winton automobiles.
Those men were actually the first auto franchise owners. Henry Ford and the other
businessmen who were producing automobiles now had a distribution system. They had an
automobile franchise network. And soon, automobile franchises were appearing everywhere.
The 1960s
Born in 1902, Raymond Albert Kroc was a sales guy

with an incredible vision. He started out selling
milkshake-mixing equipment. Kroc traveled all over
the country selling Multi-Mixers to people in the food
industry.
During his travels, Kroc had heard about two brothers

from California named Dick and Mac McDonald. They
owned a busy hamburger stand and were using eight
of Kroc’s milkshake-mixing machines—simultaneously.
Kroc had quite an epiphany after seeing the McDonald brothers’ restaurant. He envisioned
restaurants like theirs opening and operating all over the country. Coincidentally, the McDonald
brothers happened to be looking for a “franchising agent” to sell franchises across the
country—and as someone who’d been a salesman for the past 30 years, Ray Kroc was the right
guy for the job.
Kroc cemented a deal to be the McDonald brothers’ exclusive agent, and started selling
franchises. At the same time, he also opened the first duplicate of the McDonald brothers’
California restaurant in Des Plains, Illinois. Ray saw something big in the making, and tried to
convince the brothers that they should start thinking bigger also. A few years later, the three

owned multiple restaurants. However, Kroc was the one that wanted to build the eateries into
a true “empire”. He recognized that it was the perfect time to introduce a chain restaurant like
theirs, as automobile travel was becoming increasingly popular and freeways were beginning to
appear in more and more places. Kroc ended up buying out the McDonald brothers for $2.7
million after learning that they weren’t as motivated as he was in building a restaurant empire.
By 1963, McDonald’s had 500 restaurants up and running. Today, there are approximately
34,000 McDonald’s restaurants open. 80 percent of them are franchises. 1.8 million people are
employed by McDonald’s in 118 different countries. I’d say that Kroc succeeded in building an
empire.
FRANCHISING TODAY
Franchising is one of the world’s fastest growing and most lucrative industries. Franchise
businesses will be turning over an estimated $1 trillion (which is roughly 1/10 th the size of
India’s current GDP).
Franchising has since flourished into an industry which now has nearly 1,000 brands in a
multitude of different sectors.

FRANCHISING IN INDIA:
In the USA, almost a third of the retail sales come from franchised outlets, with sales of
trillion of dollars while in India, the industry is few million. India is a multi ethnic country
with the second largest population in the world. Indian consumers have experienced the
standard of services offered overseas and have sufficient exposure through media, which
has further fuelled their expectations.
 There are approximately 1150 national and international business format franchise
systems in India in 2007.
 Around 8 to 10 per cent Indian franchise systems have entered international
markets.
 There are an estimated 70, 000 units operating in business format franchises.
 The growth rate in franchised units from 2005-06 to 2006-07 was 30 to 35 per cent
for the last 4-5 years.
 Some 500000 persons are employed in business format franchise organizations.
 Franchising contributed less than 4 per cent to India’s Gross Domestic Product (GDP)
in 2007.
 Annual turnover is approximately us$ 4 billion.
Almost every product or service has a market in India but sometimes, innovative strategies
like “Indianisation” of its products and marketing techniques must be employed by a foreign
franchisor to further access the sizable market of India. In a franchised business, over 90 per
cent succeed. This success rate usually lures entrepreneurs with no experience but with a
surplus capital and a will to succeed towards franchising. The franchisee benefits from a
tried tested and proven business concept, which can dramatically reduce the chances of
failure.
Franchising potential in India:
Both demand and supply side factors are expected to contribute to this growth.
Demand side factors
 Increasing consumption and willingness to spend

 Increasing purchasing power of the middle class.
 Growing preference for branded and quality products among consumers
 Increased global exposure and growing aspirations to adopt western culture and use
international brands.

Supply side factors
 Increasing set of opportunity-driven competent entrepreneurs

 Increasing awareness of Franchising as a business opportunity and its relative low
risk profile
 Government initiatives such as the liberalization of FDI in retail which has allowed
foreign brands to enter India.
Though the Franchising in India is at a very nascent stage, but this industry has clocked the
growth rate of 25-30 per cent, the second fastest growing industry.
Organized retailing though only at 6 per cent

of the retailing, will take off in a very big
way. The Indian middle class is slowly
expanding and now buys consumer
appliances with more disposable income.
India offers lot of potential for the
franchising community.
Apart from Indians being very

entrepreneurial, franchising as a way of
doing business has been well accepted.
According to KPMG India estimates’, the

franchising industry is expected to
quadruple between 2012 and 2017.
There is scope for Franchising industry to contribute almost 4% of India GDP in 2017
(assuming 6% Y-o-Y GDP growth between 2012 and 2017), growing from a current estimated
contribution of 1.4 percent of GDP.
This is also expected to create job opportunities (including both direct and indirect) for an
additional 11 million people by 2017. While increasing consumption, willingness to spend,
growing preference for branded products, global exposure and use of international brands is
driving the demand side of franchising, increasing set of opportunity-driven competent
entrepreneurs, growing awareness of Franchising as a business opportunity and its relative
low risk profile are driving the supply of new franchisee units.
Services sector which includes Consumer services such as Financial Services, Courier

Services, Health & Wellness and Food Service sub segments is expected to contribute to
majority of the growth in Franchising in the next half decade.
KPMG India estimates’ suggest that franchisees in these areas are expected to form around
55 percent of total estimated Franchisees in 2017. Franchising in Health & Wellness sub-
segment is expected to grow to almost 6 times the current penetration. Retail (which
includes sectors such as Apparel, Jewelry, Neighborhood stores, Food & Grocery) and
Education are expected to be the other major areas where there is huge scope for
franchising to succeed.
Allowing Foreign Direct Investment (FDI) in single brand & multi-brand retail is expected to
generate interest among large international players to adopt the franchising route to enter
and expand in the country.
While certain operating models with-in franchising – such as Area development and Regional
Master Franchisee - appear more attractive than others, diversity in Indian consumer
preferences and degree of localization are expected to impact the choice of final model to
be adopted.
Today, India does not have any franchising specific laws; however various generic Indian

laws such as Competition laws, Indian contract Act etc are applicable on Franchising
operations. Any future consolidation with formulation of franchise specific regulations in this
area should allow conducive growth of franchise systems along with protection of franchisee
rights. Success of franchising is also dependent on role financial institutions can play in
promoting franchising.
Changing dynamics in franchising industry would warrant a mindset change as well. A

collaborative approach involving Franchisees, Franchisors, Financial institutions and industry
associations is the need of the hour.

Retail Sector growth projection: (from KPMG report)

Employment potential in the franchising industry:
The franchising industry is expected to employ

1.4 crore people by 2017, which is almost 10
percent of the total estimated workforce in
that year.
In addition to the direct employment,

franchising is expected to create push for
indirect employment as well.
It is estimated that indirect employment is

expected to create an additional 1.8 million
jobs by 2017 across the key franchising
sectors. Services oriented franchisees including Food service sectors are expected to generate
maximum indirect employment.

Inbound Franchising: International Franchisors in India:
India has rapidly emerged as an attractive market for international brands as is evident from
the number of launches in the last few years.
Outbound Franchising: Indian brands going abroad:
While there is surely an active interest in India by international brands, there is immense potential for
Indian brands to go global. Not only can Indian brands look at leveraging the Indian Diaspora present
across the world but also use this as an opportunity to spread Brand India.
However it is critical for Indian brands going global to note the differences in local competition,
demographics, price points, pay structures, labor laws etc before taking a strategic decision.
Industry associations such as Franchising Association of India and other such bodies could leverage their
relationships with global franchising councils in assisting such companies for a soft landing into other
countries.

Franchise Facts of United States of America
 An estimated 6,000 franchise companies operate in the U.S.

 75 industries use franchising to distribute goods and services to consumers.
 Nearly 50% of all retail sales come through franchising.
 One in 12 businesses is a franchise.
 Average initial investment level for nearly 8 out of 10 franchises, excluding real estate, is
less than $250,000.
 Nearly 86% of all franchises opened in 60 industries during the past 5 years are still
under the same ownership.
 Over 300 franchises are sold every week.
 750,000 franchised businesses in the U.S. generate almost $1 trillion in sales each year.
 In 2000, the median gross annual income, before taxes, of franchisees was in the $75,000 to
$124,000 range, with over 30% of franchisees earning over $150,000 per year.

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF OWNING A FRANCHISE?
The many advantages and disadvantages of owning a franchise should be carefully evaluated
before deciding to purchase one.
Advantages:
 “Owning a franchise allows you to go into business for yourself, but not by yourself.”
 A franchise provides franchisees with a certain level of independence where they can
operate their business.
 A franchise provides an established product or service which already enjoys widespread
brand- name recognition. This gives the franchisee the benefits of customer awareness
which would ordinarily take years to establish.
 A franchise increases your chances of business success because you are associating
with proven products and methods.
 Franchises may offer consumers the attraction of a certain level of quality and
consistency because it is mandated by the franchise agreement.
 Franchises offer important pre-opening support:
o site selection
o design and construction
o financing (in some cases)
o training
o grand-opening program
 Franchises offer ongoing support
o training
o national and regional advertising
o operating procedures and operational assistance
o ongoing supervision and management support
o increased spending power and access to bulk purchasing (in some cases)
Disadvantages:
 The franchisee is not completely independent. Franchisees are required to operate their
businesses according to the procedures and restrictions set forth by the franchisor in the
franchise agreement. These restrictions usually include the products or services which
can be offered, pricing and geographic territory. For some people, this is the most
serious disadvantage to becoming a franchisee.

 In addition to the initial franchise fee, franchisees must pay ongoing royalties and advertising
fees.
 Franchisees must be careful to balance restrictions and support provided by the
franchisor with their own ability to manage their business.
 A damaged, system-wide image can result if other franchisees are performing
 The term (duration) of a franchise agreement is usually limited and the franchisee may
have little or no say about the terms of a termination.
This section aims at highlighting some of the benefits and assessing some of the risks that
could arise in franchising. The following tables briefly summarize the pros and cons from the
franchisor and franchisee’s viewpoints.
FRANCHISOR’S VIEWPOINT
PROS CONS
Financial investment and commitment is Difficulty in finding a suitable person as a
limited. franchisee
Reasonable (sometimes, high) profits and Loss of goodwill / dilution of brand, if the
exponential growth of brand equity, without franchisee acts independently and does not
high-capital risks. adhere to certain basic standards
Exploitation of a wider territorial area, not Breakdown of a trust-based relationship
typically within his/its scope. between the parties or difficulty in receiving
co-operation from franchisees
Manpower resources looked after by the Franchisee may not disclose complete and
Franchisee. Consequently, fewer labour accurate income for calculation of franchise
problems to cope with. fees
FRANCHISEE’S VIEWPOINT
PROS CONS
Capitalizing and benefiting from the
Franchisor’s invention / brand / business Imposition of controls and supervision by the
systems / know-how. franchisor.
Heavy initial capital investment, in addition to
consideration for using the franchisor’s
Elimination of unnecessary expenses due to invention / brand / business systems / know-
franchisor’s experience and pilot operations how and receiving the franchisor’s services.

Continual assistance from the franchisor Dependence on the franchisor may hinder the
while operating the business. franchisee’s personal drive.
Franchisor’s policies may affect the
Benefit from the franchisor’s advertising and franchisee’s profitability and business
promotional campaigns operations.
Benefit from the franchisor’s negotiating and
bulk purchasing power.
While Franchisors believe franchising as a good option to grow, many entrepreneurs are opting
for the franchising route primarily due to it offering a safe and easy way of establishing business
and offering higher than market levels of profitability.
Franchising is also seen as a less-riskier option given that the business concept has already been
pre-tested in the market and the entrepreneurs get to see the results of the franchisors as well
as other franchisees.

UNIT 7 BASICS OF FRANCHISING
By drawing from the definitions ascribed to franchising by the British Franchise Association,
the International Franchising Association and the Federal Trade Commission of the United
States, the following characteristic traits of franchising emerge:
(a) A franchise arrangement is based upon a contractual relationship.

(b) The franchisor should have developed a business system or format, which is identified with
a brand name.
(c) The franchisee makes a substantial initial capital investment and normally owns the
business operation.
(d) The franchisor normally trains the franchisee to ensure that it is equipped to effectively
comply with the business system.
(e) Once the franchisee’s business commences, the franchisor continually supports the
franchisee in certain aspects of the business operation.
(f) The franchisor also regularly supervises the franchisee’s business operations in order to
protect the franchisor’s goodwill and brand name.
(g) Some form of consideration is paid by the franchisee to the franchisor for the rights
licensed and the services rendered.
FRANCHISE AGREEM ENT
FRANCHISOR FRANCHISEE
Owns trademark or trade name Uses trademark or trade name

Provides support: Expands business
• (sometimes) financing with franchisor’s support
• advertising & marketing
• training
Receives fees Pays fees

Types of Franchises
There are two main types of franchises:
product distribution business format
Product distribution franchises simply sell the franchisor’s products and are supplier-dealer
relationships. In product distribution franchising, the franchisor licenses its trademark and
logo to the franchisees but typically does not provide them with an entire system for running
their business.
In this relationship the dealer requires the trade name, trademark, and /or product from the
supplier or manufacturer. The franchisee identifies with the supplier through the product line. This
method primarily consists of distribution by a single supplier of manufactured products to dealers
who in turn would resell this to the end consumer.
The industries where you most often find this type of franchising are soft drink distributors,
automobile dealers and gas stations.
Some familiar product distribution franchises include:

✔Pepsi
✔Exxon/ Indian oil/ Bharat Petroluem
✔Ford Motor Company
Although product distribution franchising represents the largest percentage of total retail
sales, most franchises available today are business format opportunities.
Business format franchises, on the other hand, not only use a franchisor’s product, service
and trademark, but also the complete method to conduct the business itself, such as the
marketing plan and operations manuals. Business format franchises are the most common
type of franchise.

