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This is to certify that the Term paper project entitled “Study of Franchising, (BSNL ITC)”, herewith submitted by Mr. Abhinav Nigam in partial fulfillment for the term paper, is an authentic record of the work carried out by him under my supervision and guidance at Center for Entrepreneurship and Small Business Management, Maharshi Dayanand Saraswati University, Ajmer. This work has not been submitted for any other Project report. DR. ASHISH PAREEK (DY. DIRECTOR) MDS University, Ajmer. Email: firstname.lastname@example.org
I hereby certify that term paper entitled “Study of FRANCHING”, herewith submitted in partial fulfillment for the Term paper is an authentic record of the work carried out by me. The matter embodied in this term paper has not been submitted for the award of any other report.
The successful completion of any project depends largely on the efforts taken by many people. The Center for Entrepreneurship and Small Business Management, Maharshi Dayanand Saraswati University, Ajmer has provided the needed support and help for this work. I express my deep sense of gratitude to my project supervisor DR. ASHISH PAREEK Dy.Director C.E.S.B.M., MDS University, Ajmer for the inspiring guidance and constant encouragement provided to me during the course of project work. Finally yet importantly, I am thankful to my friend Vaibhav Sharma for his support during the course of study and making this project successful.
or recipe and to use the franchiser's name. A business operated under a franchise arrangement is often called a chain store. training and marketing campaigns). Another type of franchise that developed in the U. a vending machine operator may receive a franchise for a particular kind of vending machine. This is called product franchising or trade name franchising. Modern day franchising is primarily in the business format mode. A franchise agreement will usually specify the given territory the franchisee retains exclusive control over (the area protection). It has evolved from a simple grant of a right or privilege in the middle ages to the sophisticated business format franchise concept of today. technical expertise. Failure of such tests typically involves non-renewal or cancellation of franchise rights. and may indeed be required by the franchisor. and may subject the franchisee or the outlet to periodic and surprise spot checks. or simply franchise. training.e. The type that developed early on was the product franchise wherein a manufacturer granted a franchisee the right to sell it's products. Business format franchising is what franchising is all about today and is essentially why franchising is the most successful method of distributing goods and services in the economic history of the planet Earth. The franchiser also trains the new franchisee extensively up front and provides ongoing training and support throughout the life of the franchise agreement. as well as the extent to which the franchisee will be supported by the franchisor (e.g. For example. This format allows the franchisee to use a special process. This type franchising not only grants the right to use the name and sell the products or services of the franchiser but it also involves the transfer of the total way of doing business that has been developed by the franchiser. to the new franchisee.S. management methods and essentially all relevant information. and usually a percentage piece of gross sales or gross profits as well as the annual fees.Definition The term "franchising" is used to describe business systems which may or may not fall into the legal definition provided above. but no method of doing business. marketing systems. training systems. 4 . and other support services are commonly made available by the franchisor. Originally Kentucky Fried Chicken was structured this way as was One Hour Martinizing. Essentially franchising is a very specific method or way of distributing goods and services. Specifically the franchiser transfers all its operating systems. was the name and process franchise. Franchising (from the French for honesty or freedom) is a method of doing business wherein a franchisor licenses trademarks and tried and proven methods of doing business to a franchisee in exchange for a recurring payment. It has been around in one form or another since man first began to engage in commercial enterprise. There are a number of different types of franchising. which generally requires audited books. i. franchise outlet. Various tangibles and intangibles such as national or international advertising. car dealerships and service stations. including a trademark and a royalty.
Over time the regulations governing franchises became a part of European Common Law. Hutch & Idea. Some of the Indian Franchises are: Aptech. who made improvements to an existing model of a sewing machine. The idea was to let independent operators use the same name. gas and later electricity. In the middle ages a franchise was a privilege or a right. the local sovereign or lord would grant the right to hold markets or fairs. The 1950s saw a boom of franchise chains in conjunction with the development of America's Interstate Highway System. In 1935. example of franchising was John S. Dartmail & Blaze Flash The word Franchise comes from old French meaning privilege or freedom. In essence the king was giving someone the right to a monopoly for a certain type of commercial activity. Airtel. food.S. logo and even building design in exchange for a fee. Around the turn of the century. and exclusive agreements between automobile manufacturers and operators of local dealerships. This trend started as early as 1919 with quick service restaurants such as A&W Root Beer. In those days. Pemberton's franchising of Coca-Cola. giving those taverns the exclusive right to sell their ale. This concept extended to the Kings granting a franchise for all manner of commercial activities such as building roads and the brewing of ale. Chawala’s. sewerage. wanted to increase the distribution of his sewing machines. At this stage in the evolution 5 . Isaac Singer. to operate the local ferry or to hunt on his land.History of Franchising Franchising dates back to at least the 1850s. McDonalds is arguably the most successful worldwide with more restaurant units than any other franchise network. NIIT & IIHT. Over the centuries the franchising concept has evolved as the economies of the nations of the world have evolved. diners and motel chains exploded. yet much more successful. In the 1840's in Germany certain major ale brewers granted franchises to certain taverns. the Singer Sewing Machine Company began granting distribution franchises for their sewing machines. supplies. Howard Deering Johnson teamed up with Reginald Sprague to establish the first modern restaurant franchise. A slightly later. In 1851. The growth in franchises picked up steam in the 1930s when such chains as Howard Johnson's started franchising motels. John Player. Early American examples include the telegraph system. Barista & Sagar Ratna. His effort. was among the first franchising efforts in the U. In the 1880's cities began to grant monopoly franchises to street car companies and utilities for water. Singer had written franchise contracts which were the forerunners of modern franchise agreements. the oil refinery companies and the automobile manufacturers began to grant the right to sell their products. This was the beginning of the concept of franchising as we know it today. Koutons & Charlie Outlaw. Blue Dart. ADL. which was operated by various railroad companies but controlled by Western Union. Modern franchising came to prominence with the rise of franchise-based food service establishments. Fast food restaurants. In regards to contemporary franchise chains. though unsuccessful in the long run.
which is the dominant mode of franchising today came onto the economic scene after World War II with the return of the millions of US servicemen and women and the subsequent baby boom. There were a number of totally fraudulent franchise companies which literally took peoples money and ran. Also there are a number of states called registration states which have their own requirements that must be met before a franchiser is allowed to sell franchises in their states. audited financial statements. The IFA holds training in all aspects of franchising which greatly enhances the professionalism of the industry. Future of Franchising 6 . The FTC doesn't actually review the UFOCs unless there is a complaint and it decides to conduct an investigation. Business format franchising. The intent of the UFOC is that it provide enough information so that the prospective franchisee can make an informed decision. such as its history. and there were a number of companies that were undercapitalized and poorly managed which went bankrupt. The International Franchise Association was created with the specific intent of uplifting the entire industry. which is the contract between the franchiser and franchisee and a current list of franchises with owners names and telephone numbers. There was an overwhelming need for all types of products and services. On the government regulatory side. the Federal Trade Commission. ready to prey on the uninformed and gullible. the franchise agreement. In some cases these requirements are more stringent than the FTC's. litigation history. before receiving money. required that all franchisers submit to all potential franchisees a document called the Uniform Offering Circular or UFOC. There will always be the unscrupulous con men/women among us. and franchising was the ideal business model for the rapid expansion of the hotel/motel and fast food industries. The UFOC provides very detailed information on the franchise company. Today. leaving a trail of failed franchisees who lost everything. information about the officers. There are several franchisee associations which work to protect the interests of franchisees. franchising is a highly regulated industry which offers a great opportunity to those individuals who truly want to realize their dream and go into business for themselves.of franchising it was essentially just the granting of the right to distribute and sell manufacturers products. The IFA works closely with the US Congress and the Federal Trade Commission on improving how the industry relates to the franchisees. During the explosion of the 60's and 70's there were many abuses in franchising. It became clear that the franchise industry had to change in order to remain a viable business concept. On the industry side. Members of the IFA are required to adhere to the IFA's Code of Ethics which sets a high standard. in 1978. The baby boom is still driving the economy and will continue to do so into the next century.
