Description
The ppt on franchising model and how it has spread over the world with eg of McDonalds and other brands.
Definition In simple terms it is the granting of certain rights by one Party (the franchisor) to another (the franchisee) in return for a sum of money, to make a profit . The franchisee then exercises those rights under the guidance of the franchisor.
Normally Franchising involves one party developing a successful business format which is then licensed to another party to set up and run a wholly identical venture in a particular area for a specified period of time.
History It began in the 1850's when I. M. Singer & Co. inadvertently created the first embryonic franchise network in an effort to Distribute & sell its sewing machines to a then-skeptical public.
1st Franchise Model
In early 1930's, in the midst of the Depression – Howard Johnson – 25 Road side Strands
They Geared up in 50s and 60s
They Geared up in 50s and 60s
Biggest Franchisor - McDonald Indian History - Ban of Foreign Brands , Opened in 1990 for single brand
FDI in Retail in India is banned. Except Post 1990 Baskin Robbins, Movenpick, Subway, McDonalds, TGIF, Geoffry’s, Taco Bell, Pizza Hut, Pizza Piazza, Dominos Pizza, O’Brian’s Sandwich Bar, Ruby Tuesdays and Barrista
Franchisor
This is the proprietor of the franchised system. It owns the know-how of the concept and the brand name. It grants franchises to third parties.
Franchisee
This entity is granted by the franchisor the right to carry on business using the franchisor's know-how under the franchisor's brand. There are, however, various types of franchisee, depending upon what rights they are granted.
Unit franchisee
This franchisee is granted the right to operate one unit or outlet of the franchised business - a unit franchise. This is the simplest and most common form of franchising. A single franchisor may ultimately have several hundred different unit franchises.
Regional franchisee
In a geographically large area a franchisor, or master franchisee may decide that it is commercially appropriate to further divide the territory up with separate "regions" and grant a master franchise for each separate region. These franchises are known as regional franchises or sometimes area franchises. The area term is commonly used in large countries such as the USA, where regional franchise for one or several of the different states are felt to be appropriate. .
Characteristics of a Franchise
Mantra – Minimize and Control rather than Maximize and Own” For the successful Entrepreneur goal is not to own resources but to use resources to exploit the opportunities
Franchisor provides with Name, Logo, Copyright to use the logo, trade name, image, and goodwill, systems and procedures, products and services for a fixed territory for fixed period
Franchisor helps to assist in finding place, permissions, licenses, supply equipments Franchisor helps to promotions, ad campaign, training, staff selection Franchisor also helps to day to day of working thro’ their Manual Franchisee pay for place, furniture and fixture Franchisee pays a continuing royalty, for the backup services Both the parties are at liberty to end the contract as per their wish.
How is franchising different to other third party relationships?
From Franchisor’s point of view Advantages of Franchising
Low Capital Expenditure Personal Commitment and Motivation
Reduced Daily Involvement
Disadvantages of Franchising
Loss of ownership Low profits Interdependence
From Franchisee’s point of view Advantages of Franchising
A proven track record
Initial help and advice
An established name / brand Continual support and guidance
Disadvantages of Franchising
Hard work and effort Constant payments Inflexible rule Mutual dependence
Types of Franchise
Job Franchise Business Franchise Investment Franchise
Broader Classification
Bussines format Franchising
Product Franchising
5 Key Market Demand Question
Who is the customer ? Is the customer reachable? Is the price-value relationship attractive to the customer? What is the growth in number of Franchisee in current/past year How is brand perceived by the customer – In terms of Salience, Performance, Image, Feeling, Judgment and Resonance