The franchisor offers the business know how that
includes project feasibility report writing including
demand and income projections, site selection,
location planning, interior development, display
arrangement, recruitment and selection, staff
training, supply of raw materials, and other goods
from authorized suppliers, operation manual and
also provide support in operations, management
and marketing of the business.
Some popular business format franchises include:
Restaurants Health & Beauty M aintenance/ Cleaning Real Estate
KFC Merle Norman Costmetic Jani-King International Century 21

Studios The ServiceMaster
RE/MAX International
Pizza Hut Supercuts Company Coldwell Banker
Taco Bell Merry Maids
Jenny Craig International Residential Affiliates
Cost Cutters Family Hair
Retail Care Automotive Service Convenience
Blockbuster Video Meineke Discount 7-Eleven

Radio Shack Business Services Mufflers FamilyMart
The Athlete’s Foot Mail Boxes Etc. AAMCO Transmissions

GNC Franchising H & R Block Midas International
Precision Auto Care
ACE America Cash
Express
Lodging
Kwik Kopy Education/ Training
Choice Hotels
Dale Carnegie Training
Bass Hotels/Holiday Inn
Barbizon School of
Marriott Hotels
Modeling
Berlitz International
Sylvan Learning Systems

Domestic firms such as Shahnaz Hussain in beauty care, VLCC in health care and slimming, CCD
in coffee beverages, Titan in wrist watches are few examples of business format franchising.
Types of Franchise Arrangements:
Because so many franchisors, industries and range of investments are possible, there are
different types of franchise arrangements available to a business owner.
Two types of franchising arrangements:
• single-unit (direct-unit) franchise

• multi-unit franchise
• area development
• master franchise (sub-franchising)
SINGLE UNIT / DIRECT FRANCHISING:
A single-unit (direct-unit) franchise is an agreement where the franchisor grants a franchisee

the rights to open and operate ONE franchise unit. This is the simplest and most common
type of franchise. With limited financial commitment, a franchisor can enter the foreign
market by executing a franchise agreement with a local
franchisee.
It is possible, however, for a franchisee to purchase additional

single-unit franchises once the original franchise unit begins to
prosper. This is then considered a multiple, single-unit
relationship.
Here, the franchisor sells the franchises directly in the host

country and supports the franchisees directly, either from its home base or by opening an
office in the host country. Direct franchising is less common in international arena except for
the neighboring countries like Nepal or Sri Lanka.
In several cases the franchisor opens a subsidiary company in the foreign country to service
the direct franchisees in that market.
Pizza Hut restaurants in India are the direct franchisee that are serviced by Yum! Restaurants
(India). Today many brand such as HiFi, Talwarkar’s , Lakme , VLCC offer this model.
However, a potential franchisor should consider several strategic issues pertaining to this
mode of franchising:
1. The basic issue that may confront a potential franchisor is the problems associated with
the kind of control a franchisor would like to exercise over the franchisees in another
country.
2. Issue might relate to transfer of knowledge and assistance to be provided to the

franchisee during the currency of contract. The local regulatory framework pertaining to the
intellectual; and industrial property rights needs to be examined.
3. Issue could pertain to taxation. The incidence of tax would depend on how the agreement
has been structured and also on the international treaties existing between the countries.
4. Franchisors may have a tendency to see their home countries law apply even if the
franchise exists in another country.
A MULTI-UNIT FRANCHISE is an agreement where the franchisor grants a

franchisee the rights to open and operate MORE THAN ONE unit.
There are two ways a multi- unit franchise can be achieved:

• an area development franchise or
• a master franchise.

AREA DEVELOPMENT FRANCHISE:
Under an area development franchise, a franchisee has the right to open more than one unit
during a specific time, within a specified area. For example, a franchisee may agree to open 5
units over a five year period in a specified territory.
Franchisor grants exclusive rights to a company obliging it to open more than one unit in a
specified area and to operate them. Development agents provide expertise on how to make
the business profitable.
Strategic issues required managerial consideration include assessment of the market

potential, selection of geographic areas to be selected for the development and number of
outlet to be opened along with a stipulation of time duration.
Many companies offer this type of franchise models within their home country including brands
such as Maui Tacos and Salad Creations.
MASTER FRANCHISE AGREEMENTS:
The franchisor grants a person in another country, the sub franchisor, the exclusive right within
a certain territory to open franchise outlets itself and /or to grant franchises to sub franchisees.
The franchisor transfers all its rights and duties to the master franchisor.
The master franchisor on the strength of the legal agreement, takes the responsibility of
enforcing the sub-franchising agreement and also of developing the franchise network in that
country.
Franchisor grants exclusive rights for a large territory to a franchisee, which in turn has the right
to sub franchise. Usually the franchisor's brand equity in the foreign markets is low. As the
franchisee fee is considered payment for the brand, the potential franchisees are reluctant to
pay the normal franchise fee demanded by the franchisor.
The franchisees will have to spend substantially to create brand awareness in their markets and
would like their territories to be protected from future exploitation by the franchisor. In such
cases master franchising is a suitable solution. Herein the franchisee gets the benefit when new
outlets are opened as sub-franchisee in that market. As the royalties from sub franchisees are
shared between the franchisor and the master franchisee the franchisee is rewarded for the
investment in building a weak or non-existing brand.

Further as the franchisee is responsible for selection and location of sub-franchisees, the
business from its own outlets is protected. The franchisor is benefited as it does not have to
invest heavily for brand management in international markets and is able to expand the
network in foreign markets. This is becoming increasingly common arrangement in
international franchising.
The advantages of this system are that the master

franchisor is familiar with the legal system of the country
and is more capable of handling the franchisee network.
He is also aware of the culture, the market, the taste and
preference, and the other aspects of business. This would
offer the foreign franchisor quick entry and faster
development in that country.
In India, international brands such as Gold’s Gym, Hard

Rock café and domestic brands such as Jumbo king and
Chocolate Room have pursued this route.
Below is a table that compares the relative degrees of attractiveness of each model.

UNDERSTANDING OF COMMON FRANCHISE TERMS:
Business format franchise – this type of franchise includes not only a product, service and
trademark, but also the complete method to conduct the business itself, such as the
marketing plan and operations manuals
Disclosure statement – also known as the UFOC, or Uniform Franchise Offering Circular, the
disclosure document provides information about the franchisor and franchise system
Franchise – a license that describes the relationship between the franchisor and franchisee
including use of trademarks, fees, support and control
Franchise agreement – the legal, written contract between the franchisor and franchisee
which tells each party what each is supposed to do
Franchisee – the person or company that gets the right from the franchisor to do business
under the franchisor’s trademark or trade name
Franchising – a method of business expansion characterized by a trademark license,

payment of fees, and significant assistance and/or control
Franchisor – the person or company that grants the franchisee the right to do business
under their trademark or trade name
Product distribution franchise – a franchise where the franchisee simply sells the
franchisor’s products without using the franchisor’s method of conducting business
Royalty – the regular payment made by the franchisee to the franchisor, usually based on a
percentage of the franchisee’s gross sales
Trademark – the franchisor’s identifying marks, brand name and logo that are licensed to the
franchisee
UFOC – the Uniform Franchise Offering Circular, UFOC, is one format for the disclosure
document which provides information about the franchisor and franchise system to the
prospective franchisee

WHAT ARE THE ALTERNATIVES TO FRANCHISING?
In addition to franchising, there are two other popular methods by which businesses expand
their market and distribution channels:
• distributorships
• licensing
EMPLOYEE LICENSEE FRANCHISEE
In a distributorship, the distributor usually:
 has a contractual relationship with the supplier

 buys from the supplier in bulk and sells in smaller quantities
 is familiar with local markets and customers
 may do business with many companies, more than just the supplier/producer
 may not receive contractual support and training from the supplier/producer like a
franchisee
A distributor may be subject to many controls by the supplier/producer and begin to resemble
a franchise. Some popular distributorship includes:
• Amway
• Color Me Beautiful Cosmetics
• Mountain Life Spring Water
• Knorr Soup Vendor
• Campbell’s Soup Vending Machines

Licensing, on the other hand, allows a licensee to pay for the rights to use a particular
trademark. Unlike franchises, in which the franchisor exerts significant control over the
franchisee’s operations, licensors are mainly interested in collecting royalties and supervising
the use of the license rather than influencing the operations of the business.
Some popular licensors include:

• Netscape Communications
• Apple Computer
• Canon Inc.
• Woolmark
• Compaq Computer

UNIT 8 DEVELOPING A FRANCHISEE BUSINESS
IS THE BUSINESS READY FOR FRANCHISING?
Before implementing a franchise program, a company must evaluate itself on several criteria
including the success of initial or pilot operations. It has to ensure that products or services
offered have found reasonable acceptance and the same are readily adaptable to other areas in
the country, and the market potential for the franchisee is good. The level and type of
competition is to be studied so as to focus advertising and promotion to the targeted
customers.
Distinctness
To be successful, especially in a crowded market, a franchisor must have some degree of

distinctiveness or the potential to achieve distinctiveness, in its business segment. If it does not,
it will have difficulty in attracting high caliber franchisees in an increasingly competitive market.
A franchise may be distinctive in terms of its products, services, operating and delivery systems
or marketing. If the business is to be successfully expanded by franchising, its success must be
attributable to its products or services, business format, operating or management systems
and/or marketing. It cannot be attributable merely to the unique character of its founder, its
management or its location.
For example Domino Pizza has a distinction in

distribution system, Boston Computing to its
web-centric syllabus and Chawla's Chicken to its
product especially "Malai Chicken" The
elements of success must be teachable to
persons and be replicable by such persons.
Profitable Prototype
It is essential to setup a prototype outlet to test and refine the concept of the franchise
business before embarking upon franchising network. The prototype outlet is used to test the
systems relating to operations, marketing, customer service, staff management, accounting and
record keeping. The prototype outlet is used to perfect the product and service, decor, design,
layout and equipments.
Besides developing suitable advertising campaigns it also tests the marketing strategies and
plans. If the franchisor is planning an all India franchising network, it is considered essential to

have more than one prototype outlets to be setup in different parts of the country. This helps
verifying the viability and profitability of potential franchisees in different socio-cultural
settings.
Revenue Generation
The franchise business must be capable of providing sufficient return to the franchisee to take
care of not only his investments but also for his time and effort in running the franchise.
The business must also be able to generate sufficient revenue for the franchisor at least in the
long run. Till the business is able to generate sufficient return on franchisee's investment and
labour and also sufficient revenue to support franchisor's services and his profit, it is not fit for
franchising.
Experienced Personnel
A company wanting to expand by franchising has to recruit; train and support franchisees. For
this it needs experienced staff with specialized talent and abilities. The staff should have
specific skills in planning, leading and organising a franchise network.
They must possess abilities of

building teams, solving problems and
making decisions. The franchisor's
staff should have the good
knowledge of franchisor's business
and industry. They should be good
communicators, motivators and
trainers. They must have entrepreneurial qualities to be able to delegate and create positive
franchise relationships.
Protractible Trademark
Trademark is a type of intellectual property that is used only by its owner to identify the
products produced by a firm. Now it is also a symbol indicating a specific type of product and
level of quality that is used by the owner and its licensee. Even the foreign nationals and/or
companies can protect their trademarks in India under the Trade and Merchandise Mark Act
1958 (TM Act) by registering them under the prescribed class Internationally trademarks
include service mark, however, service marks as yet are not registered in India.
The registered owners of trademark can assign to third parties the right to use the mark and are
not mandated to use the marks personally. The assignment agreement must be registered at
the office of Trade Marks Registry. By registering a user agreement, the owner prevents the

user from getting a right to be the registered proprietor of the mark through use. When the
trademark is licensed, the licensor has an obligation to control the quality of its licensee's
products/ services and absence of such control in licensing of a trademark can lead to the
abandonment of the trademark.
The licensed trademarks are common trade identity of franchise networks. The franchisor
acquires the goodwill value created by its franchisees' usage of the franchisor's trademark. Even
though this asset does not show up in the balance sheet yet it is an extremely valuable asset.
A trademark can be any word, name, symbol or

distinguishing device or a combination there of.
Trademarks can be names used in commerce such as
'Coke' clearly is the trademark of Coco-Cola Corporation
of USA.
A trademark can be a symbol, such as Apple Computer

Corporation's unusual apple with a bite on the side.
Similarly a service mark can be a name, wording used in
advertising, symbols or artistic figure that create
distinctive service concept. Therefore unique lettering in the abbreviation 'NIT' for National
Institute of Information Technology coupled with a design is a service mark but the same is
registered as a trademark in India.
FRANCHISOR'S EXPANSION CAPITAL
A franchisor must have sufficient funds to develop and implement its franchising program and
solving operational problems. At the onset capital is required for the essential elements of a
franchising network. The product development, that include the layout, design, outlook and the
ambiance of the outlet and service norms involve a lot of sunk cost Funds are also locked up in
developing the marketing wheel where brand building is a costly affair. The franchising wheel
that is developing the systems, training programme and motivating the staff and franchisee
consumes a lot of funds.
Expansion capital is needed for development and modification of model to suit franchising in
the light of experience gained at prototype outlets. The prototyping of the outlet in turn
consumes a major chunk of franchisor’s capital as it involves a number of trials resulting in
delayed payback from these outlets.
In addition franchisor incurs substantial expenses for
(i) consultancy, legal and other professional services,