As the U.It should be relatively easy to train others in the use of the Systems and Procedures. Within a decade or less. There are greater opportunities for wealth creation among both franchisees and franchisors today then ever before. new business owners the best possible chance of succeeding with the least risk.the concept must be consistently profitable and the degree of profitability should be predictable. it's getting better conceptually and in reality. These systems and procedures should be in manual form. e) Excellent margins. This ROI should exceed 20% before taxes. and world economies grow with the ever increasing populations. c) Systematized. There is a move toward better protection of franchisee rights and over time this will push more franchisors towards structuring their relationships with their franchisees in a totally win/win manner. well managed existing franchise companies will continue to grow. because of the inescapable logic of the underlying concept. franchising will comprise over 50% of the retail economy. b) Profitability. then you should look closely at franchising as the vehicle to take you to where you want to be in the 21st century. because there are hundreds of thousands of Americans who can afford an investment of this size. A profile for a franchise would be as follows: a) Unique. Franchising is evolving.000.The profit margins built into the concept should be great enough that every franchisee who adheres to the system can realize an attractive Return on Investment. and will enable hundreds of thousands to realize the American dream of successful business ownership. and the move toward free market economies. The ideal franchise investment is under $100. Franchising clearly offers aspiring. Profile of a Franchisor Not all businesses can be franchised but most business concepts can be. new franchise concepts will come on the scene and the solid.If the franchise is very expensive there will be few who can afford it. 7 . f) Affordable. d) Training.The growth of franchising is inevitable.New or unique concept that has the potential to expand nationally and even internationally.S. The future of franchising is as bright as the sun and if you want to take the big step and go into business for yourself or if you have an existing business that you want to optimize.all the operating systems of the concept should be very polished and efficient. will employ millions of people.
Another reason why it is prudent to buy a franchise is that a franchise investment can be thoroughly researched before any significant expenditure are made.S. Business format franchising is as close as you are going to come in todays market place to a guarantee of success.. If you can't compete in the market place. This is fundamentally why you buy a franchise. No matter how much research you do it is very difficult to get a handle on so many aspects of the new business. All the studies done have found that franchise new business startups rarely fail and when they do it is typically because the franchisee did not stick to the franchisers systems. how do you feel about the day to day duties of the business and if you had it to do over. trying and failing again and again and eventually trying and succeeding. Unfortunately. Failing in business can be a horrible experience. 8 . Do you feel that you were properly trained. Such as. But the most important information comes from the existing franchisees.Why Buy a Franchise? In a sense. the market place is not very tolerant of the inexperienced neophyte trying to learn how to operate a new business. the franchiser has already gone through the learning curve and has learned the secrets of success for the specific business. your credit. With a franchise the franchiser is a wealth of information about the business from how to prepare a pro forma to the best personality traits for the business. what is your annual return on investment. Unfortunately this happens to thousands of poor souls every year in the U. In business format franchising all that has been learned by going through the curve is transferred to the franchisee. With a good systematic approach you can get answers to nearly all the really key questions. would you do it again? You can in a very real sense try the business on before you buy to make sure it is a good fit for you. Every study ever done on the success rate of new (non-franchise) business startups concludes the same thing. With a new business startup (non-franchise) you are always operating in the dark. it is very probable that you will fail. This process is generally called the learning curve. Unless you have considerable experience in the specific type business that you are considering going into. how long did it take before you reached break even. you go bust. franchising is a business model whose primary purpose is risk minimization. Starting up a new business is very risky. The primary reason that the failure rate is so high is because the owners have to go through the learning curve of operating that specific type business. you get eaten by the sharks very quickly. you lose money. In the context of franchising. your home. your reputation and sometimes even your family. This learning process requires going through a series of trial and error encounters wherein knowledge is gained by trying and failing. Most studies show that over 90% fail within three years. to minimize risk and give yourself the best possible chance to succeed. and it is so unnecessary. In all human endeavor there is involved a learning process.
Why do you want to own a franchise? If it's to get rich or to get on easy street and not have to work. A recent Gallup Poll of franchisees found that over 94% considered they successful and that over 75% would buy their franchise again if they had it to do over.Another very important reason to buy a franchise is intertwined into it's basic nature. then franchising may be for you. it's hands on. because the franchisees provide the expansion capital. The least you will receive is a letter and a brochure and from some of the more progressive companies you will get a video. If you are like many people who have the dream of owning your own business. After you narrow your search down to one or two franchises it's time to visit a 9 . A franchise business is like nearly all businesses. There are few restraints to growth in franchising. The critical thing at this point is that you must be realistic and look at opportunities that are in harmony with you. is to minimize risk and enhance your chances of success. especially the first year. It's been said that the truly happy people among us are those who are living their dreams. being your own boss and having control of your life. Most people associate size with success. you have to be there to make it happen. A synergy begins to be created in which success begets success. how you think and what your interests are. Look through the information. How to Select a Franchise This is a very big subject so we will try to be as laser like as possible and give you the essence of the information you need in order to properly select a franchise. Can you see yourself happy in that environment. The synergy just grows and grows. the next step is to begin the search. This is the chance to realize the dream. and that's to be in business for yourself. The bigger the franchise the better it must be. day after day. As a franchise system expands into hundreds of units many positive things begin to happen. Generally. As Mr. they are generally very revealing. you must ask yourself certain questions and be very objective. be your own boss and control your own destiny. The franchise begins to squeeze out competition through it's sheer size. Franchising inherently leads to rapid growth. franchising gives you the chance to do something really significant. After evaluating yourself. First. then franchising will probably not meet your expectations. which tends to increase sales. The franchise can buy products in large quantity at significant discounts which it passes on to the franchisees. However. The name begins to become well known because people see it everywhere. Imagine yourself operating the franchises that look interesting. It's also true that as a franchisee you generally work long hours. The truth about franchising is that it's very rare that franchisees get rich. Spock of the original STAR TREK would say regarding franchising. The large number of units enables the franchise to advertise heavily. In summary the primary reason you should buy a franchise as opposed to starting up a nonfranchise new business. Examine these materials carefully. “The Logic is Inescapable".290. The same poll also found that the average pre-tax gross income was $ 124. possibly for years. You have to literally keep your hands on it. a franchise is going to involve longer hours and more stress than would a job where you just put in your time and then go home and forget about it until the next day.
