Financial Tie-Ups

FRANCHISING

Background
Singer sewing machine (1850)- Isaac Singer Coca-Cola Fast food establishments (1933)

What is Franchising
Contractual relationship between the franchisor

and franchisee in which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee.
The agreement is governed by a contract,

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

Franchising
Franchising A marketing system revolving around a two-party

agreement, whereby the franchisee conducts business according to the terms specified by the franchisor Franchisee An entrepreneur whose power is limited by a contractual agreement with a franchisor Franchisor The party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party

Franchising
Use of franchisors trade name, format, system

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

Franchising
Franchising is more than distributorship
Extends to an entire operation or method of

business
Greater

assistance,

control

and

longer

duration
Distributor merely re-sells products to retailers

or customers

STEPS INVOLVED IN FRANCHISING?

TYPES OF FRANCHISE
3 main types of franchise:
1. Product distribution franchise; 2. Business format franchise; and 3. Management franchise.

1. PRODUCT DISTRIBUTION FRANCHISES

A product distribution franchise model is very

much like a supplier-dealer relationship.

Typically,

the franchisee merely sells the franchisors products. However, this type of franchise will also include some form of integration of the business activities

EXAMPLES
Example of famous product

distribution franchises :

1. PRODUCT DISTRIBUTION FRANCHISES

Produces the syrup concentrate

Sells the syrup concentrate

FRANCHISEE

Produces the final drink

Retail Stores Restaurants & F&B Outlets

Vending Machine Operators

2. BUSINESS FORMAT FRANCHISING

In a business format franchise, the integration

of the business is more complete.

The

franchisee not only distributes the franchisors products and services under the franchisors trade mark, but also implements the franchisors format and procedure of conducting the business.

EXAMPLES

3. MANAGEMENT FRANCHISE
A form of service agreement. The

franchisee provides the management expertise, format and/or procedure for conducting the business.

EXAMPLES

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

Disadvantages of Franchising
Loss of independence High initial fees High royalties and advertising allowances Contractual restrictions

Inapplicable advertising
Termination clauses Not receiving promised help Unsuitable products Lack of competitive advantage of parent company

Franchise Your Business Successfully

To franchise your business in a fruitful manner, just get answers to some questions such as : Do you have a successful business? Do you wish to see its branches in different corners of the nation? Do you want to increase your brand visibility? Is franchising right for you? Is your business expandable? Will the target audience like your products or services? Well, to achieve all this why dont you franchise your business?

Factors Defining the Growth of Franchising in India

Positive Factors Huge consuming class Shift towards Services from Agriculture & Manufacturing Franchising has already proven to be successful in several

sectors Large entrepreneurial pool

Negative Factors

Lack of regulatory framework Financing mechanisms not in place

Franchising The Road Ahead in India

Indias vast geographical spread, diversity, growing economy, purchase power, young population & acceptance of western concepts are huge enablers for franchising. Growth sectors include reality, food & beverages, hospitality, health & fitness, tourism, education, etc. For the last several years, franchising is growing in India at a steady rate of 25-30%. Established brands like Pizza Hut, MacDonalds, Kodak, Crossword, KFC, Subway are consolidating.

FRANCHISE OF LEVIS

About the co.

Levi Strauss & Co. (LS&CO) is a privately held clothing company known worldwide for its Levi's brand of denim jeans. It was founded in 1853 when Levi Strauss came from Bavaria, Germany to San Francisco, California to open a west coast branch of his brothers' New York dry goods business.

Levi Strauss Asia Pacific Division was established in 1995

Details of Franchise
Vertical: Clothing Required Capital: Rs 50 Lakh to Rs 5 crore depending on location No. of Franchise Outlet: 200+ Retail space of 42000 sqft and planning to add more than 1 lakh sqft in the next 3 yr. Planning to open large format retail store ranging between 1500-4000 sqft Expanding along with retail chain like shopper stop, lifestyle, and pyramid. Campaign like Dangerously also to get more women customer who now account for 30%of the sale.

BUSINESS PLAN AND MODEL

Franchise steps (1)

Fashion show attended by Franchisor & Franchise

Design developed in Europe

Asia-Pacific head choose design

Arrange fashion show in Mumbai & Delhi

Franchise steps (2)

Franchisee like some product

Franchisee gives order based on sales data and forecasting

Franchisor, Asia division accepts and gives order to vendor

Franchisor source raw material & give to vendor

Franchise steps (3)

Vendor manufacture s & give to franchisor

Franchisor distribute product to franchise

Franchisee sell product and earn profit

Franchisee gives margin on sales to franchisor

TARGET CITIES

FRANCHISEE RELATION Free consultant. Store location. Analyzing the market. Financial support. Store layout plan. Trained worker. Marketing, human resources, inventory procurement, and professional services.

FRANCHISEE SUPPORT

1. 2. 3. 4. 5.

Newsletter, Meetings, Toll-free phone line, Grand opening, Internet, Security/safety procedures, 6. Field operations/evaluations, 7. Purchasing cooperatives