(ii) training the support staff of the franchisor,
(iii) designing training program and providing training to the franchisee,
(iv) marketing and advertising
(v) selling franchise.
Although the franchisor receives initial franchise fees from the franchisees that substantially
offsets it operating costs, yet the franchisor should not depend upon the initial fees paid by the
franchisee to cover its operating cost. Without adequate operating capital the franchisor is
under pressure to sell the franchises for its survival. This greatly offsets the franchisor's ability
to select the best and most qualified franchise candidates. Due to shortage of funds the
network is often not able to expand to remote areas as the franchisor is unable to effectively
support and monitor franchisees.
STEPS IN FRANCHISING
Anyone planning to franchise his business should develop a concrete plan for supporting the
franchise operations, communication with franchisees and marketing the franchise. In this
respect the following steps are recommended.
1) Develop a Franchise Program and Prioritize the Package of Services Required by the
Franchisee to Succeed.
The services needed by the franchisee vary from business to business and are to be selected
depending upon the characteristics that control the success of that business. The support
services are developed considering the capabilities and limitations of the franchisor, keeping in
mind the cost involved in these services, and the type of support required - consultative,
instructive or directive. A study reveals that the franchisors normally offer the following support
services for setting up the franchise.
• Market surveys
• Layout and design of facility
• Assistance in negotiation of lease
• Operations manual
• Training of franchisee and his staff
• Financial assistance
In addition the franchisor has to provide certain services as a part of an ongoing program. These
include

 Continuing training
 Advertising and marketing assistance
 Collection and analysis of data
 Guidance and control in accounting and book keeping
 Group purchase programs
 Research and development
 Seminars and Conventions
Important components of delivering the support services which need specific preparation
before starting franchising are:
1. Operations Manual
The prospective franchisees have to be provided with the detailed

instructions for all major functions involved in opening and
operating a franchise. Such instructions are documented in the
operations manuals. These manuals help the franchisee to maintain
product and service standards with overall uniformity in the
network. Normally a manual caters to the following information.
 Introduction and history of the franchise network.

 Company policies and business practices.
 The minimum quality standards required by the franchisors so as to ensure that franchisees
attain and maintain the same standards for operating and maintaining the business.
 The responsibility of the franchisees .in carrying out and maintaining these quality
standards.
 Standards, procedures and documentation for hiring the staff along with job description
and guidance for personal administration.
 List of operating equipments required, preparation techniques, requirements, schedules
and procedures for cleaning, maintaining and repairing the equipments as well as business
premises
 A check list for tasks to be carried out on opening and closing the days business and
guidance, directions and instructions on maintaining customer's services.
 Operations forms, record keeping forms to be filled daily / weekly along with the
procedures including the requirements and procedures of book keeping and management
control system to be followed.
 The main responsibilities of the franchisor and day to day support that will be provided in
relation to the main discipline, particularly the support in setting up the business, assistance

in marketing, financial management and business development. This on one hand acts as a
guide for the franchisor on the other assures the franchisee about the exact nature of
assistance that may be expected.
 The examples of best practices in relation to operational requirement should be included in
the manuals. In activities like- how the corporate image must be maintained to ensure
uniformity across the network, how the franchisee will be expected to market products
and/or services, how to train and motivate your staff, what financial systems and controls
are to be adapted- examples make the manuals easily understandable and more useful.
The manual should be a living document and it is the responsibility of the franchisor to
constantly update them as and when any new system is introduced or any procedure or control
modified. A well-documented operation manual increases the profit potential of the franchise
system through
 More effective and efficient management

 Greater customer satisfaction
 Increased customer loyalty
 Forging stronger links between the franchisor company, its managers and the franchisee
Franchisors should protect their manuals containing the entire technique of establishing and
running the business, videos relating to the use of the product etc. under the Copyright Act,
1957.
Infringement of copyright provides the franchisor with civil remedies like injection, damages
and accounts of profits made by the defendant by violating the copyright. In addition, a criminal
remedy such as imprisonment for six months to three years is also available.
2. Training Program
Franchise training program is an important component of the support services. As the

franchisees are required to maintain the same
standard in service and product quality, it is necessary
that all the franchisee and their staff are suitably
trained to manage the outlet before the same
become operational. The pre-training program not
only covers the operational skills and knowledge but
also the management know how. The franchise
owners need training to develop their entrepreneurial
skills and a willingness to cooperate for mutual

benefits and advantages'.
The training helps creating an enthusiasm for the franchise program and a strong allegiance to
the franchisor company, thus laying the foundation for cooperative future relationship. More
often the franchise is offered only to those who successfully complete the pre operative
training.
This pre operative training gives the franchisee a chance to reconsider joining the franchise
network and the franchisor is able to judge the commitment and suitability of the potential
franchisee. The training helps the franchisor and the franchisee to consciously choose each
'other. The franchisor also uses the training to mould the franchisee.
Two separate sets of training programs, for the franchisee, their managers and their
operational staff are to be designed and developed. Besides operational training the staff needs
to be trained in developing ability to meet the service norms of the franchise system and
bringing suitable changes in the attitude towards the customers. The training programs ought
to be appropriately systematic and highly structured.
3. Control System and Procedures
The franchise systems are formulated so as to ensure uniformity of all the franchisees and
compliance with the standards in the network. The systems are required to assist the franchisor
to monitor, control and guide the activities of all the franchisees. It is important to exercise
controls in the process to monitor sales, operations, completion of tasks, and financial matters.
The control systems and procedures are useful in not only monitoring the franchisee's
performance but are also used to monitor their adherence to the standards. The franchisor has
to develop these controls and of the same time, set up a strong corporate office with a good
product management, legal, R & D and sales department to provide support to the network of
outlets and monitor their operations.
In the absence of such a system and well defined procedures, different franchisees will report
their progress, achievements and other data in varying forms and formats, sometimes making it
impossible to compare the progress of different franchisee and compile the overall progress of
the network. A uniform procedure and reporting system is especially helpful in auditing the
franchisee's operations.
Such control mechanism ought to be build into the franchise management system right from
the outset. These controls can trap deviations at an early stage and nip problems in the bud,
thereby preventing small deviations from becoming major issues.

4. Supervision Program
As an important component of support service a supervisory program is required to

continuously guide and assist the franchisee. The supervisor ensures that standards are
maintained, defects removed and problems resolved before they assume any seriousness. This
program is to update the attitudes of the franchisee and his employees and introduce new
products/ services and promotional programs.
2) Develop a Communication System
To ensure the healthy growth and development of the franchise network, a franchisor has to
communicate not only with the existing franchisee but is required to establish effective
communication links with the prospective franchisees. There are two dimensions to the
communication system:
 to establish a communication network for the franchisor and the franchisee and
amongst the franchisees, which are the member of the franchise network,
 to communicate with the prospective franchisee so as to solicit new franchise.
I. Communication network: The franchisor has to carefully plan a system of information

sharing, recognition and reporting for the franchise network. Effective communication is critical
for the continuing growth and development of the franchise network. It has been observed that
a strong infrastructure in terms of telephonic contact, fax, leased lines, satellite
communication, teleconferencing, electronic mail using internet are the basic requirements.
Newsletters have been found effective in explaining various activities within the network,
recognising the top sale franchisee, expressing opinions of franchise managements, announcing
new members of the franchise network with their territories and presenting other information
to the franchisees and their staff. Besides the personal visits by the field supervisor for normal
supervision, the visits by the general manager, chiefs of operations or training and other senior
executives of the franchisor company assist in good public relations and boost the morale of
the franchisee and their staff.
Franchise group meetings that encourage sharing of experience, techniques and advise by the
stronger franchisee are beneficial to all members of the network, especially the newer and the
weaker franchisees. Peer group influence is always a strong force on people's attitude and
behaviour.
An informal atmosphere encouraged through dinners and social gatherings make such
meetings and conventions useful for the franchisor in bringing together the franchisees on a
regular basis to share information and provide training.

II. Offer Document: The franchisor has to prepare mailers, brochures etc. to attract suitable
people to take interest in his franchise network and motivate them to buy franchise. He has to
develop a suitable advertisement for this purpose to be released, in the leading newspapers
and trade journals.
The information about the business, that is the brand and the
business system with the benefits of the support system offered and
the earning potential along with the framework of a franchise
agreement and initial and continuing fees are made available through
a /'prospectus" called Offer Document.
A good offer document has to draw a fine balance between

generating expectations which cannot be met easily and giving
franchise targets which are so low that do not need any effort to fully
exploit the business opportunities. Franchisor should not oversell or
undersell. It is a matter of matching the offer to the norms of franchises' recruitment market
However it is to be ensured that offer document is in conformity with the state's law of
franchising (if any) and the franchise code of conduct.
CONTENTS OF FRANCHISE OFFER DOCUMENT
• Information about the product / service

• Market potential of the product
• Experience of the management and directors
• Number of franchise in operation
• Years Franchisor Company has been in operation
• Type and amount of training to be provided
• Type of managerial assistance to be provided
• Other support services including marketing support
• Financial stability of the franchisor
• Assistance in franchising (if any)
• Total funds required in buying and setting up the franchise
• Space needed and assistance in site location
• Business skills needed

• Profit potential along with projected Profit and Loss Account and Cash Flow statement for a
franchise
• Break Even analysis of the franchise
3) Marketing the Franchise
Marketing is key both to the success of the franchise program and to the success of the
franchisee's business. Franchisors must address a number of marketing issues.
I. The business' image: The business' image established by the franchisor is an important factor
in inducing a franchisee to buy into the franchisor's program. Distinctive and appealing
'packaging', that is the identification strategy is important to the success of the franchised
business and franchising program. The franchisor should develop store layout, colours,
furnishings, decor, designs, uniforms, graphics etc. to establish a distinctive image.
II. Marketing direction: The franchisor should establish a direction for expansion of the
franchise network. Some franchisor prefer cluster locations within the established markets
because these markets have been successful and adding more franchisees in these established
markets are likely to generate addition revenue and market share. This in turn can lead to
sealing out the competition. Computer education institutes have used this approach in metro
cities often the run-off value of the franchisor's trademark and reputation precedes the
franchisee in the new locale. Herein the other option is to enter newer areas where there are
no existing outlets. In such a case the franchisor should evaluate and develop the ability to
service the franchisees in new location area. He should also consider the sales potential of new
market area, the level of competition that exist in the new-markets and evaluate the
population, income, retail sales, and other factors likely to influence the success in newer
markets
III. Recruiting the franchisees: A franchisor must determine the profile of its likely franchisee,
particularly the skills and talents required. The characteristics of the franchise business dictate
the kind of person that is likely to succeed as a franchisee. A franchisor should select and accept
as individual franchisee only those who, upon reasonable investigation, appear to possess the
basic skills, education, personal and financial resources sufficient to carry on the franchise
business. After the franchisor has established the profile, it must determine the most effective
place to advertise. He has to choose between the business magazines and newspapers and
select the most suitable one Direct mail, trade shows, business seminars, internet and
broadcast media can also be tapped to obtain an Interview with a qualified prospective
franchisee.

UNIT 9 FRANCHISEE’S PERSPECTIVE BEFORE FRANCHISING
It is essential for a prospective franchisee to study the franchise system, various franchise
options available, their costs and benefits and match the same with his strengths and
weaknesses and thus choose the right one for him.
Most buyers look at franchise ownership as a means to achieve financial goals. Ultimately, in
making any investment decision, two most important factors are risk and return, but a
franchise investment can be difficult to assess in these terms. Everyone wants a no risk
franchise that offers high return, but such franchise simply does not exist. They key lies in
finding the franchise that offers the highest return for an amount of risk one is willing to
assume.
WHAT SHOULD I ASK THE FRANCHISOR?
Buying a franchise is just the same as buying into any business. The purchase needs to be made
in the cold light of day and not on impulse. Balance sheets need to be looked at and bottom
lines investigated. The franchise should also be compared with similar franchises in similar
areas so that pears are compared with pears and realistic expectations and incomes
ascertained.
The most overlooked aspect of franchising and one that is invariably taken for granted is the
Intellectual Property owned by the franchisor – or in some cases not owned by him. An
essential factor of a franchise is its name. This is how franchises products and services are
brought, sold and marketed. It is how its customers know the business. Particularly when
entering into a new franchise system, or into a new area it is imperative that the monopoly
position encompassed in the name of the franchise is investigated thoroughly.
About the franchisor:

 Who owns the trademarks, service marks, etc., and are they federally registered?
 Are there any disputes pending or threatened against the trademarks?
 Has the franchisor complied with the FTC and state disclosure laws?
 Are any senior management or key personnel leaving the system?
 Does this company compete with the franchisees in the marketplace?
 Will the franchisor finance any of the costs?
 Is the franchisor willing to negotiate the terms of the franchise?
 Does the franchisor staff attend seminars on franchising and management?

 Do field consultants offer help and guidance or merely act in a regulatory role?
 How many franchises are expected to be added each year?
 Where will they be located?
 What is the success rate of existing franchises?
 What method is used to protect franchisees from poorly performing franchises?
 Is there a franchise owners association?
 Is there a franchise advisory council?
About costs:
✔ What is the total investment required to own a franchise?
• franchise fee
• furniture, fixtures and equipment
• leasehold improvements
• lease deposits
• other deposits
• franchise training
• travel expense
• supplies
• advertising and brochures
• grand-opening advertising
• inventory
• pre-opening staff costs
• working capital until breakeven
• working capital – living expenses
• other
✔ What are the continued financial costs, the basis used

for calculation, method of payment and frequency of
payment:
• royalties
• advertising
✔ Must the franchisee purchase products or services from the franchisor:

• Does the franchisor earn income on purchases?