After the tour you will sit down with a franchise sales person and be given the sales presentation. This is the contract between you and the company. then contact the sales rep and get as much definitive sales information as possible. franchises that have closed and litigation history. At least three. a company that has been in business for 3 years or more. Call at least 10. the next step is to visit the home office. has a large number of units and has few closed or bought back. highly experienced people in the key positions. If at this point you want to continue. 5. This can be good and bad. Talk to the employees. customers and the owner or manager. be there at different times of the day. Call as many franchisees as possible. The following are the steps you should take upon returning home. Ask the franchise sales rep where the nearest unit is located and arrange to be met there by a owner or manager who can answer your questions. Analyzing the UFOC is tricky and professional help at this point can prove invaluable. the financial statements and the litigation history.operating unit if you haven't already. either company owned or a franchise unit. usually including the President. The Federal Trade Commission requires that you be given a UFOC at the first personal meeting. a list of current franchises. Here you will get a guided tour of the offices. 1. meet key people. If everything still looks good. 2. which is of course designed to sell you. You will be given a Uniform Offering Circular (UFOC) to take with you. the longer the better. McDonalds is so successful because it is very tough on franchisees who do not maintain McDonalds high standards of product quality. Closely examine the franchise agreement. Franchise agreements are always biased in favor of the franchisor. This information is critical to evaluating a franchise opportunity. that's just the way it is. Often the owner or manager will be more forthcoming in person than over the phone. 3. The key question is "Would you buy this franchise again?" 4. You want to pay close attention to the history of the company. Spend as much time at the unit as you possibly can. For example. backgrounds on the officers. during peak hours and during slow times. 6. Visit personally as many operating units as possible. Most franchisors will not make earnings claims but they will provide information with which you may extrapolate gross sales. It will have information on the history of the company. 10 . If everything still looks good then go for it. This strict compliance is only possible through a strong franchise agreement. and generally you will visit a flagship unit. If you do this thoroughly you should get a good read on the viability of the concept. Analyze the UFOC (Professional help recommended) In the UFOC you want to see strong financial statements. a copy of the franchise agreement. The company can be unfair in it's dealings with you and the franchise agreement may allow this. the backgrounds of the officers. This is a compilation of a great deal of information on the company and the opportunity. on the other hand you should want a strong franchisor. financial statements on the company. good service and cleanliness. Find out how they are doing.
c) Efficient. h) Market Dominance. Again it's the advantage of spreading cost over a large number of franchisees. it offers the opportunity to have 1000's of units through out the world.Because franchises tend to grow rapidly. There is no other way to grow as rapidly as franchising allows. 11 .maximum profits are realized by getting very large. It's simply much easier to secure great locations as a franchisor than it would be for a non-franchise business. therefore more efficient and profitable than company owned units. who are so necessary to grow a business. Franchise units tend to be better run. It is the classic case of using OPM. It is difficult to find and keep good experienced managers. b) Trained. i) Development of advertising materials. for the simple reason that the Franchisees capital is at risk and they tend to be very motivated. Because there are few impediments to growth through franchising. e) Achieve optimum size. and you just miss it. often if you don't move quickly on expanding a concept. These monies are pooled to make top quality advertising materials for the franchisees.The advantages of Franchising as a way to grow your Business a) Capital is always scarce in growing a business. you have people who are well trained in the franchise systems and who are also very motivated because their capital is at risk. This combination of having many high profile locations with large advertising budgets is a competitive advantage that can't be overcome. successful Franchises in their shopping centers.The large number of units allowed by franchising enables the company to buy for the entire system and at great savings to the individual franchisees. This greatly enhances profit margins and gives the franchisees a very strong advantage over all competitors. g) Securing locations. or other people’s money. someone else will. motivated management is part and parcel of franchising.Profitable. they tend to locate many units in a given market and essentially squeeze out the competition. d) Rapid Expansion. The window of opportunity will close. A franchise can do extensive advertising in a given market because the cost is spread among many units. f) Great buying power. and no other business expansion model can offer that.As a franchising system grows it begins to take on an image in the marketplace of size and success. With franchisees. Landlords like to have well known.Today's marketplace changes very quickly.Most franchisors require that the franchisees pay an ad royalty to the company. In franchising the capital needed to expand the business is provided by the Franchisee. so that everyone benefits.
which is not available for free to individuals starting up their own business. and can earn profits commensurate with their contribution to those societies. These qualities make Franchise Companies very good candidates for being bought by a large conglomerate and for going public. • • • • • Disadvantages 12 . having franchises offer a consistent product or service makes life easier. For some consumers. They know what to expect when entering a franchised establishment. the franchisor may choose to leverage the franchise to build a distribution network. k) Get super rich.Property Rental • ) . Either of these two possibilities can yield millions of dollars to the owners of the franchise company. mentoring and ongoing support as well as statutory requirements and troubleshooting. Additionally.Sales of Services • ) .Franchise fee • ) .Franchise companies are high profile. After their brand and formula are carefully designed and properly executed. and have the potential to get very large.Franchise royalties • ) . materials sales • ) .Franchises make money in a number of ways such as the following: • ) . General Advantages • Franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and formula of doing business. training.Equipment sales • ) . A well run franchise would offer a turnkey business: from site selection to lease negotiation. Franchisers often offer franchisees significant training.Rebates from vendors of equipment and supplies. grows quickly. franchisors are able to expand rapidly across countries and continents. All these income streams from large numbers of franchisees equal big money. as opposed to having to build a new business and brand from scratch (often in the face of aggressive competition from franchise operators).j) Maximum income.Supplies.
in order that you always have the staff to serve your franchisees. You have to have the franchise fee income to stay in business until you have enough franchise royalty income to reach your monthly break-even. Tremendous effort and resources should be focused on doing all that is possible to help the franchisees be successful. They simply must make money. c) Managing Growth. As long as your franchisees are making money. the condition of the national economy. It's here also that the value of a tightly written franchise agreement comes into play. You don't want to end up in court. then the control issue becomes less important. The way to avoid conflict and litigation is to do everything possible to support your franchises and make them successful.a) Sales. competition. by its very nature is a very fast way to expand a business. In franchising. It's absolutely necessary to be slightly overstaffed at all times. the franchisee controls his unit and to varying degrees runs it his way. If it ends up in court. but in franchising.Of course. If the franchisee sticks to your systems. This is the real key to successful franchising. It's here that the operating system comes into play. if you are not growing. you will probably lose because our legal system creates a very uneven playing field for the franchisor in legal proceedings. etc. International Legal aspects In the United States. because there are few limits which inhibit growth. each and every one. everything is fine. then it's very much as if you are operating the unit yourself. then conflict will arise and if you don't handle the situation well you could end up in court being accused of everything from not providing adequate training to misrepresentation and fraud. d) Litigation. It's the big business against the little guy. you are dying. but if they lose money. If you have a polished system which guarantees success if adhered to.All franchise companies are franchise sales driven in the beginning. this means you must have an effective franchise marketing program with very good sales people.The biggest negatives in franchising are the conflicts between the franchisee and franchisor which are almost inevitable and worse still the litigations. It's best to have a franchise agreement which allows the franchisee little latitude to vary from your system. Many variables can affect the franchise sales effort such as interest rates. banks willingness to make loans for your franchise.This is a nice problem to have but it can be fatal. franchising falls under the jurisdiction of a number of state and federal laws. Franchisors are required by the Federal Trade Commission to have a Uniform 13 . Franchising. when you own it then you control it. b) Loss of Control.
franchise agreements are invalid unless written and registered. Supreme Court has dealt with cases involving direct franchisor/franchisee conflicts at least four times. As a result. There is no federal registry of franchising or any federal filing requirements for information. and three of those cases involved a franchisee who was resisting the franchisor's motion to compel arbitration. Franchising in India Franchising is in its early stages in India. the Franchising Association of India was set up in Mumbai. The Franchising Association is still considering whether it should have a Code of Conduct or whether they 14 . rather. and enforce laws and regulations regarding their spread. well-known restaurant chains (Burger King and Subway). in 2000 which has links with other such associations around the world. Enforcement of laws and resolution of contractual disputes is a problem: Dunkin' Donuts chose to terminate its contract with Russian franchisees that were selling vodka and meat patties contrary to their contracts. Since 1980. Each state may require the UFOC to contain specific requirements. rather than pursue legal remedies. under ch. the parent of 7-Eleven. This means that many franchisors have a unique UFOC for each state or sometimes are able to include all state specific requirements into one document. and franchisors cannot set standards or limits on the prices of the franchisee’s goods. both in terms of international franchises and domestic ones.S. 54 of the Civil Code (passed 1996). states are the primary collectors of data on franchising companies.Franchise Offering Circular "UFOC" to disclose potential franchisees about their purchase. In Russia. the third involved Southland Corporation. the U. Because litigation is expensive. Two of the latter cases involved large. the majority of franchisors have inserted mandatory arbitration clauses into their agreements with their franchisees. This disclosure must take place 10 business days prior to solicitation (franchisor agrees to offer the prospective franchisee a license). and has become increasingly popular as a means of doing business in the past few years.