Brand / Name Image Building / Location Image Product Image Quality Image Service Image Behavior Image Price Image Ambience Image Range Image
Areas of Franchise in India
Beauty Salons & Supplies Business Services Clothing Computer & Internet 1 Consultancy Consumer Services Education & Training 2 Entertainment 1 Play School & Activity Centre Retail 2 Financial Florists Food and Beverages 1 Health Care & Fitness Immigration Interior Jewellery Others 1 Travel
Areas of Franchise in India
IT education and franchises such as APTEC, NIIT, and STG
Local Food chains like Chawla’s, Nirulas, Nilgiris, Coffee Day, Café Nescafe, and Sagar Ratna
Health clubs like VLCC have come up along with hair and beauty parlours who often sell their products like Shanaz Hussein, Biotique and Habibs
cargo and courier companies like Blue Dart, ADL, Dartmail, Blaze Flash, First Flight, Professional Couriers and DTDC
Few Current Hot Brands of Franchise in India
CEAT TRADESWIFT Shemrock Schools Mr & Mrs Idly Cliniminds Movie Mart Abacus Mathematics Mind Lab Group Mr Orange Sirf Biryani Berkowits Clinic Kwality Wall's Timex Live-in Home Store
Shahnaz Husain US Dollar Store Dosa Plaza Coffee News Red Tape Junjharji Investment Sky Academy Caba Innovatives Pumpkin Academy corn company Global Aviation Hello Kids Coffee Beanz Bigshoebazaar.com Coffee Culture
British Academy GoldenGate IHT Network Crazy Noodles Trimax International
• • • • • • •
Unit:Investment: Rs. 10,00,000 - Rs. 20,00,000 Master:Investment: Rs. 30,00,000 - Rs. 50,00,000 Countries Available: India, Multi Units: Investment:-- NIL Countries Available: India, What areas are available International,Nationwide for Unit franchise?:
• Is there a unit franchise fee included in this figure?: Yes • How much working capital is required in unit franchise addition to this?: 2,00,000 • Is there exclusive territorial rights given to a unit franchise?: Yes • Are any performance guarantees given to unit franchisees?: No • What is the anticipated percentage return on investment?: 20 • What is the likely pay back period of capital for a unit franchise?: 2 and a half to 3 yrs. • Are there other investment requirements?: No
• What type of property is required for this franchise opportunity? :malls, high street,food courts,highways, multiplex • Floor area requirement: 400- 1200 . • Preferred location of unit franchised outlet: highstreet, malls, highways, multiplex
IMPORTANCE OF LOCATION DECISION
Location is a major cost factor because it
Involves large capital investment Affects transportation costs Affects human resources cost e.g. Salaries
IMPORTANCE OF LOCATION DECISION
Location is a major revenue factor because it
Affects the amount of customer traffic
Affects the volume of business
IMPORTANCE OF LOCATION DECISION
st 1 nd 2 rd 3
LOCATION LOCATION LOCATION
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS IN FRANCHISHING
SELECTION OF A CITY
SELECTION OF AN AREA WITHIN CITY IDENTIFICATION OF A SPECIFIC SITE
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS
SELECTION OF A CITY
POPULATION & GROWTH TRENDS
CURRENT POPULATION POPULATION DYNAMICS –
Apartments V/S Homes, Population Density Likelihood of Growth, Decline, Constant
THEIR INCOME LEVEL SEASONAL CHANGES / PERIODICAL INCOMES AGE GROUPS & SEXUAL COMPOSITION
SELECTION OF A CITY
SIZE OF THE CITY’S TRADING AREA
PRIMARY , SECONDARY, TERTIARY
PURCHASING POWER & ITS DISTRIBUTION
DISPOSIBLE INCOME
TRADE POTENTIAL NUMBER,SIZE,QUALITY OF COMPETITION
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS
SELECTION OF AN AREA WITHIN CITY
AREA WITHIN CITY
CUSTOMER ATTRACTION OF SHOPPING DISTRICT QUANTITATIVE & QUALITATIVE COMPETITION TRAFFIC AND TRAFFIC PATTERNS NATURE OF ZONING REGULATION DIRECTION OF THE AREA EXPANSION VISIBILITY OF THE AREA
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS
IDENTIFICATION OF A SPECIFIC SITE
SITE DECISION
ADEQUACY AND POTENTIAL TRAFFIC COMPLEMENTARY NATURE OF ADJACENT STORE ADEQUACY OF PARKING TENANCY MIX – IF MALL / SHOPPING CENTRE OWNERSHIP OR LEASE
OWNERSHIP V/S LEASE
OWNERSHIP
ADVANTAGES
# Increase in real estate value can be solely enjoyed by the Owner # Physical Changes in the property can be done # Liberty to rent a store # No Interference of Landlord
DISADVANTAGES