• How much does the franchisor earn?
• How are the products distributed?
• How long does it take for the orders to be filled?
• What other initial or continuing services does the
franchisor provide?
• What do these cost?
About consumer research and marketing:

✔ What type of consumer research has the company conducted?
✔ What were the results?
✔ Has the franchisor conducted any market studies on
the territory to ensure that it can support a
franchise?
• What are the demographics required to
support a franchise?
• What are the traffic counts required to
support a franchise?
About training:
✔ What are the location, duration and additional costs of
initial training?
✔ Who must attend the training?
✔ What is the cost of additional staff attending training?
✔ What is the training curriculum?
✔ Who conducts the training and what are their
backgrounds?
✔ Who pays for transportation, room and living expenses?
✔ Does the franchisor provide training materials for training
new staff in addition to the operations manuals?
✔ Does the franchisor provide hands-on assistance
during the pre-opening, grand opening and initial period?
Of what type, duration and cost?

About products and services:
✔ Are there any new products or services under consideration for addition to the franchise?
✔ When are they going to be introduced?
✔ What is the estimated additional cost for adding the new products or services?
✔ Are there any restrictions on the distribution or sale of the product?
✔ Is there a guarantee or warranty program? How is it administered and what is the cost?
✔ Is there a minimum that must be purchased?
About advertising and marketing:

✔ What type of consumer advertising does the company
recommend?
✔ What types of cooperative advertising programs are
being used?
✔ What percentage of sales is recommended or required
for advertising or marketing?
✔ How do the franchisees obtain their sales leads or
customers?
✔ What is the franchisor’s national/regional advertising
program and budget?
✔ What portion of the national/regional advertising contribution is used for
administrative/corporate/agency expenses and fees?
✔ What are the primary advertising/marketing vehicles?
✔ What is the grand opening advertising program and cost?
About operations:
✔ What are the roles and responsibilities of the field
staff?
✔ How many locations does each franchise
consultant work?
✔ What is the background of the franchise consultant
I will be working with?
Can I meet that person before purchasing the
franchise?
✔ How often does the field staff visit a franchisee’s
location?

✔ What is the additional cost of field services if the franchisee requires it?
✔ Exactly what kind of assistance is given?
✔ What kind of supervision or quality control is there?
✔ What, if any, is the charge for assistance?
✔ What kind of business management systems are provided to boost sales and profits?
WHAT DO YOU HAVE TO KNOW ABOUT FINANCIAL STATEMENTS?
Financial statements are the track record of the franchise. They are provided for the
franhisee in the UFOC and contain important information about the franchisor’s financial
status and strength.
The two most important financial statements you need to review:

✔ balance sheet
✔ income statement
The Balance Sheet

A balance sheet is a snapshot summary of how much a company is worth on any given day. It
reports the financial condition (solvency) of the franchisor.
Balance sheet categories include:

◆ assets – what a company owns: current, fixed and intangible assets
◆ liabilities – what a company owes: current and long-term debt
◆ stockholders’ equity – the company’s net worth; it is the money the company has taken in
from the sale of stock plus any accumulated profits:
Stockholders’ Equity = Assets – Liabilities = Net Worth

Things you want to see on a franchisor’s balance sheet:
◆ increasing assets
◆ increasing stockholders’ equity
◆ more cash than debt
◆ amount of current debt < (less than) 1/2 of the total assets
◆ amount of current debt < 1/3 of the stockholders’ equity
The Income Statement

An income statement reports a company’s profit or loss. It shows a company’s income,
expense and net income—also known as the “bottom line” or earnings.
Other names for an income statement include:

◆ Profit and Loss Statement
◆ Statement of Income
◆ Statement of Operation
◆ Statement of Earnings
◆ Results of Operations
◆ Statement of Consolidated Income
Things you want to see on a franchisor’s income statement:

◆ increasing profit
◆ more revenue derived from royalties and system income than from selling franchises
◆ increasing revenue trends, usually > 15%
◆ increasing net income trends, usually > 15%
◆ increasing net income per share trend, usually > 15%
◆ a profitable franchisor!
What you should know about these financial statements:

◆ The financial statements should be audited financial statements.
◆ The statements should contain two to three years of financial date.

UNIT 10 EVALUATION AND SELECTION OF A FRANCHISEE
Before an entrepreneur selects a franchise he should ensure that he wants to be a franchisee rather
than setting up his independent business from the scratch. He should seriously view the pros and cons
of a franchisee vis a vis an independent business. He should collect the relevant information about
franchising He must equip himself with the knowledge of philosophy, working and limitations of
franchising as a business.
After ascertaining the market potential for the same he should choose the product or the service he is
interested in and search for a Suitable franchisor. The information about the franchisors can be
obtained from various business and trade journals. Many directories can be searched. Now specialised
magazines on franchising are available that have sections devoted to businesses open for franchising.
Steps in Selecting a Franchise
Market Survey Evaluate Franchisor's information in

Pruduct/ Service & combination with independent market
Franchisor information.
Comparative statement of different

Franchisors
Negotiation with the Franchisor
Legal vetting of Franchise Contract
Seek information Sign the franchise contract

from Franchisors
Five Steps of Evaluating a Franchise

Here in India there have been several fly by night franchisors, who had advertised very aggressively,
build hype about their business, sold a number of franchises, collected fat franchise fees from them
and then vanished in thin air leaving the franchisees high and dry. Yet there is no law governing the
franchising in India. Hence it is more important for a prospective franchisee to be cautious and
evaluate the franchisor before buying a franchise. The process is not foolproof and misjudgments can
still occur. However following this process helps avoid disastrous mistakes being made by the
franchisee. The five steps are to assist in finding a suitable franchise that has a potential for financial
success. These are important elements of conducting a thorough due diligence process.
1. Examine the opportunities

2. Examine the franchise and the franchisor
3. Analyse and evaluate the information provided by the franchisor
4. Investigate the franchisor
5. Make a decision
1. Examine the Opportunities:
This is the first step that involves a market survey of various businesses that have a potential in a given
area/ region. It should always be remembered that the best of the franchise can only be evaluated in
terms of its market potential in the community where the outlet is proposed to be opened. Following
aspects are to be considered about the market viability of the product.
• Longevity of product: To protect the investment the franchise should have long-term staying
power. The product or service should not be faddish. It is necessary to look past ones enthusiasm
and be objective in the choice of product/ service. It is better to talk to friends who would be
typical of the future customers and if necessary seek professional advice. The combined opinion
helps predict the product's longevity.
• Population & stability: Find out the population projections of the area where the franchise outlet
is proposed to be located. This data can be obtained from Indian Statistical Organization and
publications of Census of India. The growth of population will have a significant effect on
franchise's potential success
• Competition: Study the competition that will compete directly against the franchise. Then also
study the indirect competition. For example a pizza franchise may compete not only with Pizza
Corner but also with Narulas and Mc'donalds.
• Price: The price of the product or service should be consistent with the average income of the-
people in the geographic area. A high priced product will sell where the income is high but would
probably be a looser in an area with low income households.
• Risk: Evaluate the risk of various franchise options. The technique is to assign numerical value to
each element risk for each franchise being considered. Pay attention to which candidate has lowest

turnover level, the smallest ratio of lawsuits, and is the most experienced. Total all the scores and
use the results to draw insight regarding the risk specific franchise.
Also it is important to know the franchisors (operating available) that deal in the preferred product or
service. For example if one is interested in fast food, a number of franchisors are offering different
franchises in related business. This can vary from South Indian dishes from Sagar Ratna or Woodlands,
Pizzas from Pizza Hut or Dom Continental food from KFC or Wimpy and Coffee shop Berista or Café
Coffee Day. To choose a right business one has to contact and compare all possible franchise choices.
2. Examine the Franchise and the Franchisor
It is important to obtain through information from franchisor about the franchise. Many countries
have stipulating the information that a franchisor is required to provide. The following list contains the
twenty items of information that must be supplied by the franchisor. In India there is no such law, yet
the prospective franchisee must seek the following information from the franchisor.
• Information identifying the franchisor and its affiliates and describing their business experience
• Information identifying and describing the business experience of each of the franchisor's officer,
directors and management personal responsible for franchise services, training etc.
• A description of the lawsuits in which the franchisor and its directors, officers and managerial
persons have been involved
• Information about any previous bankruptcies in which the franchisor and its directors, officers and
managerial persons have been involved
• Information about the initial franchise fee and other initial payments, required to buy the franchise
• A description of continuous payments the franchisee is required to make after the franchise opens
• Information about any restriction on quality of goods and services used in the franchise and where
they may be purchased, from including restrictions requiring purchases only from the franchisor or its
affiliates
• A description of any assistance available from the franchisor or its affiliates in financing the purchase
of the franchise.
• Descriptions of goods or services franchisees are permitted to sell
• A description of any restrictions on the customers with whom franchise may deal
• A description of any territorial protection that may be granted to the franchisees.

• A description of the conditions under which the franchise may be repurchased or refused renewal by
the franchisor, transferred to a third party by the franchisee and terminated or modified by either
party.
• A description of the training programs provided to the franchisee and its staff.
• A description of the involvement of any celebrities or public figure in the franchise.
• A description of any assistance in selecting a site (location) for the franchise to be provided by the
franchisor
• Statistical information about the present number of - franchises, number of franchises projected for
the future, the number of franchises terminated, the number of franchises that the franchisor has not
renewed and number of franchises repurchased in the past.
• The financial statements of the franchisor.
• A description to the extent to which the franchisees must participate. in the operation of the
franchise.
• A complete statement of the basis for any earnings claims- made to the franchisees, including the
percentage of existing franchisees that have already achieved the results claimed.
• A list of names and addresses of other franchisees.
The prospective franchisee must get a chance to review this information without interference from the
franchisor. The franchisee should try to get these documents as early as possible to start their
screening. It is better if the franchisor knows that the documents supplied are being screened and
compared with the information provided by his competitors. Franchisors that dislike independent
evaluation and comparison of the information are generally not worth doing; business with and -
should be avoided.
3. Analyse and Evaluate the Franchisor's Information:
Information provided by the franchisor provides a basis for thorough analysis of the potential for the
franchise. However it is necessary to investigate the franchisor to ensure that the information provided
is true and accurate. The analysis should not only cover various aspects about the franchisor but also
aspects related to the personal needs of the franchisee.
a) Points to consider about the franchisor

i. Experience of management and director- The
experience of directors as well as the management team
is crucial -for the success of the franchising system. They
should have special knowledge and expertise in the-type
of business operations of the franchise. Their experience
normally supplements the expertise of the franchise
owners and contributes to the success of the franchise.
ii. Years the franchisor is in this business- The length of

experience - often indicates the stability of the
franchisor. It also signifies a higher potential for
franchises to be successful. This however does not mean that newer franchises do not offer good
business prospects but one has to be more meticulous - in evaluating a new or young franchise.
iii. Number of franchises in operation- The number of running franchises provides a measure of
stability and experience of the franchisor. The franchisee has a reduced risk when he buys into a
franchise having a large number of franchise outlets. Each franchise adds to the experience of starting
a new outlet and refines the training skills of the franchisor's team. This combined experience can
prove highly useful in starting a new franchise.
iv. Number of franchises no longer in operation- It is important to know the number of franchises that
have been closed, gone out of business or repurchased by the franchisor. This information, at times, is
more important than the number of franchises presently running. Franchisors often buy out or close
franchise outlets to remove problems. Larger the number of such occasions higher is the risk in buying
such a franchise.
V. Reputation amongst franchisees- The franchisor's customers are its franchisees. The best way to
know how the franchisor treats its franchisees is to talk to the existing franchisees. It may be better to
talk to a past franchisee, who is no longer in business. Such persons can offer a unique insight into
franchisor's treatment and service.
vi. Financial stability- The financial health of the franchisor can easily be inferred from the audited
financial statements of the franchisor. The financial statements provided by the franchisor should be
studied carefully with special reference to the auditor's qualifications if any. Any type of questionable
financial problems should result in caution about developing an association with the franchisor.
vii. Type of training- The type and duration of the training-provided by the franchisor determines the
likely success of the new franchise. A. good training program includes classroom teaching

supplemented with on the job training either at.thc franchisor's outlet or preferably at the new
franchise being set-up. Depending upon the type of business the staff should be trained for a few
weeks for the training to be really effective.
viii. Assistance in financing- Find out the type of assistance the franchisor is to provide in arranging
finance for buying and setting up the franchise. Franchisors normally have a better clout with the
banks and institutions. They can assist in negotiating a loan. Nationalised banks like State Bank of India
and Canara Bank are providing debt finance to VLCC and Archie Franchisees. ICICI Bank also extends
loan to reputed franchise if the franchisor agrees to be.
ix. Type of management assistance provided- There should be a large amount of assistance to be
provided during the start-up of the business. Initial period of time is normally the most difficult and
requires the maximum assistance. It is better if a franchisor provides continued assistance on a regular
basis as it helps meet unexpected crises.
x. Assistance in locating the site- For any retail business 'location' is the most important contributor to
its success. An experienced franchisor should be able to help in selecting a location that is ideally
suitable for the franchise. Besides the assistance in constructing a building can help save a great deal of
money. Find out the type of help the franchisor is going to provide in planning, construction or
renovation of the building and whether there is any additional fee for this assistance.
xi. Potential profits and break even point- A crucial element in deciding about a franchise is the
amount of annual profits one can expect. Undertake a cost analysis to determine if the projected profit
is sufficient to ensure a reasonable return on the investment. It is better to confirm from other
franchisees if their profits are near the figure projected by the franchisor. Estimate the payback period
for the initial investment.
It should be remembered that like any other business a franchise is not going to generate profits from
day one. The truth is most new businesses take at least six months to a year before they start
generating significant income for the owner.
b) Points to consider about personal needs: Several things must go into prospective franchisee's
personal buying decision. How one feels about what one will be doing? Does it seem like fun? Does
one believes to be good at it and would like to do the same for next ten to twenty years. Major points
include:
i. Funds required. The capital investments requirement including the franchise fee is the biggest
obstacle for most potential franchisees. So, firstly determine the funds one can invest oneself in the
franchise and discuss with the bankers the amount of debt that can be provided. This information can
be used to screen those franchises which fall outside the scope of funds that can be marshalled.