Other retail chains include Shopper’s Stop. Biotique and Habibs. and Sagar Ratna. McDonalds. This has been the case in respect of IT education and franchises such as APTECH. Pepe Jeans and Adams. Coke.should press for specific legislation in relation to franchising. The difficulty with a Code of Conduct is that not all franchisors and franchisees are members of the Association and it is difficult to enforce. ADL. participate and have some interest in the development and success of the entire business. L. and slowly other Indian franchisors are likely to look to expand internationally with the easing of restrictions by the Government especially since 2000. Schweppes etc. Movenpick. Nilgiris. some have been successful and others not so fortunate. and STG. as it is obvious that the local business would profit just by riding on the back of a well known brand. The foreign brands started returning gradually from the mid ‘80s. Café Nescafe. Courier companies like Air Action and DHL are there along with computer and software related franchises. Blaze Flash. Indians feel the foreign franchisor or business should also invest. NIIT. Dominos Pizza. In the 1990’s as the market opened. Now the major area for local franchises seems to be healthcare with Apollo Hospitals and various diagnostic centres. There are numerous cargo and courier companies like Blue Dart. Taco Bell. O’Brian’s Sandwich Bar. 15 . Retail franchises include Marks & Spencer. If the brand is well known in another country but not in India or to Indians travelling abroad. Shanaz Hussein beauty saloons and products is already an international franchise. Geoffry’s. international soft drink and hotel franchises arrived in India as early as in the 1960s. First Flight. Nirulas. Market research and pilot projects can assist in assessing the prospects of any international franchise in India. If the brand name is very well known world wide and the product is marketable in India. and faced many hiccups along the way especially KFC. Clothing retail outlets especially for designer clothing include Bentley. The well-known franchises relating to soft drinks. There are Indian travel agencies which now want to franchise abroad like Uniglobe or expand locally like Travel Port.F Couture. Evita Peroni. but in 1977 the Government of the day had expelled foreign brands from India. The Government has liberalised the rules and regulations in relation to the retail industry and a boom in this sector is on its way. That again can be overcome if the product or service provided by the franchise is in short supply in the country and important to its development. Pizza Hut. West Side. Pizza Piazza. then the attitude can significantly change. Regarding the background. Health clubs like VLCC have come up along with hair and beauty parlours who often sell their products like Shanaz Hussein. ice-cream parlours or restaurants include Pepsi. Subway. Baskin Robbins. Coffee Day. then it is difficult to convince an Indian businessperson to pay lump sum payments or royalties as its worth is not the same in India. Dartmail. Since then there has been progressive entry of international franchises. Then there are local food chains like Chawla’s. TGIF. Lifestyle and Ebony. Franchising has also become a popular method of doing business within India with the franchisor granting numerous unit franchises in a wide range of areas. Ritu Beri and Deewan Sons. Ruby Tuesdays and Barrista. foreign franchises started coming in gradually. Professional Couriers and DTDC. It took some time for international franchises to become acceptable because of certain attitudes of Indian businesses towards foreign franchises whereby they could not understand why the Indian party had to make all the investments in India and on top of that had to make hefty payments in foreign exchange to the Master franchisor.
McDonald and Pizza Hut have already captured the mass market. and a customer should find identical quality of goods. education. publisher of The Franchising World magazine. retail. held recently. real estate. of the Australia-based White Connections — consultant in areas of franchising. Action International Asia. business services. And sectors such as food. the film industry or celebrities. however there is still scope in the retail sector for cheaper goods in terms of clothing or cosmetics. Mr George Miranda. Foreman & Company — a consultant on retail and real estate. people like spicy food. If one goes to a McDonalds or TGIF or Pizza Hut in India.The lower the price a product or service can be sold at. Research should be done on the viability of any product or service in any given state in India. to discuss opportunities and challenges facing the domestic franchise industry. Coke. property investment. The women’s fashion however. A foreign franchisor needs to be aware of local culture and custom. Managing Director. Pepsi. Expensive cosmetics and beauty therapy from abroad is for the latter. expert on laws pertinent for franchisors. In relation to Restaurants and pubs. retail. Managing Director. Malaysia. trousers. environmental technology and financial services. In many instances the products sold by the franchise outlets may have to be significantly tailored to local taste. In the soft drink and fast food sector. The needs of the affluent has been met already with many expensive products in the market. Western clothes like suits. Indian industry was represented by Mr P. communication. The summit bought together industry experts such as Mr Kenneth Ho. Foreman. Managing Director of the New Zealand-based. and when deciding on franchise fees or other payments they have to consider realities about the buying power and people’s habits about spending and not make assessment on the basis of population numbers. skirt and tops for women are becoming popular among teenagers and women in cosmopolitan areas of large cities. the licensing laws in many states prohibit entry of persons less than 21 years to go to an eating place or restaurant where liquor is sold. The seminar was organised by Franchise India Holdings Ltd. Regarding retail franchises involving clothing. Mr John B. Miranda & Samuel. Some products may be designed to appeal to the masses and other high price items can be marketed just for a select clientele like those in big business. healthcare. Dhoot. the food tastes different and the menus are geared to local taste and culture.N. partner. even if families would like to go together. 16 . the more customers they are likely to have. lifestyle. These were the highlights of the conference on Franchising in India. and beef and pork have to be absent in the menu to avoid offending religious sentiments. For instance. and Mr Tony White. is significantly different with the majority wearing salwar kameez or saris. entertainment and travel are set to witness a boom in franchising. professions. Singapore. the children’s wear and men’s wear is similar to any other western country except that the material has to suit the tropical climate and relatively milder winters. which may go against the franchising concept or principle that outlets should be identical. `Indian franchise market is second largest in the world' INDIA is now the world's second largest franchise market and is growing at the rate of 2530 per cent.
