Session-46

Franchising
DR. SANDEEP KUMAR MOHANTY
Franchising

 Franchising is an arrangement where one party (the

franchisor) grants another party (the franchisee) the
right to use its trademark or trade name as well as
certain business systems and processes, to produce
and market a good or service according to certain
specifications.
 It is for a limited period of time
 Franchiser and franchisee are basically business partners
Franchising
 Involves a business owner who licenses trademarks and
methods to an independent entrepreneur.
Franchisor
 Party in the contract that specifies methods to be
followed/terms to be met by the other party.
Franchisee
 An entrepreneur whose power is limited by a contractual
agreement with a franchising organization.
Advantages and Disadvantages of
Franchising
Probability of Success
1. Proven line of business
2. Pre-qualification of franchisee
3. Training Support
Franchisor-provided
4. Financial assistance
Franchisor assistance
5. Operating benefits
Franchisor-aided
Franchise Costs
1. Initial franchise fee
2. Investment costs
3. Royalty payments
4. Advertising costs
5. Restrictions on business
operations
6. Loss of independence
7. Lack of franchisor support
Success Factors
Challenges
1.Misleading or exaggerated earnings
2.Opportunity behavior
3.Restrictions on franchisees for alternative investment opportunities
4.Conflicts of interest
5.Churning: terminating a successful franchise
6.Encroachment: locating a new outlet or point of distribution too close
to an existing
7.Imposing noncompete clauses on franchisees
8.One-sided contracts devised by franchisors
9.The imposition of new restrictions as a requirement of contract
renewal
10.Franchisor intimidation of franchisees