ii. Business skills. The franchise should have certain relationship to the business experience and skills.
The more one knows about the business operation, the higher is the potential for success. However it
is not essential to have experience in the specific product or service. Though the franchisor is to
provide training and managerial assistance, yet the related experience helps.
iii. Interest in the product. The franchise owner will be associated with franchise for many years and
needs enthusiasm for motivation. The customers and employees sense his attitude towards the
franchise. The customers are more likely to patronise the business when they observe the owner/
manager's enthusiasm. Similarly employees work hard when inspired by the franchisee's excitement.
Thus franchisee needs to have an interest in the franchisor's product / service.
4. Investigate the Franchisor
It is important to thoroughly investigate the franchisor before joining a franchise network. It has been
stated earlier that buying a franchise is a long-term relationship and franchising can be considered as a
partnership between the franchisor and a franchisee. One should be aware of the franchisors who
want you to rush through the decision making so fast that it leaves no time for you to go through a
detailed investigation process. A three stage investigation process as given below is recommended.
i). Investigate the credibility and reliability of the franchisor. This is particularly critical with
franchisors that do not have a long history and have been in operation for a short time. Try to find a
person or a company who will run a credit check on the organisation. It is recommended to conduct a
background check on the management and the promoters of smaller and lesser-known franchisors.
ii). Collect information and experiences from other franchisees: You should ask the franchisor to give
you complete list of other franchisees with their addresses. A discussion with a few of them selected
randomly provides important information. If you ask franchisees how much profit they made last year,
you might not get an accurate answer because of embarrassment over low earnings or concern about
tax liabilities.
iii) Seek professional advice: Three professionals have been identified that one should consult at the
time of buying a franchise. They are:- an attorney, a chartered accountant and a banker.
5. Make a Decision
We see here that a decision to buy a particular franchise is not an easy one. Many questions have been
presented which need to be investigated. In the process one is required to discover some positive and
some negative facts about the franchisor. If the positive and negative facts are one sided it is easier to
make a decision. However the facts must be organised to take a decision keeping the risk factor in
mind.

UNIT 11 FRANCHISING AGREEMENT
The franchise agreement is the legal, written document t hat governs the relationship and specifies
the terms of the franchise purchase.
A master franchise agreement gives the franchisee more rights than an area development agreement.
In addition to having the right and obligation to open and operate a certain number of units in a
defined area, the master franchisee also has the right to sell franchises to other people within the
territory, known as sub-franchises. Therefore, the master franchisee takes over many of the tasks,
duties and benefits of the franchisor, such as providing support and training, as well as receiving fees
and royalties.
The object of a franchise agreement is either to promote a product or a business format. Historically,
franchising developed as a means of distributing products.
Outline of a Franchise Agreement
Scope and Subject matter

Licensing and Protection of IPR
Obligations of the Franchisee
Obligations of the Franchisee
Consideration
Taxation
Termination and its Consequences
Notice Provisions
Negative Covenants
Indemnification
Arbitration
Governing Law
Jurisdiction

1. Scope and subject matter of the franchise
Franchise agreement should lay down the nature of the business or project that the parties have in
mind, the geographical scope, the subject matter and the term of the franchise. The subject matter
could either by a product or a business format or system. Based upon the subject matter, the
agreement will need necessary tailoring. For example, the franchisor is a well-known computer
institute in India who wishes to start a chain of computer education centers throughout the country. In
that case, this section must set out the basis for the agreement by outlining the intention of both the
parties to start the chain of computer centers, the areas in which these centers would be commenced,
the term for which they will operate under this agreement, and whether the agreement is an exclusive
or non-exclusive arrangement.
2. Licensing and protection of intellectual property rights
Intellectual property rights are the core of any franchising agreement. Therefore, it becomes necessary
to determine the intellectual property (such trademark, service mark, trade name, copyright, patent,
trade secrets or know-how) associated with the franchisor and the exact and specific intellectual
property he/it is licensing to the franchisee. All such licensing must confirm to the particular
intellectual property legislations in India.
The franchisor must limit the manner and circumstances in which the intellectual property is to be
used and should ensure that it is not misused by the franchisee in a manner to cause damage to the
brand and goodwill of the franchisor. In the event the franchisor has transferred or may transfer some
trade secrets or confidential information to the franchisee, the agreement could stipulate that such
information be kept privileged, during and post-termination of the agreement.
3. Obligations of the Franchisee
Every agreement contains certain activities that each party must perform or refrain from performing
during the term of the agreement. These activities are obligations on the concerned party and they
must be adhered to, or else it could lead to a breach of the agreement. While drafting these
regulations, the franchisor must try and incorporate all conditions necessary to protect his brand and
also to ensure that the franchise is successful and profitable. Some of these obligations are stated
hereunder.
(a) Services to be rendered: The agreement must clearly outline the duties and services to be rendered
by the franchisee. If necessary, a separate schedule could be attached to the agreement for clarity.

(b) Infrastructure and Minimum Investment: The franchisor must also ensure that the franchisee has
the adequate financial resources and infrastructure to carry out the business operations. The
franchisor could specify that the premise be of a certain size and that the franchisee should have a
minimum amount of infrastructure to operate the franchise.
(b) Location of the franchise outlet: The franchisor would desire that the franchise outlet is located in a
place that would attract several customers. Therefore, the franchisee may be obligated to first
select the place and then get it confirmed from the franchisor. The franchisee could also be
obligated from not commencing any competing business in the same area or location after
termination of the franchise agreement.
(c) Operating Manual: The franchisor could also provide the franchisee with a manual that contains
information, not limited to, but concerning property specification, layout of the franchise shop,
hiring policy to be followed, outfits of staff members, training and education to be imparted,
manner of marketing the franchise and any other details to be followed.
(d) Protection of intellectual property and confidential information: the protection of intellectual
property forms a very important aspect of a franchise agreement. The franchisor must stipulate
negative covenants to protect the intellectual property and confidential information.
(e) Restrictions on suppliers: The franchisor may also have a good negotiating power with certain
suppliers and may obligate the franchisee to purchase materials on from such suppliers. This may
also be to ensure the quality and standard of the final product.
(f) Accounts and Inventory Audits: The franchisor may also want to supervise the activities of the
business operations and may require to carry out periodic inventory and account audits. The
franchisor could also ask the franchisee to provide periodic reports on the functioning of the
franchisee’s business.
(g) Management and Control: The franchisor may want the franchisee to personally participate in the
direct operation of the franchise or designate some person as a full-time Manager or Supervisor to
look into and control the activities of the business. This would be to make sure that the franchise
operation is run smoothly.
(h) Good Faith: A clause requiring the franchisee to act equitably and in good faith normally finds place
in most franchise agreements. This is more of an omnibus clause as it could include any and every
possible action of the franchisee.
4. Obligations of the Franchisor
The franchisee may also want the franchisor to act in a certain manner during the term of the
agreement and thereby impose some obligations mentioned below on the franchisor.
(a) Finalization of location: The franchisor may be obligated in assisting the franchisee in locating and

negotiating a place to start the franchise outlet, based upon the needs of the franchisor.
(b) Provide Operations Manual: The franchisor would normally loan a copy of their confidential and
proprietary Operations Manual to the franchisee covering the specifications, standards and
operating procedures that the franchisor requires and informing the franchisee about his/its
obligations.
(c) Education and Training: The franchisor may also be obliged to provide some form of basic training
to the franchisee as to how to conduct the business operations and also continue to upgrade the
franchisee with new methods, equipment and services.
(d) Exclusivity of the Franchisee: Depending upon the negotiating power of the parties, the franchisee
may desire that he/it be given exclusivity for a particular area to promote the franchise.
(e) Regulatory and legal approvals: In order to construct and commence a franchise operation, several
regulatory and legal approvals may be required from the local municipalities and even at the state
and central government levels, depending upon the nature of the franchise. The franchisee may
also require the franchisor to assist the franchisee in procuring such approvals. The agreement
must clearly spell out all the help the franchisor will provide in this respect
(f) Ongoing support: From the franchisee’s viewpoint, this clause is also very important as it can
impose certain obligations on the franchisor to take interest in the franchise and thereby help it
grow and develop. The franchisee could demand that the franchisor guide him/it during the
business operations, provide on-going training to the employees and also give ideas to promote the
business. The franchisor could also be obligated to make ongoing recommendations regarding the
advertising and merchandising services, administrative and accounting practices, and general
operational and management procedures.
(g) Advertising and Promotion: The franchisee may also want the franchisor to advertise and promote
the activities of the franchise, which in turn would increase the overall turnover. The agreement
could stipulate the manner in which the franchisor would promote the franchise business and how
all funds collected for such purpose will be utilized.
5. Consideration
The agreement must specify the royalty or a license fee and any continuing fee to be paid by the
franchisee to the franchisor for the license obtained and the services rendered by the franchisor on an
ongoing basis. The manner in which and the times at which such payments are to be made must also
be addressed. In the event, such payments are to be made outside India, it should be specified as to
who must obtain the necessary regulatory and legal approvals.
Generally, payments could be on a percentage of the total earnings of the franchisee. However, at
times the franchisor may also stipulate a minimum amount to be provided to the franchisor,
irrespective of the total earnings. While this may provide an incentive to the franchisee to take active

interest in the franchise, it could also result in termination of the franchise due to non-fulfillment of
the minimum amount.
The franchisor may also want that the franchisee contribute a certain fixed amount towards
advertising and promotional expenditure. Depending on the expected success of the business, such
terms could be included in the arrangement.
6. Taxation
It goes without saying that any business transaction must be made to work satisfactorily from a tax
point of view, and this will be a major consideration in devising a suitable structure for the franchising
arrangement.
7. Termination of the franchise agreement
A provision must always be made to terminate the franchise agreement. Grounds for
termination could include a material breach of the agreement, legal incapacity of any party to
perform the agreement and changes in the legal and regulatory framework in the country. As a
consequence of the termination, the franchisee should be constrained from using the
intellectual property rights and/or the business format of the franchisor. The franchisee must
also be asked to return all confidential information obtained during the term of the agreement
and completely de-identify itself with the franchisor. The franchisor may also covenant that the
franchisee should not open a competing business within the same location.
8. Notice Provisions
In order to make the franchise contract equitable, a provision should be made for notifying
either party before making any changes to the agreement or before rescinding or terminating
the agreement. The notice must also be given for a reasonable period. While this provision
may seem inconsequential, if the contract does not have this provision, the courts could hold
the contract as inequitable.
9. Negative Covenants
Negative covenants particularly relating to non-competition and protection of intellectual

property and confidential information often find place in franchising agreements. However, in
case of an international franchise arrangement, such clauses may have to be re-looked upon

asked upon the laws of the foreign country.
10. Indemnification
A franchising arrangement could give rise to several liabilities as outlined in the section on legal
issues. The franchise agreement must therefore provide adequate provisions for
indemnification of the parties for any liabilities arising out of the other party’s breach of
contract. The contract can also lay down an inclusive list of situations in which parties would be
liable for indemnification.
11. Arbitration
Many a times, agreements have an arbitration clause, wherein all disputes arising out of the
agreement are subject to arbitration. The arbitration clause would normally stipulate the
manner in which the arbitration is carried out. For example, in case both the parties are
Indian, the clause could stipulate that the Indian Arbitration and Conciliation Act, 1996 would
apply. However, in the event one party is foreign, the parties may wish to choose an
international arbitration forum such as the International Chamber of Commerce or the
American Arbitration Association to adjudicate upon any disputes.
12. Governing law and Jurisdiction Clauses
The problem of ascertaining the governing law is more perplexing in the case of agreements
than in almost any other topic, as in the case of an agreement there may be a multiplicity of
connecting factors such as the place where it is made; the place of performance; the domicile,
nationality or business center of the parties; the situation of the subject matter and so on.
Jurisdiction is another issue that must be carefully thought upon before being documented.
Jurisdiction refers to the authority of a court to adjudicate upon a dispute. Generally
jurisdiction is of three types:
Territorial or activity-based jurisdiction i.e.

(a) relating the court; Personal jurisdiction i.e. based on the persons
(b) who are parties to a dispute;
(c ) and the location of the subject matter that forms the essence of the dispute.
If both parties to the agreement were based in the same territory, then it would be rational to
subject any disputes out of the agreement to courts in that territory. However, if the parties
were based in different territories, the choice of jurisdiction becomes a point of negotiation.