Said Mr Gaurav Marya. This event is an attempt and to promote franchising and recognise and award excellent work done in this field. and McDonald's India as the `retail brand of the year' Source: ." The seminar awarded Apollo Health and Lifestyle Ltd as Franchisor of the year. consultant’s fees. tax breaks and royalties. Chief Executive Officer & Managing Director. Mr Pramod Khera as `Man in Franchising'. advantages and disadvantages of India as a market. It is advisable that parties disclose and exchange information on each other and due diligence is carried out before entering into a formal agreement. There is considerable discussion going on the aspect of whether disclosure laws should be introduced. and design and engineering fees. There are remedies however. 17 . CEO Apollo Health and Lifestyle Ltd. the industry has about 1. "In this scenario. Videocon. India is now the world's second largest franchising market place after North America. Mr Vikram Bakshi.000 crore. it becomes imperative that we establish the best franchise systems and practices for the industry.Hindu BusinessLine…. Aptech Ltd. There are several Governmental permissions that would be required before an international master franchise can be granted in India. One needs to check the areas where incentives are given by the Government in terms of allowing more foreign shareholding.. McDonalds India. Payments for Master franchisors are best spread out between lump sum fees. Mr Durgesh Shankar. Indian Laws There is no specific legislation or rules applicable to franchising.President. Hewlett Packard. President. It is often in the area in which franchises exist. Managing Director. there has been a lack of information. Estimated at Rs 10. CCIC. Mr Ratan Jalan. Managing Director. There are also restrictions on the number of shares a foreign company or person can hold in an Indian company if the joint venture option is taken. Franchising Holdings India Ltd. and Mr Ashwini Aggarwal. Ms Shahnaz Hussain as `Woman in . legislation and sharing of best practices across the practitioners of franchising. and there are restrictions on payment of royalties if it is a technical collaboration agreement between the foreign master franchisor and Indian master franchisee. under the Indian Contracts Act and Specific Relief Act for breach of contract or misrepresentation. royalties." Mr White added. Mr Pramod Khera. It is also advisable that the franchise is structured in such a manner that it fits around the rules and regulations and also best protects the interests of the parties. The absence of regulatory framework in the country. and opportunities and challenges in retail and franchising and future trends were among the subjects that came up for discussion. Country Manager. "Franchising being a relatively nascent concept in India. According to Mr White.500 homegrown franchisors. like in the hotel and tourism industry. knowledge.
Intellectual Property Laws. This Act interprets agreements in a very wide sense including all kinds of arrangements and understanding whether formal or informal. However. LEGAL ASPECTS OF FRANCHISING IN INDIA Introduction Franchising as a business concept in catching up very rapidly in India. it is necessary to check the state and local laws relevant to the town or city. Though this being so. such as those involving tied sales. prohibition of abuse of dominant position and regulation of combinations. Still permissions have to be sought under the latter before doing business abroad and there are limits or caps regarding the foreign exchange available. The master franchisee can be registered as permitted/licensed user. Competition Laws. understanding or action is intended to be enforceable by legal proceedings. protects both trade marks and service marks. etc. written or oral which has the desired effect. which affect the relationship between the franchisor and franchisee. Various remedies are available under common law and criminal law against violation of intellectual property.. Taxation. This prohibits franchisors and franchisees from entering into agreements. whether or not such arrangement. which came into force in 2003. presently. there is no franchise specific legislation in India.It is important that the trade marks and copyright in relation to the product or service provided by the franchise is registered by the master franchisor in India if it intends to expand into that territory. In relation to opening outlets in various parts of India. etc. This would protect the franchise from infringement by third parties and make it easier to obtain injunctions if necessary. (i) Contract Act Formation of Contract: 18 . The main areas that are dealt with by the Act are the prohibition of anti-competitive agreements. there are other laws which need to be considered by a foreign franchisor before expanding into India. Besides these. significant positive changes have been made since the Foreign Exchange Regulation Act 1973 was replaced by Foreign Exchange Management Act 2000 and rules made under it. For Indian master franchisors seeking to expand to other countries. The new Competition Act 2002 is aimed at promoting free trade and ending protectionism. such as the Contract Act. Property Laws. An in-depth understanding and legal assistance in respect of these laws is necessary before foraying into the franchise market. such as Foreign Exchange Regulations. there are various laws. The new Trade Marks Act 1999. price fixing and other monopolistic trade practices. It is much easier for Indian companies who are earners of foreign exchange and those that have foreign branches or subsidiaries. Labor Regulations.
understanding of Intellectual Property Rights legislations becomes very important. or else the MRTP Commission could grant an injunction preventing such trade practices and may also award compensation to the complainant for any losses or damages suffered. are not construed as monopolistic or restrictive. the author of a work shall be the first owner of the copyright therein. Principal-Agent Relationship: This is of considerable importance. Know-how and Confidential Information: The franchisor’s know-how and confidential information would be a valuable trade secret. 1969 prohibits imposition of restrictions in respect of sources of supply and pricing of products. Trade Mark Protection: There are three courses of action that can be initiated against trade mark infringement.The contractual relationship between the franchisor and the franchisee would be governed by the Indian Contract Act. institute proceedings for infringement by claiming injunction. restriction on use of the trade marks during and post termination of the franchise agreement. Therefore. (a) an injunction under statute (b) an infringement or a passing off action. the franchisor as the owner of the copyright has the exclusive right to own and licence the work. (ii) Intellectual Property Rights: Franchise relationship essentially deals with use of Intellectual Property Rights of the franchisor by the franchisee for the franchise business. there are various implications for such relationships such as liability for acts done by the franchisee. Hence. It must be ensured. lawful object and purpose of the agreement and capacity of the parties to enter into an agreement. The franchise agreement must ensure the existence of the basic ingredients of a valid contract such as lawful consideration for the agreement. Hence. it is advisable to incorporate sufficient safeguards in the franchise agreement against unnecessary disclosure of such information. 1872. a principal-to-principal relationship must be clearly brought out. depending on whether the trade mark is registered or not and (c) criminal action for an offence of falsifying a trade mark. Therefore. from the franchisor’s perspective. Care needs to be taken while drafting the franchise agreement to ensure that the franchise 19 . According to Section 17 of the Copyright Act. viz. damages and accounts of profits made by the defendant as a result of the violation of the copyright (iii) Monopolies & Restrictive Practices Law And Competition Law: The Monopolies and Restrictive Trade Practices Act. since under the Contract Act. Appropriate provisions need to be incorporated in the Franchise agreement dealing with the rights and obligations of the parties in case of infringement of trade marks. that the terms of the franchise agreement. 1957. Copyright Protection: The Manuals containing the entire technique of running the franchise business and advertising material are of great value to a franchisor and unlawful reproduction and piracy of this literary work can be protected under the Copyright Act.
advertisement contributions. presently the applicability of the provisions of the MRTP Act continues. If such payments are to be made to a foreign franchisor the provisions of Foreign Exchange Management (Current Account Transactions) Rules. remittances for use of trademark/franchise in India would not require such approval. (iv) Consumer Protection and Product Liability: The Consumer Protection Act. The term ‘manufacturer’ as defined and understood in the Consumer Protection Act would include a manufacturer. 1965. Payment of Bonus Act. etc. (vi) Labour Laws: Issues with regard to employees employed by the franchisee would be subject to various labour legislations such as Employees’ Provident Funds and Miscellaneous Provisions Act. (v) Foreign Exchange Regulations: Normally. 1972 etc.. 2000 would be relevant whereunder. Accordingly. which prescribe hours of work in shops and establishments. 2002 has been passed to replace the MRTP Act.agreement is not hit by the provisions of the MRTP Act and at the same time sufficiently protects the interests of the parties. assembler and a person who puts his own mark on any goods manufactured by another manufacturer. 1986 provides for rights and remedies to consumers for defect in products and deficiency in services making the manufacturers and service providers liable for the same. (vii) Taxation: Various direct and indirect tax laws such as income tax. Some of its provisions have not yet come into force. would be relevant in the context of franchise relationship as they are in any other business concept (viii) Real Estate: 20 . excise customs etc. royalty for use of trade marks and system. as a Government notification to that effect is awaited. sales tax. However. This would also be the case for the services rendered by the franchisee under service marks of the franchisor. Competition Law: The focus is now shifting from curbing monopolies to promoting healthy competition in India. a franchise arrangement would involve payments such as franchise fee. 1952. the Competition Act. To avoid complications in future. prior approval of the Reserve Bank of India (“RBI”) would be required for making remittances outside India for purchase of trademark/franchise in India. There are also various legislations at the State level. Payment of Gratuity Act. Hence. the responsibility in respect of liability with regard to defective products and deficient services and indemnification from any claims on that account should be expressly set out in the franchise agreement. training expenses.
