COMMUNICATIVE ENGLISH

Topic:

Scenario Of Franchise Business in

Bangladesh

BY

S M MARUF SIDDIQE

BRIEF OUTLINE:

What is franchising?
Types of franchising
Why franchise?
Considerations for franchisor/franchisee
Pitfalls/Be Careful
Bangladesh Experience

WHAT IS FRANCHISING?
A franchise operation is a 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 in such areas
as know-how and training; wherein the
franchisee operates under a common trade
name, format and/or procedure owned or
controlled by the franchisor, and in which the
franchisee has or will make a substantial
capital investment in his business from his
own resources.

WHAT IS FRANCHISING?

Franchising is more than distributorship

Extends to an entire operation or method of
business
Greater assistance, control and longer
duration
Distributor merely re-sells products to
retailers or customers

TYPES OF FRANCHISE

3 main types of franchise:

Product distribution franchise;

Business format franchise and
Management franchise.

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.

PRODUCT DISTRIBUTION
FRANCHISES
Examples of famous product distribution
franchise:

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.

FAMOUS EXAMPLES:

MANAGEMENT FRANCHISE

A form of service agreement.

The franchisee provides the management expertise,

format and/or procedure for conducting the
business.

WHY FRANCHISE?
Franchises offer important pre-opening support:
site selection
design and construction
financing (in some cases)
training
grand-opening program

WHY FRANCHISE?
Franchises offer on-going support
training
national and regional advertising
operating procedures and operational assistance
supervision and management support
increased spending power, access to bulk
purchasing and economies of scale

FRANCHISORFRANCHISEE
RELATIONSHIP

Regulated by contract which usually covers:

Initial fee
Royalty fee/Management fee
Capital required from franchisee
Territory/Area of operation
Duration of license and renewal
Termination

COMMON MISTAKES OF
PROSPECTIVE FRANCHISEES:

Not
Not
Not
Not
Not
Not

seeking sound legal and financial advice

verifying oral representations of franchisor
analysing the local market in advance
analysing the competition
making thorough due diligence of the franchisor
choosing the right location

FRANCHISEES IN BANGLADESH

Generally young and well educated

62% below 40 years old
37% had post-secondary education
32% own their own outlets
46% occupy the outlets as tenants

REASON FOR FRANCHISING

2/3 of franchisees felt that economies of scale in bulk
purchasing encouraged them to consider franchising
People are more interested in some popular brands
than others.
Easy to earn more money.

CONCLUSION

Franchising a great model for SMEs

Proven formula for success
Due diligence
Central role of IPRs
Avoidance of dispute