UNIT 12 FRANCHISE REGULATIONS
A good relationship between the franchisor and franchisee is critical for the success of both
parties. Since franchising establishes a business relationship for years, the foundation must be
carefully built by having a clear understanding of the franchise program. Unfortunately,
understanding the legal language of franchising can be daunting. The advice of an
experienced franchise attorney should be sought to help a prospective franchisee
understand the legal issues and to protect them from making costly mistakes.
The two main franchising legal documents are the:

✔ the Disclosure Document, which may be in the format known as the UFOC.
✔ franchise agreement
The UFOC
The purpose of the UFOC is to provide prospective franchisees with information about the
franchisor, the franchise system and the agreements they will need to sign so that they can
make an informed decision. In addition to the disclosure part of the document, the UFOC
includes the actual franchise agreement as well as other agreements the franchisee will be
required to sign, along with the franchisor’s financial statements. The UFOC is designed to give
you some of the information you need in order to make an informed decision about investing
in a particular franchise. By law, a franchisor cannot offer a franchise until the franchisor has
presented the prospective franchisee with a Disclosure Document.
The UFOC includes information about:

✔ the franchisor
✔ the company’s key staff
✔ management’s experience in franchise management
✔ franchisor’s bankruptcy and litigation history
✔ initial and ongoing fees involved in opening and running the franchise
✔ required investment and purchases
✔ territory rights
✔ responsibilities of the franchisor and franchisee
✔ other franchisees in the system with contact information

Receipt of the UFOC is governed by the “ten-day rule.” This is a cooling-off period in which
franchisors must give prospective franchisees 10 business days to think about their decision
before they are allowed to sign the franchise agreement.
WHAT INFORMATION IS FOUND IN THE DISCLOSURE DOCUMENT (UFOC)?
The purpose of the UFOC is to provide prospective franchisees with information about the
franchisor, the franchise system and the agreements they will need to sign so that they can
make an informed decision.
✔ Item 1: The franchisor, its predecessor and affiliate. This section provides a description of
the company.
✔ Item 2: Business experience. This section provides biographical and professional
information about the franchisors and its officers, directors and executives.
✔ Item 3: Litigation. This section provides relevant current and past criminal and civil
litigation for the franchisor and its management.
✔ Item 4: Bankruptcy. This section provides information about the franchisor and any
management who have gone through a bankruptcy.
✔ Item 5: Initial franchise fee. This section provides information about the initial fees and the
range and factors that determine the amount of the fees.
✔ Item 6: Other fees. This item provides a description of all other recurring fees or payments
that must be made.
✔ Item 7: Initial investment. This item is presented in table format and includes all the
expenditures required by the franchisee to make to establish the franchise.
✔ Item 8: Restriction on sources of products and services. This section includes the
restrictions that franchisor has established regarding the source of products or services.
✔ Item 9: Franchisee’s obligations. This item provides a reference table that indicates where
in the franchise agreement franchisees can find the obligations they have agreed to.
✔ Item 10: Financing Available. This item describes the terms and conditions of any financing
arrangements offered by the franchisor.

✔ Item 11: Franchisor’s Obligations. This section describes the services that the franchisor
will provide to the franchisee.
✔ Item 12: Territory. This section provides the description of any exclusive territory and
whether territories will be modified.
✔ Item 13: Trademarks. This section provides information about the franchisor’s trademarks,
service marks and trade names.
✔ Item 14: Patents, copyrights and proprietary information. This section gives information
about how the patents and copyrights can be used by the franchisee.
✔ Item 15: Obligations to participate in the actual operation of the franchise business. This
section describes the obligation of the franchisee to participate in the actual operation of the
business.
✔ Item 16: Restrictions on what the franchisee may sell. This sections deals with any
restrictions on the goods and services that the franchisee may offer its customers.
✔ Item 17: Renewal, termination, transfers and dispute resolution. This section tells you
when and whether your franchise can be renewed or terminated and what your rights and
restrictions are when you have disagreements with your franchisor.
✔ Item 18: Public Figures. If the franchisor uses public figures (celebrities or public persons),
the amount the person is paid is revealed in this section.
✔ Item 19: Earnings claims. Here the franchisor provides information that a franchisee can
use to estimate what can be earned from the business.
✔ Item 20: List of franchise outlets. This section provides locations and contact information
of existing franchises.
✔ Item 21: Financial statements. Audited financial statements for the past three years are
included in this section.
✔ Item 22: Contracts. This item provides of all the agreements that the franchisee will be
required to sign.
✔ Item 23: Receipt. Prospective franchisees are required to sign a receipt that they received the
UFOC.

LEGAL ISSUES:
Consumer
Protection Competition
Franchise and Liability Law and
MRTPIssues
Validity of Weights
the contract and
Measures
E- Tortious
commerce Issues
Corporate
Insurance
and
LEGAL
Labour
ISSUES Exchange
Securities Intellectual
Agency Property
Property Control
Tax

1. Enforceability and validity of the franchising agreement
Fundamentally, every franchising relationship is a contractual relationship and therefore, the

Indian Contract Act, 1872 (“Contract Act”) would be applicable to all franchising arrangements.
While the Contract Act does not stipulate that a contract has to be in writing, it is advisable to
have a formal and written franchising agreement to precisely lay down the rights and
obligations of the franchisor and the franchisee. This would assist in resolving any future
deadlocks and disputes.
2. Constitution of an Agency
While normally franchisors and franchisees intend to create an independent contractor

relationship, sometimes, depending upon the nature of the contract, the relationship between
the franchisor and the franchisee could be considered to be an agency. For example, if the
franchisee is given the authority to enter into contracts with third parties on behalf of the
franchisor, the relationship could be an agency. Another example could be in a distributor
contract, where a wholesaler enters into agreements with several retailers to market and
distribute a product to the end-users.
In the event the franchising agreement creates an agency, the franchisor (the principal) could
be liable for acts performed by the franchisee (the agent) in the ordinary course of business.
Similarly, as per the Contract Act, the franchisee could also be liable to compensate the
franchisor for liabilities arising due to acts performed outside the course of the business or
contrary to the franchisor’s directions. If a third party acts upon the representation of an agent
and suffers any losses, it might create some issues for the franchisor. Further, any limitation on
the authority of the franchisee will not bind any third party unless he is or is made aware of
such limitation.
3. Protection of Intellectual Property Rights
All franchising agreements involve the transfer of some form of intellectual property, either an
invention or a patent for the invention or a design (in the case of a manufacturing agreement),
or a trademark or trade name (eg. Bata shoes) or a business format / know-how / trade secret
(eg. McDonalds and Barista coffee chain) or copyright (in the case of character merchandising
agreements). Since the intellectual property license lies at the core of a franchise, the laws
governing licensing of intellectual property constitute the heart and arteries of franchise laws.

An understanding of issues that could arise in this arena is vital for any franchising business.
Trademark
Know-how Copyright
IPR
Patents Designs
Trade
Secrets
(a) Due Diligence: Before entering into a franchising agreement, the franchisee must ensure
that any intellectual property rights being licensed under the agreement exist and that the
franchisor has the authority to license those rights. Moreover, the franchisee would also
need to ensure that the rights being licensed do not in any way violate the intellectual
property rights of any third party.
(b) Licensing: While licensing an intellectual property right, both the parties must follow the
necessary provisions of the law. For example, in the case of character merchandising, if the
copyright in a graphical or fictional character is being licensed, the license must confirm to
certain parameters namely, it must be in writing, signed by both the parties, specifying the
rights licensed, the royalty payable if any, the term of the license and the territory for the
rights are licensed. The license must always specify the exact nature of rights granted and
the extent to which such rights are granted.
(c) Misuse of rights: The franchisor must also ensure that the intellectual property rights
licensed to the franchisee are not misused in any manner. For example, the franchisor
needs to ensure that the franchisee does not use the franchisor’s trademark for purposes
outside the purview of the franchise agreement.
(d) Post-term use of trademarks: Disputes involving post-term use of the franchisor’s mark by
the franchisee are potential litigious issues in franchising. Often the franchisee may also use
the trademark pendent lite, or even after the termination for reference purposes or as part
of a corporate name. Careful drafting the franchise agreement could minimize the risks

arising from such litigation.
(e) Passing off action for trademarks: The franchisor and franchisee should ensure that the
brand and goodwill associated with the trademark is not diluted in any manner due to any
actions or inactions of the franchisee. Similarly, neither party should use any unregistered
trademark of a third person so as to cause confusion in the minds of the public at large.
(f) Protection of know-how and trade secrets: An important aspect, especially of a business
format franchise agreement is leveraging upon the know-how and trade secrets of the
franchisor. It is crucial for the franchisor to decide on the amount of know-how and trade
secrets he/it wishes to transfer to the franchisee. Moreover, the franchisee must also take
adequate precautions to protect the franchisor’s confidential information from third
parties.
4. Consumer Protection and Product Liability
Complaints and legal action from consumers is a potential issue that both the parties must bear
in mind. Such lawsuits are not uncommon in the United States, and can definitely arise in the
Indian context.
Under the Consumer Protection Act, 1986, a consumer can file a complaint with the consumer
forums for unfair or restrictive trade practices adopted by a trader or for any defects /
deficiencies in the goods or services supplied by the trader or if the goods being offered for sale
are hazardous to life or do not confirm to certain provisions of the law. In case of a franchise,
the franchiser and the franchisee could be held liable for any defective goods or services
supplied by the franchisee. On another level, it may be possible for the franchisee or sub-
franchisee, as a consumer, to sue the franchiser on the above-mentioned grounds. Provisions
to minimize liabilities arising due to such risks should be properly documented in the franchise
agreement.
5. Competition law and Unfair Trade Practices
Anti-Trust or restrictive trade practice, whereby the agreement between the franchiser and
franchisee tends to snub market competition is another issue. In India, the Monopolies and
Restrictive Trade Practices Act, 1969 (“MRTP Act”) has been enacted to prevent concentration
of economic power, control monopolies and prohibit monopolistic trade practices and
restrictive trade practices. The franchisor or franchisee must ensure that their practices do not
classify as monopolistic or restrictive, or else the Commission under the MRTP Act can grant an
injunction to prevent such trade practices and may also award compensation for any losses or

damage suffered thereby.
For example, if the franchisor demands that the franchisee must not sell goods below a
particular price, or if the franchisee makes a false representation about his services or products,
or if the franchise manipulates, distorts, contrives or embellishes the intellectual property of
the franchisee, it could give rise to action under the MRTP Act.
6. Tortuous Liability
A tort is a civil wrong independent of contract for which the appropriate remedy is an action for
un-liquidated damages. Tortuous liability could arise in a franchise relationship in the following
situations:
(a) Negligence: Negligence is a breach of duty caused by an act or omission, which results in
damage. In a franchising arrangement, the breach of any duty by the franchisor or
franchisee, which causes a loss or damage to the franchisee or franchisor, respectively or to
any third party, could lead to a civil action for negligence.
(b) Vicarious Liability: In the event there is a principal-agent relationship, or an employer-

employee relationship between the franchisor and the franchisee, the franchisor could be
held liable for any torts committed by the franchisee during the course of the business.
However, if the franchisee has acted outside his capacity or contrary to the instructions of
the franchisor, the franchisor may be able to recover any damages from the franchisee. If
the franchisee is an independent contractor, the franchisor may not be liable for the
tortuous acts of the franchisee.
7. Weights and Measures
If a franchising agreement pertains to the sale or distribution of goods by weight, measure or

number, the Standards of Weights and Measures Act, 1976 and the rules made there under
could become applicable. For example, under the Standards of Weights and Measures
(Packaged Commodities) Rules, 1977, all commodities which are to be sold in packages must
conform to certain standards, and each package must have certain declarations. Even packaged
commodities that are exported from and imported into India have to comply with certain
norms. Therefore, depending upon the nature of the franchise, the franchisor or the franchisee
may have to conform to these laws.

8. Taxation
Royalties paid by the franchisee to the franchisor for the use of the franchisor’s intellectual
property rights, would be subject to tax at 20% on gross amount paid. In case of an
international franchise agreement, this rate could be reduced depending upon the provisions
in any double taxation avoidance agreement.
9. Property Law
Laws affecting real estate and leasehold property form an important part of franchising. A
careful evaluation of the property laws would be required in order to determine whether the
franchising scheme is possible. If the scheme not possible, necessary adjustments would have
to be made and possibly fundamental rethinking may have to be engaged in.
10. Labour Law
Depending on the nature of the franchise arrangement and the amount of control the
franchisor has over the franchisee’s business operations, different labour law issues could
arise. These issues could be based on:
(a) the relationship between the franchisor and the franchisee;

(b) the relationship (if any) between the franchisor and the employees of the franchisee, for
example where the franchisor retains the right to approve the employees of the
franchisee; and
(c) The position of the employees of the franchisee in the franchise system, which includes
questions such as the right of the employees to be consulted on important business
decisions.
11. E-commerce issues
In the event a franchising operation is set up on the Internet, besides complying with the
regular business and commercial laws relevant to franchising, the franchise would also have to
deal with various issues specific to e-commerce. Some of the potential issues are outlined
hereunder.
(a) Security: All sensitive and customer information on the websites should be adequately

secured from any unauthorized intrusion. The franchisor could also face security threats
externally as well as internally. Externally, the company could face problems from hackers,
viruses and trojan horses. Internally, the business must ensure security against its technical
staff and employees. Security can be maintained by using various security tools such as
encryption, firewalls, access codes / passwords, virus scans and biometrics. Apart from
adopting adequate security measures, appropriate legal documentation would also be
needed. For example, a company could have an adequate security policy that would bind
all the people working in and with the company.
(b) Privacy: The franchisor’s website may have cookies that store personal information of the
users, which they fill in while placing the order. This is a threat to the privacy rights of
people. However, presently there exists no legislation in India that upholds the privacy
rights of an individual or organisation against private parties. Moreover, when the
franchising business caters to consumers in foreign jurisdictions, the foreign jurisdictions
may have laws that could make the franchisor/franchisee liable for violating the foreign
consumer’s privacy rights.
(c) Liability: Franchisors should also guard against the potential sources of contractual,
statutory and tortuous liability arising from the website, which could lead to legal claims
against them. Since the Internet knows no boundaries, the owner of a website could be
confronted with legal liability for non-compliance or violation of laws of almost any
country.
12. Industry specific issues
Different issues may emerge out of a franchising agreement depending upon the industry and
sector to which it caters. Some of the promising sectors for franchising include:
(a) Healthcare and Diagnostic Centers;
(b) Restaurants/Cafes (particularly "fast food");
(c) Computer Education Centers;
(d) Other Education Centers;
(e) Entertainment Centers;
(f) Hotels;
(g) Retailing; and

(h) Automobile sector.
Depending upon the sector to which the franchising agreement relates, trade and sector-
specific legislations will need to be followed.
Though the business and commercial laws in India can protect and govern a franchise
arrangement, there is a growing need to improve this regulatory and legal framework. In 1999,
a firm step was taken towards consolidating the franchising industry in India, by establishing
the Franchising Association of India (“FAI”), through the efforts of the Indo-American Chamber
of Commerce. FAI represents the interests of franchisors, franchisees, vendors, consultants and
other interested individuals and bodies.