Acquisition of property.Location of the franchised outlet is the key factor for success of the business. would require consideration of various legal implications. in the case of a food and hospitality. which affect the title and continuity of user of the property during the franchise period. Health licence from the Health Department of the Municipal Corporation would be required. appropriate legal advice and proper understanding of the relevant legislations is a must both for the franchisor and franchisee before entering into the relationship. Hence proper care needs to be taken while selecting the site. Eating House licence from the Municipal Corporation. whether on ownership or lease. The municipal laws applicable to a particular area also regulate construction of buildings. The user of the land and building under the Town Planning law needs to be checked. (ix) Industry Specific & State/Local Regulations: Depending on the nature of the industry/sector to which the franchise belongs. various sector specific legislations need to be considered e. 21 . licenses under the Shops and Establishments Act. Conclusion Considering the peculiar nature of the business concept in franchising. A proper understanding between the parties suitably documented would form a strong foundation for success of the business relationship and expansion of the franchise network.g.
63730 Rkm of Microwave Network connecting 602 Districts. CellOne.5 Lakhs villages. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. The company offers vide ranging & most transparent tariff schemes designed to suite every customer. In basic services.8 million cellular customers. expanding the network. Account Less Internet(CLI).e. BSNL has installed Quality Telecom Network in the country and now focusing on improving it. That means that almost every fourth mobile user in the country has a BSNL connection. it has about 47. more than 37382 fixed exchanges.3 million line basic telephone capacity. 20. BSNL has been adjudged as the NUMBER ONE ISP in the country. 2000. Carrier service. BSNL is miles ahead of its rivals. Broadband. MPLSVPN. 85 per cent share of the subscriber base and 92 percent share in revenue terms. BSNL has more than 2. BSNL serves its customers with its wide bouquet of telecom services. BSNL cellular service. VoIP services. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the country. introducing new telecom services with ICT applications in villages and wining customer's confidence. DIAS. Today. Dial-up. 480196 Rkm of OFC Cable. data and video through the same Backbone 22 . multi-protocol convergent IP infrastructure that provides convergent services like voice. 7330 cities/towns and 5. has more than 17. BSNL is the only service provider. Leased Line.1 Million GSM Capacity.Company Profile: Bharat Sanchar Nigam Ltd.5 million Internet Customers who access Internet through various modes viz.1 million Basic Phone subscribers i. VSAT. with 35. BSNL has set up a world class multi-gigabit. 287 Satellite Stations.5 million WLL subscribers and 2. making focused efforts and planned initiatives to bridge the Rural-Urban Digital Divide ICT sector. formed in October. GSM Mobile. IN Services etc. 18000 BTS. garnering 24 percent of all mobile users as its subscribers. 4 million WLL capacity. Internet. CDMA mobile. is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline. BSNL is numero uno operator of India in all services in its license area. Within a span of five years it has become one of the largest public sector unit in India.
1 GSM operator in its area of operation. 733 crores (US$ 16.99. 23 . Installation. the present turnover of BSNL is more than Rs. MISSION To provide world class State-of-art technology telecom services to its customers on demand at competitive prices.67 million) in the next three years. To Provide world class telecom infrastructure in its area of operation and to contribute to the growth of the country's economy. The company has vast experience in Planning. b) To provide quality and reliable fixed telecom service to our customer and there by increase customer's confidence.390 million (US $ 2.000 million (US $ 14. VISION To become the largest telecom Service Provider in Asia.351. comprehensive range of telecom services and the desire to excel has made BSNL the No.and Broadband Access Network. 1 Telecom Company of India. The turnover. The infrastructure asset on telephone alone is worth about Rs. c) To provide mobile telephone service of high quality and become no.630.6 million DataOne broadband customers. nationwide coverage. BSNL plans to expand its customer base from present 47 millions lines to 125 million lines by December 2007 and infrastructure investment plan to the tune of Rs.26 billion) for last financial year.820 million (US $ 8 billion) with net profit to the tune of Rs. Scaling new heights of success. OBJECTIVES a) To be a Lead Telecom Services Provider. reach. At present there are 0.37 billion). d) To provide point of interconnection to other service provider as per their requirement promptly. network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute.
0 ITC (Indian Telephone Card) BSNL is providing basic service to approx 36 million subscribers. The calls are charged to the secret number specified in the card and not to the telephone connection being used. BSNL was the first Telco in India to start VCC card services through IN Network that is branded as ITC (India Telephone Card) for domestic subscribers. GSM Mobile Service to 19 million subscribers and WLL Service to about 3 million CDMA subscribers. Agreement will be signed for a contract period of one year with successful bidders. The franchisees will be appointed as per the eligibility criteria of the EOI. anytime. ITC card purchased in one city can be used in any other city where this service is available. selling and marketing of these calling cards in their area of operation. d) Implementation of Triple play as a regular commercial proposition. you can enjoy the freedom of making calls anywhere. After evaluation. from any telephone. This prepaid card enables you to make local.Contribute towards: a) National Plan Target of 500 million subscriber base for the country by December 2010. 1. The ITC franchisee will be responsible for selling calling cards to existing franchisees of BSNL at the doorstep also. b) Broadband customers base of 20 million in the country by 2010 as per Broadband Policy 2004. 24 . India Telephone cards are available on sale at all the Customers Service Centers of BSNL and through its franchises appointed in different cities. BSNL uses Alcatel technology in it’s IN platform. Equipped with this card. selling and marketing BSNL’s ITC cards. STD or ISD calls even from a STD/ISD barred telephone. The electronic PINs will be made available to said franchisee that will be responsiblefor printing. BSNL intends to appoint ITC Card franchisee for calling card on circle basis for printing. These cards are widely used by the Indian subscribers. c) Providing telephone connection in villages as per government policy.
2000 Rs. 2300 Rs. 100 Rs. 1122 Rs. Rs. Then call is carried through tiered TAX (Trunk Automatic Exchanges) which works as Service Transfer Point (STP) for 25 .e.0 Intelligent Network The Intelligent Network (IN) of BSNL comprises of the state of the art technology switch i. 50 Rs. 50 Rs. There will not be any registration charges for this ITC service. 100 Rs. after which you can dial the destination number. On dialing. 56 Rs. of MCUs allowed Activity period in months (usage period after 1st use) Expiry period (Self life) 1. 6000 50 100 200 500 1100 2300 6000 1 months 3 months 4 months 5 months 7 months 9 months 12 months 18 months for ITCs of all denominations 2. all IT Cards calls are preceded by the code 1602xyz as shown in the IT Card. will be given on payment of Rs. 1100 Rs. 5000 Rs.This is an access code based service. 100/- Tariif for new ITCards effective from 1st May 2006 S. 7. 3. 224 Rs. 1000 Rs. 200 Rs. STD or ISD calls can be made. 5. 500 Rs. which work as Service Switching Point (SSP) for the calls originated from these Local Exchanges (LE). 500 Rs. 6. Service Control Point (SCP) installed at five geographically distributed locations across India. 200 Rs. 4. Any detailed bill. Denomination of IT Card Sale Price Talk of ITC* value of (including ITC revised ST&Edu Cess of 12. and PIN. having subscriber Account No. you are informed of the balance amount against your IT Card. 561 Rs.No. 112 Rs. 2. 5612 Rs. There will not be any free calls. Tariff (new technology IN platform ITC cards) • • • • On all denomination of Cards Local. BSNL has local exchanges all over India. 2245 Rs.24%) No. if asked by the card holder. This enables you to dial the IT Card number after dialing the access code.