UNIT 13 INTERNATIONAL FRANCHISING
With the growing popularity of franchising, it has become a preferred method of global
expansion for many companies throughout various industries from food chains to courier
services and education. The trademarks and signage of franchise chains are becoming popular
in all parts of the world - from Beijing to Buenos Aires.
As franchising is penetrating new and exotic markets, it is the right time for Indian franchisors
to expand their business internationally. Simultaneously with multi-nationals having stronghold
in the markets of Thailand, Singapore and Malaysia, India is being observed as the next big and
important South East Asian market for expansion. Many foreign franchisors have already
entered India, especially in the apparel and food categories, multiplying their outlets and
opening more franchisees.
IMPACT ON GLOBAL ECONOMY
Why should a country support or even encourage international franchising?
The answer lies in the impact of franchising on global economy. It helps in the accelerated
economic and social growth of the nations involved in international franchising. Major
economic benefits are employment generation, increase in private sector investment,
availability of uniform product and services and simulation of the economy itself. It helps the
developing economies in their effort of integration with the global economy, creating
entrepreneurial culture, opening entrepreneurial opportunities and developing entrepreneurs.
Besides it helps solving unemployment problem by creating new and productive jobs. The
developed economies are benefited by increased investments through public and private
offerings, creation of low risk entrepreneurial opportunities and growth of related sectors
through suppliers, advertisers etc.
Moving into international market is neither ‘easy nor exotic' . It even cannot it be considered as
a passport for the pleasure trips for the franchisor and his family. It is a complex process that is
not only costly but also carries sufficient risk. To be successful in foreign markets the franchisor
has to be flexible enough to adapt certain changes in the structure of the franchise network,
standardized operating system as well as cope with legal changes required for international
agreements.
Franchisors are becoming more and more aware of the attractiveness and potential inherent in
international expansion. Moving away from the home base is not without risk. The franchise
FDDI/B.Des FMRM/TTLM/BDes.FMRM- Page - 121

structure and system developed over time with great pains for the home market may not be
suitable for international franchising.
SOCIAL AND CULTURAL ASPECTS
Working in foreign in requires sensitivity to social and cultural aspects that are peculiar to every
country. Most people are sensitive to their culture and social norms and the franchisor has to
take special care not to offend the cultural mooring of the host country. One wrong step can be
very damaging and can force the franchisor to pack up from a highly potential market.
Franchisor should fully understand the cultural and social history of the host country and the
response to local culture may require various visible business changes to be introduced. Only, a
local citizen can fully understand these aspects and their help should be sought for identifying
such issues.
The master franchisee, development agent or the joint venture partner proves helpful in this.
While the' most obvious changes take place in the food and service sector, flexibility is required
in 'other sectors as well keeping in view the local cultural norms and religious sentiments.
McDonald's known for its Big Mac (a beef

Burger) has not in any beef product in India.
KFC, a subsidiary of Pepsi, had to wind up its
business in India as it failed in changing its
menu to suit the eating habits of local
people.
Besides changes in the product, advertising

for building the brand is also affected by the culture of the host country. As advertising is very
visible, the franchisor should bear in mind the sensitivity of local people and may have to create
new advertisements to suit the local culture.
In addition employment norms, service conditions and salary levels are affected by the social
considerations that are particular to a given foreign market. Many times it is important to judge
the sentiments of the local people towards a specific industry or a product. A popular ,
sentiment against these can wreak a mob frenzy on the outlet .As a large section of people in
Karnatakà were against the entry of multinationals in Agri-business, in India, there was an
attack by violent mob against KFC restaurant in Bangalore. Finally Pepsico had to close down
KFC restaurants In India.

A word of caution is that it is important to judge the public sentiments towards the franchisor's
country before entering any foreign country. If there is a latent hatred for the franchisor's
country amongst the people it may be suicidal to enter such markets.
PRODUCT CHANGES
One of the benefit of franchising lies in Iocalisation. The franchisee being the local person has
better knowledge of the area to help develop the local market. Thus localisation is a must in
international franchising as the franchisor usually has only limited knowledge of local demand
and prevailing competition.
Product localisation is a strategic response to domestic

condition of a foreign market. Changing the products
to suit the local needs has the potential of destroying
the identity of the franchise network. Franchisor has
to deal with product changes very cautiously. Pepsi
had to increase the gas contents in their main drink to
suit Indian taste and compete with Thums up, their
main competitor at that time.
The product localisation is often an issue of survival for a franchisee in the foreign market. As a
result they keep innovating on their products to better serve the local markets. The franchisor
cannot have the same yardstick in approving the innovative changes suggested by the foreign
franchisee as it uses for the domestic franchisees. Franchisor has to give a greater leeway to
allow the franchisees to adapt the local innovation in a controlled manner. The changes
brought should not be franchisee specific but country or region specific.
Peppy Paneer and Chicken Chittined pizza toppings have been introduced only in India by
Domino's Pizza. Franchisor should introduce a formal system of not only encouraging local
product innovations but also a formal procedure for screening and approving these
innovations. The modified new products need to be standardised and uniformly introduced at
all franchise outlets.

Product changes are not limited to franchises having physical products; even franchise dealing
in service industry may be required to modify their services. Though such changes may be very
much needed for capturing the foreign markets the franchisors normally have a more difficult
task of not only standardising theses services but also ensuring the maintenance of the
established standards.
Franchisors are often required to develop specific mechanisms to monitor and approve the
changes in the products being offered by its foreign franchises. It is required to ensure
uniformity of product and service at all franchises.
MARKETING:
We have already discussed the cultural differences in different foreign market. Marketing mix
may need changes to suit local requirement. The franchisor will have to provide the foreign
franchisee flexibility in terms of pricing, advertising and local marketing activity. But in doing so
it is to be ensured that the strategic positioning of the product is not compromised and the
integrity of the business format is maintained. This requires regular field visits and a detailed
and through performance audit of the franchisees.
Pricing is a sensitive decision, on one hand it effects the royalty income of the franchisor, on the
other the growth and sometimes even the survival of the franchisee hinges on the product
price. Franchisor may be interested in having uniform international prices at par with the home
market for all its international franchises.
The buying power or local competition may not support the same. Further the cost structure,
that is, the costs of inputs, wage level, productivity and taxes may vary from market to market.
Hence pricing is normally a local decision and be best fixed in consultation with the local

franchisees. Uniform prices are to be fixed for a region or a country so as to ensure that
franchises do not compete amongst themselves.
The franchisor's interest is normally protected by charging royalty per unit sold rather than a
fixed percentage of sales revenue. This frees the franchisor's revenue from the product prices
thus permitting decentralisation of pricing. Decentralisation of pricing helps the franchisees to
have a faster response to the pricing moves of local competitors.
Normally the marketing literature is provided by the franchisor who has a common advertising
policy for all its Franchises. The same may not hold for international franchising. All promotional
campaigns need a prior approval by the franchisor. This creates unnecessary hurdles in
decision-making and causes delay in responding to market requirement. The franchisors are
required to adapt their advertising and promotional schemes to meet the local requirements.
Most of the times advertisements and other promotional literature will require translation in
the language of that country. Sometimes the translated material may look crude and the whole
literature may have to be designed afresh especially using local models and colloquial language
with due regards to customs and cultural norms of the host country. Franchisors are
recommended to consult the local franchisees and use the services of local agencies from the
target countries as they have better understanding of people's needs and sensitivities.
FRANCHISE POLICIES
Franchise policies are normally tailored to suit the domestic laws and competition
requirements. While considering expansion into international franchising the franchisor cannot
afford to have rigid policies relating to franchise network. Franchisor is required to have
flexibility in its policies so as to suit the legal requirements of the target country.
A franchisor may have a policy of charging, say, a royalty of 6 percent on the sales revenue but
government of India does not permit payment of royalty exceeding 5 percent. Royalty structure
of the competitors is to an important consideration for royalty policy. Royalty should not put
such a burden of high cost on the product or service so as to make it uncompetitive in the
target market. Thus the royalty policy is affected by the competition.
In addition the pricing of the franchise cannot be uniform internationally as it is dependent

upon the cost structure and profitability in different markets. The purchasing power, the price
of the substitute product and services, the competitor's prices and strategies in the target
country are likely to be different from that of the home market. This necessitates flexibility in
the product pricing policy.

Similarly the cost of property, local laws relating to property, the expectations of profit margins
and restrictions on royalty payments, if any, call for changes in the price of franchise outlets for
different markets.
Franchisor may be supplying certain materials to all the franchisees in the home market but it
may not be possible to supply the same materials to its franchisees in different countries. The
local taxes on imports and the logistic constraint including freight costs may be unfavourable in
certain countries. Some materials may cost much less in some countries. Thus it will be
profitable for the franchisees to buy these materials locally.
The tax laws and other legal requirements and accounting norms of the target country often
require suitable alterations in the standardised accounting practices of the franchisor.
GUIDELINES FOR INTERNATIONAL EXPANSION
Here are some basic guidelines for franchisors who may consider developing franchising
programs in foreign lands.
1. Strengths and Weaknesses. Before expanding to another country, be sure to have a secure
domestic foundation from which the international program can be launched. Make sure that
adequate capital, resources, personnel, support systems and training programs are in place to
assist your franchisees abroad. Be sure to make a strong resolve to commit resources to
compete in the foreign markets and allocate these resources in a manner which will not overly
distract from the current domestic or other already-established overseas markets.
2. Target Market. Going into a new market blindly can be costly and lead to disputes. Market
studies and research should be conducted to measure market demand and competition of the
products and services in the international market.
Take the pulse of each targeted country where one plans to establish international franchise
operations and gather data on: economic trends; political stability, currency exchange rates;
foreign investment and approval procedures; restrictions on termination and non-renewal
(where applicable); regulatory requirements; access to resources and raw materials; availability
of transportation and communication channels, labour and employment laws, technology
transfer regulations; language and cultural differences; access to affordable capital and suitable
sites for the development of units, governmental assistance programs; customs laws and
import restrictions, tax laws and applicable treaties; repatriation and immigration laws;
trademark registration requirements, availability and protection policies; the costs and

methods for dispute resolution; agency laws, and availability of appropriate media for
marketing efforts.
3. Partners: Experienced international franchising executives around the world believe that the
ultimate success or failure of international franchising depends upon the choice of a right
partner. Regardless of the specific legal structure selected for international expansion into a
particular market the master developer or sub franchisor candidates in each of the region
should always be philosophically and strategically viewed as a "partner".
An international partner should be chosen after a proper due diligence. The most promising
candidates are those with proven financial resources who have business and management
experience and which may already have established a successful business in the host, country.
Before embarking on overseas franchising, the franchisor and franchisee both have to consider
certain critical issues. These include the systems for recruiting and selecting the right
candidates, and procedures for reviewing their qualifications.
4. The Value. Many franchisors entering overseas markets for the first time have grandiose
ideas about the structure of the master license fee and the sharing of single-unit fees and
royalties. Reality and patience are the two key buzzwords here. If the franchise is overpriced, it
will scare away qualified candidates and / or possibly leave your partner with insufficient capital
to develop the market.
If it is underpriced, the franchisor will be lacking the resources and incentive to provide quality
training and ongoing support. The fee structure should fairly and realistically reflect the division
of responsibility between the franchisor and the franchisee. Other factors influencing the
structure will be currency exchange rates and tax issues, pricing strategies, market trends, the
availability of resources and personnel with franchisor to provide on-site support and the party
(franchisor/ franchisee) that will bear responsibility for translation of the manuals and
marketing materials as well as adaptation of the system, products and services to meet local
demand trends and cultural differences.
In structuring the actual master franchise agreement, the franchisor should carefully consider
the structure of the relationship, the term of the agreement and' the scope and extent of non-
disclosure and non-competing clauses. The provisions and their enforceability will have an
increased importance when complicated by distance and differences in legal systems.
5. Trademark: As a general matter, trademark laws and rights are based on actual (or a bona
fide intent to) use in a given country. Unlike international copyright laws, a properly- registered
domestic trademark does not automatically confer any trademark rights in other countries. The

franchisor has to take necessary steps to ensure the availability and registration of the
trademarks in the host-country well in advance of your entry into the market place.
Also be sure that your trademark translates effectively in the targeted country and its native
language. Many franchisors have to modify their names, designs or slogans because of
translation or, pirating problems in new targeted markets.
6. Product and Service: The format of the proprietary products or services, which have been
successful in the home country, may or may not be successful in another country. The
franchisor has to be sensitive to differences in tastes, cultures, norms, traditions, and habits
within a country before making final decisions on prices, sizes or other characteristics of its
products or services.
7. The Resources: Access to resources and experienced advice is a major factor in the success of
an international franchising program. It requires the help of advisors and market research
studies. National and regional franchise associations can be an excellent starting point for
gathering data about a targeted market.
8. The Rationale: Franchisors often have widely varying reasons for selecting a targeted country
or market. Sometimes they are "pulled" into a market by an interested prospect who is familiar
with their concept (often as a result of being a temporary resident, tourist or student in the
franchisor's home country).
It can be dangerous if the franchisor relies solely on the assurances of the interested candidate
to ascertain the demand for its products and services. Often franchisors "push" their way into a
targeted foreign market (sometimes due to market saturation or a lack of opportunity in their
domestic market) by ranking the likelihood of their success by measuring certain factors of
overseas markets. These factors include language and cultural similarities, geographical
proximity, market and economic growth trends, risk level, cooperative attitude and potential
return on investment.

UNIT 14 TERRITORIES AND CO- BRANDING
The setting and operations of territories is one of the most complicated components within
franchise systems. Territories are potentially the most contentious issue for franchise networks.
The second emerging issue is co- branding especially in master franchising when aligning with
strong franchisees.
STRUCTURING TERRITORIES
New franchisors may be tempted to grant over-large or overprotected territories as it makes it

easier to sell the first franchise, but they can later regret a decision, which restricts the system's
ability to service a developing market. A franchisee's attachment to his or her territory once
granted is understandable; it may be more emotional rather than practical. The right structure
can avoid these headaches, while the wrong structure can lead to ongoing discord and lack of
growth.
In fact, there are many possible options to set franchise territories. Once one fully understands
the options and their implications, it soon becomes apparent which structures will work for a
given franchise network.
It is also worth remembering that all franchise systems are individual. Although a structure
might have worked well for one system in a similar industry, that does not guarantee that it is
the best structure possible and works for all networks. Often the structure that is individually
designed leans on a combination of factors or elements that are used in a number of different
systems or system types.
DEFINING A TERRITORY
The most common way of dividing physical

territories is via a detailed map, which is often
appended to the franchise agreement. This will
normally mean drawing on a map and then, if
necessary, clarifying in writing (for example, are
both sides of a particular road included?).
Depending on the territory structure chosen

there could be further markings on a map. These
could include, the area within which the

franchisor undertakes not to set up a further outlet for a period of time (or for the term of the
franchise agreement); the territory in which the franchisee can solicit (market) for business; the
area within which a franchisee is allowed to service a customer, the area within which the
franchisee can market for business until a new franchisee is placed in that area. Still another
could be the area in which a franchisee receives a commission on a sale -or margin on a product
if it is sold and possibly also distributed by the franchisor from mail-order, or the Internet. Such
markings depend on the territory and operating structure employed.
TERRITORIAL STRUCTURES FOR A FRANCHISE SYSTEM:
 No territory
 Regional territory
 Non exclusive territory
 Exclusive territory
No Territory
In some circumstances, a franchise will not be granted any territory. There will be no
geographical restrictions or protections on the franchisee's business. This may apply either to
service or retail-based franchise systems.
a) For Service Franchises
This is generally preferred in one of two situations:
(i) Where a franchisee is likely to get a considerable amount of their business from existing
contacts and word of mouth. For example, a mortgage broker who can sell products to any
potential person and moreover can do some or all of the work from home (therefore not being
hampered as much by geographical constraints). They are typically franchises with an active
sales role where franchisees build their own customer base, especially via contacts or referrals,
and then continue to service their customer base thereafter.
(ii) Within contract franchises, that is franchisees where, instead of being licensed a territory,
the franchise gets the right service a specified set of contracts (i.e. customers). Example of
these types of franchises are many home service business where the franchisor or master area
franchisees get most the clients and then pass them on to be serviced by franchisee once there
is enough business, to sustain the franchise.
Further contracts can be added either by the franchisee taking on more from the master or
area franchisee, or by the franchisee securing more contracts itself Sometimes contracts
sourced by franchisees themselves can be 'sold' at a pre-agreed rate to another franchisee or

back to the master / area franchisee to be redistributed The selling back of 'surplus' clients in
this way enable the franchisees to concentrate their business in a smaller area, reducing their
travelling time and increasing productivity. It also provides some capital gain on the work they
have done to establish the business.
b) For Retail Businesses
It is quite common that no territory is granted where a retail outlet (such as a coffee shop or
fast food outlet) has the right to operate from a specific location only. This generally only works
where the individual units can operate successfully in close proximity. It can lead to potential
conflict with the franchisor if franchisees feel that the franchisor is selling the outlets too
closely.
The risks can be minimised for a franchisee if the franchisee has a first option to establish
nearby outlets themselves or where in order to help the franchisee get established, the
franchisor limits the number of franchisees to be established in a specific area or, over a
specified period of time.
Regional Territories
A regional territory is a set region within which a predetermined number of franchisees

operate, each of whom can work anywhere in the territory. This structure is best suited where
the franchisee's customer base is largely attracted through existing contacts but the franchisor
wishes to give its franchisees the comfort of knowing the maximum number of franchisees who
will be operating in a given area.
For instance, in a house building franchise someone in the industry may have an existing range
of clients or contacts spread out across an entire region or major urban area. Both the
franchisor and franchisee want those customers to be serviced personally rather than being
passed on to another franchisee or possibly not serviced at all. It allows the franchise to
operate equitably while retaining the all-important franchisee / client relationship and saves
any squabbles between franchisees. They know the position when they sign up and there is
usually no need for referral fees between individual franchisees.
The difficulty with this structure can come when franchisees start targeting new clients, as
potentially two franchisees could pitch for the same client at the same time. Sometimes this is
not a major issue, but other times it may be depending up on the amount of new business
sought and the value of the transaction.

One way around this is for franchisors to operate a 'dibs' register, i.e., a list of new clients being
targeted. When a franchisee wishes to approach a new client then they have to check with the
register that no other franchisee is currently targeting them. This sort of register must have a
time limit on the prospecting period to provide equal opportunity for all franchisees. However,
even such a register cannot allow for the unpredictable targeting of, say radio advertising or
mail drops, which is why some franchises insist that these are co-operative affairs between
franchisees.
Non-Exclusive Territories
Non-exclusive territories are nominal territories allocated to a franchisee where in besides that
franchisee other franchisees and franchisors outlets may also conduct business. Depending on
the franchise agreement, there will normally be restrictions of some sort (or perhaps
commissions payable to franchise whom the territory is allocated) if someone else operates in
the designated territory, or vice-versa.
A good example of this is where a milk distribution franchisee has a defined territory in which
he / she can service all homes and standard retail outlets, but the franchisor services
supermarkets or other major chains directly. To carry and distribute the necessary level of stock
to service such chains would be beyond the ability of many franchisees, and would inevitably
distract them from the brand-building work of growing the home and standard retail business.
Another example is where a training franchisee trains all customers in his or her territory
except for a nominated list of clients that are serviced directly by the franchisor - perhaps a
national company requiring specialist consistent training.
A non-exclusive territory can also operate where a franchisee is permitted to secure a client in
another franchisee's territory but then has to pay a commission or 'out-of-territory' free for
doing this work. However, this is difficult to monitor.
There can also be the situation where a franchisees operate with an 'area of primary
responsibility' where as they cannot actively solicit for business outside of their specified area,
but can be referred clients outside their territory, normally no fee is payable to the franchisee
whose territory it is.
Exclusive Territory
An exclusive territory is one where no other franchise of the same system can be established or
operate in a given territory, and also the franchisor cannot establish a company owned business
or operate in the specified territory.

This arrangement provides a lot of security for the franchisee who needs to worry about
external competition only. It is often preferred by banks, accountants and lawyers, and
therefore makes a franchise easier to sell. However, it too has its weaknesses as an exclusive
territory often offers little flexibility for change if the territory size has not been defined
accurately, or if the market changes.
If the territory initially granted is too big then the franchisee will not be able to service all the
customers in his or her territory. If that happens then there will be a gap in the market,
encouraging more competitive outlets who may then be able to get the upper hand in a region.
This is clearly not in the interests of either the franchisee or
the franchisor.
It is always better to work with a company outlet or other

franchised outlet and have the dominant brand in an area
than to be squeezed. At the same time, the franchisor is
disadvantaged if sales turnover is not reaching its potential
due to the reduced royalties or production margins
generated in the region. A similar effect also occurs if a
franchisee reaches his or her 'comfort zone' and stops
building the business in the territory, allowing sales plateau
rather than to continue climbing.
CO- BRANDING
The unique feature of franchising is the way it is developing with changing times. What was
once traditional is moving rapidly to the non-traditional. Both franchisors and franchisees are
constantly seeking new ways to maximize facilities, human resources and competitive
positioning. One manner of breaking the traditional model is through co-branding. This concept
is normally considered as a formal or loose association of two or more different brands having
separate owners.
Co-branded operations may exist 'under one

roof, or cover large geographical areas. Credit
cards are the common example of co-branding,
which is carrying the brand of the card company
as well as the issuing bank sometimes along with
institutions like MTNL or a petrol company. The
convenient stores often have several franchises
at one location. Co- branding has unlimited

possibilities.
Co-branding is the best way to get the prime locations, which otherwise are to cost
prohibitively high. However in co-branding one has to be cautious and look for a synergy
between the brands as well as franchising concept. If the brands are too similar in nature then
the second brand may dilute the franchisor's brand. Thus a franchisor must be careful and
conduct a proper research before going for co-branding and selecting the brands.
In addition, franchisors, before embarking into co-branding are advised to ensure that the
franchisor's brand and system are fully protected. Franchisors should explore implementing a
master agreement with the owner of the co-brand and tailor each franchise agreement for co-
brand operation.
The concept of co-branding is evolving swiftly but before one leaps into the arena make sure
that one has fully researched the concept and is satisfied of the synergy with one's system.

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Non Store Retailing &amp; Franchising

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MINISTRY OF COMMERCE & INDUSTRY

B DESIGN – Fashion Merchandising and

Non Store Retailing and Franchising

PREPARED BY: MS. AASTHA GARG

FDDI/B.Des FMRM/TTLM/BES 307 Page - 1

Sr. No. Content Page Number

1 Non Store Format Vs. Store Retailing 3

3 Case Study On Direct Marketing 29

8 Developing A Franchising Business 79

10 Evaluation And Selection Of Franchisee 96

11 Franchising Agreement 103

12 Franchisee Regulations 109

13 International Franchising 121

14 Territory And Co-Branding 129

FDDI/B.Des FMRM/TTLM/BES 307 Page - 2

FDDI/B.Des FMRM/TTLM/BES 307 Page - 3

Store Based Retailer vs. Non-Store Retailing

There are both advantages and disadvantages to non-

The breadth of customer coverage is considerably wider

Advantages of Traditional Store selling:

A storefront affords you a host of merchandising options from

FDDI/B.Des FMRM/TTLM/BES 307 Page - 4

Disadvantages of Traditional Store selling:

Advantage of Non Store retailing:

 Its freedom from physical retail presence

Disadvantages of Non Store retailing:

 Fear of credit card misuse and mail fraud both retailed

FDDI/B.Des FMRM/TTLM/BES 307 Page - 5

WHAT IS DIRECT MARKETING?

According to the official definition of the Direct

In direct marketing, the transaction may take place at

 A purchase over the telephone or by post;

FDDI/B.Des FMRM/TTLM/BES 307 Page - 6

1. Many costs are reduced-

a. Products cannot be examined before purchase.

FDDI/B.Des FMRM/TTLM/BES 307 Page - 7

GROWTH OF DIRECT MARKETING

1. Changing lifestyles were an important factor in the acceptance of direct marketing

FDDI/B.Des FMRM/TTLM/BES 307 Page - 8

3. Technological growth in general, and computer-based technologies in particular, have

FDDI/B.Des FMRM/TTLM/BES 307 Page - 9

Much direct marketing activity requires accurate

Information such as types of purchase, frequency

Database marketing is defined as an interactive approach which uses individually addressable

a. Provide information to a target audience;

Typical information stored on a database includes the following:

2. Transactional information. Such information as frequency of purchase, when the customer

FDDI/B.Des FMRM/TTLM/BES 307 Page - 10

5. Geodemographic information. Information about the geographical areas of customers and

FORMS OF DIRECT MARKETING

Direct mail is material sent by post to a home or

Consumer lists may be compiled from subscriptions to magazines, catalogues, membership of

FDDI/B.Des FMRM/TTLM/BES 307 Page - 11

The management of direct mail involves asking five questions:

Who: Who is the target market? Who are we trying to influence?

What: What response is required? A sale, an enquiry?

FDDI/B.Des FMRM/TTLM/BES 307 Page - 12

FDDI/B.Des FMRM/TTLM/BES 307 Page - 13

FDDI/B.Des FMRM/TTLM/BES 307 Page - 14

Call Centers – The Telemarketing Imperative

A call centre or call center is a centralised office used for

Outbound call centers are operated for telemarketing,

FDDI/B.Des FMRM/TTLM/BES 307 Page - 15

Automatic lead selection or lead steering is

Non Store Retailing & Franchising

Non Store Retailing & Franchising