3. 4. 4.2 The company shall have an experience of at least 2 years in telecom/FMCG/ electrical goods/in the related area for marketing and selling similar service/products. 3.4 ITC Card Franchisee shall deposit the aforesaid PBG of the said amount as BSNL may recommend from time to time.3 BSNL reserves the right to seek/verify financial information from franchisees’ bankers/credit provider and pursue any other source as to carry out verification. Lucknow 4. 25 lakh to be submitted before signing of the agreement.3 The company shall have a minimum turnover of Rs 5 crore for last two years.5 The ITC Card Franchisees should have expertise in printing. Audited Balance sheets for the last 2 years shall be enclosed as supporting document. All the bidders meeting the eligibility criterion & agreeable to the terms and conditions of the EOI shall be appointed as ITC Card Franchisee. Bangalore 3. BSNL reserves the right to forfeit/adjust the said PBG in full or part or any sum due from the franchisee to BSNL at any time.1 The Bidder should be a company registered & incorporated under the Indian Companies Act. 3. Franchisee shall continue to be liable for balance if any. The Turnover mentioned in this clause shall not include businesses other than IT/ Networking/ Telecom/ Content delivery/FMCG/electrical goods etc.0 Financial Requirement 4.0 Eligibility Requirements 3.2 The PINs will be available to ITC Franchisee by making the upfront payment for the same after deducting the commission. Ahemdabad 3.4 The Bidders are allowed to submit their application for any number of circles. BSNL reserves the right 26 . The five IN-SCP locations are: General Purpose IN (GPIN) platform 1. 1956.1 PBG of Rs. Kolkatta 2. 3. 4. selling and marketing of calling cards.IN call. 4.
1 Quarterly review will be done of the ITC Card Franchisee for their performance.1 The existing commission structure of ITC Cards is indicated below.0 Commission and Incentive 6. The franchisee shall be given additional 3% commission towards printing.0 Review 5. Purchase amount of ITC. 5 00 000 10. Crore A5 B4 C3 27 . excluding Service Tax Commission offered Rs.00. Type of Circle Target/Rs. Presently existing minimum discount for franchisee is 9%.00.to increase the amount of PBG at any time in its own discretion with respect to any/some/all franchisee.5% 10. selling & marketing of ITC cards.2 The ITC Card Franchisee should achieve the targets in the respective circles as per the type of Circle given below .000 9% > Rs. 1. 5. The ITC Franchisee will extend a minimum existing discount for franchisee as fixed by BSNL from time to time to existing franchisee. 5 lakhs in a lot (month).001 to 5. 6. The franchisee should purchase ITC card worth minimum Rs.
sales. receipt vouchers.7. BSNL shall have free access to the franchisee premises and to inspect all records.1 The Franchisee shall work out strategies for advertising. 7. at its sole discretion.3 The franchisee will be passed on the minimum commission upfront (9%) at the time of purchase of PINs. the layout/design of the stationery and calling card will be provided by Marketing Cell of BSNL.5 After sales services: Franchisee shall receive.0 Billing and Payment 7.0 Office Support All office support related to stationery items. sale book or any other document related to ITC card activity.2 The Franchisee shall solely be involved in distribution of the cards.1 The franchisee will provide the bank guarantee of Rs. 8. 9. 9. 7. airports. attend & rectify the complaints.4 Franchisee shall generate demand for providing services permitted by BSNL to franchisee. BSNL may decide to provide computer connectivity to franchisee for on-line activity such as bill payment/settlement/ PINs etc. Apart from the places/ distribution points of Franchisee’s choice the cards shall be made available to the users at various outlets. marketing and promoting the Calling Cards/ITC to the users. 9. The targets will be reviewed after 6 months . bills. All forms of complaints on phone and walk-in-complaints will be handled directly by 28 . prominent commercial places. However. vouchers shall be the responsibility of the franchisee. BSNL franchisee will target both individual and corporate customers.2 The franchisee will have to make the upfront payment for purchasing the PINs in electronic form which will be subsequently printed by franchisee and sold to the end customer/existing franchisee. Promotions shall be carried out under BSNL’s brand name.3 Franchisee shall be able to meet the targets defined by BSNL failing which minimum commission shall be paid. 25 lakh before signing the agreement. 9. The balance commission will be paid to the franchisee after achieving the targets. 9. Railway stations through retailers.0 Responsibilities of Franchisee 9.
Franchisee shall redress all possible complaints on the spot and forward the remaining to call center for further disposal.000 (For 10 lakhs) Effective rate of Commission 5% 6% 9. Commission on bulk purchase of ITCs • • • • The commission on purchase of ITCs to BSNLs marketing agents including Cellone/ Excel franchisees shall be as under wef 01.08.001/. 50.000 Rs 1.001/- 29 .00. Amount of commission may be paid upfront at the time of purchase of ITC. 1.000/Rs. The existing franchisee should be extended the commission at the time of purchase of ITC card by ITC franchisee.00.6 The payment of commission to existing franchisee shall be the responsibility of ITC franchisee.Franchisee.00.000/Rs.2% 10. 5.001 to Rs 5. 9. for which BSNL will not have any responsibility. Commission Offered 5% 7% 10% 12% Amount of Commission on upper limit Rs 2500 Rs 6000 Rs 46.00.06.to Rs 1.000/More than Rs.2004 Minimum purchase of ITCs at a time shall be atleast Rs 5000/An annual incentive of 1% on the total sale of cards by the agent can be given if the sale is more than Rs 50 lakhs per annum.6% Purchase amount of ITC (excluding service tax) Upto Rs 50.
huge customer base.000 crore and registering a growth of around 13 percent. Longdistance calls were reduced by 13 percent and tariff was further revised. solid infrastructure. WEAKNESS Very low level of promotion of ITC card. a rate for a distance of 200 km within the same circle was brought down substantially. This unique service if promoted properly can benefit BSNL. Internet. Due to all India presence of BSNL calls can be forwarded without much problem of call drop. 30 . OPPORTUNITY ITC style of service is a new to Indian market.SWOT Analysis of BSNL ITC STRENGTH BSNL performed very well in the first fiscal by netting a turnover of Rs 23. and voice over Internet services THREAT Reliance and other private basic operators poses a threat as they can imitate ITC and with better promotion and plans may beat BSNL. poor customer care. ITC is a unique facility which can benefit customers. Limited mobility. Overstaffing. People are not aware of ITC Card. All India presence. Under this revision. The performance is excellent considering the fact that tariff re-balancing for long distance was done twice in the same fiscal.
Better customer care..Summary ITC. Otherwise other private players may take advantage. With proper promotion and plans it can succeed in market. better plans is the key to success. 31 . being BSNL’s service has immense potential.
the contract binding the two parties is the "franchise. tested. At least two levels of people are involved in the franchise system: (1) the franchisor." but that term is often used to mean the actual business that the franchisee operates. there should be some signage in the restaurant which indicates that the restaurant is independently owned and operated. and associated with the 32 . the owner may develop a second or third store and hire employees for the dayto-day operations. Technically. and quality should be the same. The plan provides step-by-step procedures for major aspects of the business and. he or she may decide to "franchise" the store name and business system to an independent business person a franchisee. one may be operated by a franchisee and the other operated by the company. WHEN I VISIT A STORE IN MY AREA. if it is a franchise. Many companies have stores that are operated by franchisees but also have stores that are company owned and operated. the means for distributing goods and or services. the products. At that point. HOW CAN I TELL WHETHER THAT RESTAURANT IS OPERATED BY THE FRANCHISOR OR A FRANCHISEE? It's difficult to tell just by visiting the restaurant. However. for managing and operating the establishment. anticipating most management problems.Appendix A: Frequently Asked Question WHAT IS FRANCHISING? Franchising is a method of distributing products or services. or format. and (2) the franchisee. has been developed. if the entrepreneur still wants to expand but prefers not to operate additional stores himself or herself. The major advantage of buying a business format franchise is that the system. FOR EXAMPLE. In return. If the business is successful. the franchisor prescribes for the franchisee a complete plan. So it's entirely possible that of two stores with the same name. The business is now franchised. In either case. who lends his trademark or trade name and a business system. the entrepreneur may ask for an initial fee and/or a continuing royalty payment based on a percentage of that franchisee's sales. who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. WHAT IS "BUSINESS FORMAT" FRANCHISING? In business format franchising. services. A WELL-KNOWN FAST FOOD RESTAURANT. provides a complete matrix for management decisions confronted by the franchisees. HOW DOES A FRANCHISED CHAIN START? Imagine a store owned by an individual with a particular concept.
trademark. mail processing. restaurant or hotel from the outside guarantees there will be no surprises or disappointments on the inside. to home inspection. but others may well be the "household name" franchise success stories of tomorrow. As a result. Typically. to video sales and rentals. carpet cleaning. and other areas such as environmental services. maid services. ARE THE "LOOK-ALIKE" CHARACTERISTICS OF FRANCHISES A DISADVANTAGE? DON'T CONSUMERS WANT VARIETY? The increasingly mobile Indian consumer has come to depend on and appreciate the consistent quality of franchised products and services. and various other maintenance and cleaning services. The industry categories in franchising that are expected to continue to experience rapid growth for the start of the new century are servicerelated fields such as home repair and remodeling. computers. no matter where they go. hair salons. advertising services. as is natural with any business. personnel and temporary help services. package wrapping and shipping. 33 . but franchising covers the spectrum from almost A to Z B from advertising/direct mail to construction. rapid expansion of a successful retail concept can occur more quickly than through company-owned expansion. The ability to easily recognize a franchised store. and printing and copying services. health aids and services. Quite simply. to dating services. long range trends indicate a steady. automotive repairs and services such as quick-lube and tune-up. you would think of fast food and restaurants first when thinking of franchising. real estate. cleaners. the public knows what to expect and likes it that way. lawn care services. solid growth in business format franchising. WHAT ARE THE MAJOR GROWTH INDUSTRIES IN "BUSINESS FORMAT" FRANCHISING? As the economy becomes more service and technologically oriented. household furnishings. as more women enter the work force. educational products and services. growth areas in franchising are responding to these changes. to security systems. Printing and copying services. it is more important to analyze an individual franchise company's track record. people expect and want the same quality. and as a larger percentage of the population grows older. all business support services including accounting. SPECIFICALLY. and telecommunications services. and travel agencies are excellent examples of successfully applying franchising to established industries. hotels and motels. WHAT KINDS OF BUSINESSES LEND THEMSELVES TO FRANCHISING? Virtually every business form you can imagine. While it is important to consider industry growth before investing in a franchise. children's services. keeping in mind that quick growth does not always spell success. which is why consumers so often stop at franchised establishments. Some will fall by the wayside. Overall. clothing. computer services. A franchise organization that grows too quickly might not have a service team in place to support all of the units properly. Today.
You should research the company's growth and prospects for future growth. HOW DO YOU EXPLAIN THE SUCCESS RATE FOR FRANCHISED BUSINESSES? 34 . Who the franchisor is.? Am I prepared to work hard and take financial risks? Do my advisors. sporting goods. f. For instance. and j. The financial condition of the franchisor and its system. Important questions to ask yourself include: Am I suited to the industry physically and by experience. and how many franchisees have left the system during the past few years. and "shop wisely. you need to inquire into the training and support provided. WOULD I MAKE A SUCCESSFUL FRANCHISEE? A successful franchisee should be suited to the industry of which he or she is a part. IF I WANT TO BUY A FRANCHISE. i. resenting authority and restraints. or can I accept guidance and direction happily? If I prefer to act as a passive investor in the franchise. How much it's going to cost to get into the franchise. people. e. You should contact the companies directly. education." Shopping wisely requires that you determine how much you can afford to invest and where to obtain financing. and suited to the franchise system generally. WHAT SHOULD I DO TO GET STARTED? The first thing to do is to identify companies offering franchises. How much you're going to pay for the continuing right to operate the business. The hours and personal commitment necessary to run the business. will the company accept this? How do I personally feel about the company's image and products and services? The right answers to these types of questions help determine your potential success as a franchisee. for example.WHAT SHOULD I CONSIDER BEFORE BUYING A FRANCHISE? Among the points which FAI recommends for investigation are: a. temperament and financial ability? What type of work is most appealing to me. h. You should also seek advice from professionals and businesspeople you respect. d. learning capacity. A complete understanding of the business. mechanical things. It all depends on the industry and the type of business. c. assistance in finding and developing a location. WHAT KIND OF INVESTMENT IS NECESSARY TO BUY A FRANCHISE? Investment requirements differ tremendously. You need to examine what the franchise relationship entails. and friends think I am adaptable and trainable? How do I react to controls? Am I a "loner". How other franchisees in the same system are doing. do I enjoy working with food. and the business experience of its officers and directors. By shopping wisely. family. If there are any products or services you must buy from the franchisor and how and by whom they are supplied. real estate. you can make an informed decision on whether to purchase the franchise. The type of experience required in the franchised business. what its track record has been. etc. b. suited to the particular franchise company. g. books and recordings. and the sources of inventory and supplies. The terms and conditions under which the franchise relationship can be terminated or renewed.
too. you must recognize that your success can come only through hard work. If you hear a claim about a company that sounds too good to be true. Your hard work and the franchisor's expertise spell a strong partnership. hard work. ARE THERE ANY CURRENT TRENDS IN FRANCHISING? Among the most important trends in franchising today are the internationalization of franchising. Two of three respondents said that they would not have been successful if they tried to open the same business on their own. A study on franchise owner's and attitudes towards their franchise experience revealed that more than nine of ten franchise owners stated that they considered their franchise to be somewhat or very successful. Unavoidable business mistakes have been worked out of the system through experience and the franchisor is available to assist when new challenges arise. all successful businesses require a lot of dedication and plain. If you are a person who likes to make most decisions on your own or to chart the course of your business alone. Although the majority of franchisees are satisfied. 35 . All of these have profound and positive effects on franchising and make it an even more dynamic method of doing business today. WHAT ARE SOME OF THE DRAWBACKS OF OWNING A FRANCHISE? In exchange for the security. the emergence of women in franchising. As a franchise owner. That's why you must be particularly wary of any company which "guarantees" profit or certain success. But. You must be prepared to make that commitment. your franchisor should be eager to help you overcome problems. some do suffer financial losses. successful business people. and marketing power of the franchise trademark. With a franchised business. Investigation of all earnings claims made by a franchisor is especially important. The franchising system is designed to provide a formula for operating a successful business. regardless of earnings claims. you must be able and willing to give up some of your independence. Then. Industry Experts say most businesses fail from lack of management skills. HOW CAN I BE SURE I WON'T LOSE MONEY? No one can be 100 percent sure. Success or failure ultimately depends on you. it probably is. and the increased use of technology. training. you must comply with the various controls and procedures established by the franchisor."Success" is a subjective term. a franchise may not be right for you.
com www.bsnl.Wikipedia.Marketing Management.com www.in www.com www.franchiseassociationindia.co.hindubusinessline.com www.infofranchise. WEBSITES • • • • • • www.BIBLIOGRAPHY BOOKS AND MAGAZINES • PhilipKotler .franchiseindia.com 36 .
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