# Huge Initial Investment # Heavy Interest # Maintenance costs # Decrease in real estate value has to be borne by the Owner
OWNERSHIP V/S LEASE
LEASE
ADVANTAGES
# No Initial Investment except Deposit (if any) # No Initial Interest # Opportunity to move elsewhere at the expiration of the lease # Ability to concentrate on merchandising instead of on real estate
Site selection Template
Excellent
Good
Fair
Poor
Total population Growth Projection Income per Capita Disposable income Average Customer expenditure
Over Market assessment
Site selection Template
Excellent
Good
Fair
Poor
Trade area definition Commercial Development Retail Development Future Development Competition Traffic count Other assessments
Over Trade area assessment
Site selection Template
Excellent
Good
Fair
Poor
Site Location – Corner/Main Street/Noncorner, side street, III side street,
Visibility of signage
Visibility of store
Adequate parking Complementary retail activity Other commercial activity High Pedestrian Traffic High Automobile Traffic Speed of Automobile traffic Ingress / Egress
Over Site location assessment
TYPES OF LOCATION
BROADER CLASSIFICATION RELEVANT IN INDIA
DESIGNED (MAIN)
TYPES OF LOCATION
BROADER CLASSIFICATION RELEVANT IN INDIA
AREA WHICH CAN BE CONVERTED
TYPES OF LOCATION
BROADER CLASSIFICATION RELEVANT IN INDIA
LOW RENT DISTRICT
Category specific Locations
Food Retailing (Catering) –Take home / Instant food / Pizza, Subs, Burgers, Coffee Beauty salons and suppliers Health care and fitness Garment – Elite brands, Un-branded
Interior and Furniture
Education and training Computer and Internet Complementary versus Contradictory Neighbor
THE SPREAD OF FRANCHISE IN INDIA
BANGALORE CHENNAI MUMBAI DELHI KOLKATTA HYDERABAD PUNE GURGOAN NOIDA INDORE CHANDIGARH NAGPUR BHOPAL JAIPUR UDAIPUR NASIK AHEMDABAD COCHIN MADURAI
CATCHMENT AREA
CORE OUTER CORE EXTENDED
HOW FAR IS THE CUSTOMER WILLING TO TRAVEL
5 4 3 2 1
Jewellery 4.5 km Apparel 2.32 km Music 2.54 km Books 2.74 km Grocery 1.5 km Cosmetics 4.5 km
KSA Technopak Consumer Outlook 2005
Central Place Theory – by Losch
Threshold : Minimum amount of consumer demand that must exist for a store to survive Range Threshold ATLEAST
Range : Maximum distance that a consumer is willing to travel for a particular product / service
Threshold PREFERABLE
Range
Range Threshold
IDEALLY
MARKETING IN A FRANCHASE
Franchisor Marketing and Franchisee Marketing
Local Marketing v/s National Marketing
Joint Advertisements Cross Promotions Print Media Out doors Sales Promotion in Stores Paper insertions/ Handouts
doc_287201500.ppt
The ppt on franchising model and how it has spread over the world with eg of McDonalds and other brands.
Definition In simple terms it is the granting of certain rights by one Party (the franchisor) to another (the franchisee) in return for a sum of money, to make a profit . The franchisee then exercises those rights under the guidance of the franchisor.
Normally Franchising involves one party developing a successful business format which is then licensed to another party to set up and run a wholly identical venture in a particular area for a specified period of time.
History It began in the 1850's when I. M. Singer & Co. inadvertently created the first embryonic franchise network in an effort to Distribute & sell its sewing machines to a then-skeptical public.
1st Franchise Model
In early 1930's, in the midst of the Depression – Howard Johnson – 25 Road side Strands
They Geared up in 50s and 60s
They Geared up in 50s and 60s
Biggest Franchisor - McDonald Indian History - Ban of Foreign Brands , Opened in 1990 for single brand
FDI in Retail in India is banned. Except Post 1990 Baskin Robbins, Movenpick, Subway, McDonalds, TGIF, Geoffry’s, Taco Bell, Pizza Hut, Pizza Piazza, Dominos Pizza, O’Brian’s Sandwich Bar, Ruby Tuesdays and Barrista
Franchisor
This is the proprietor of the franchised system. It owns the know-how of the concept and the brand name. It grants franchises to third parties.
Franchisee
This entity is granted by the franchisor the right to carry on business using the franchisor's know-how under the franchisor's brand. There are, however, various types of franchisee, depending upon what rights they are granted.
Unit franchisee
This franchisee is granted the right to operate one unit or outlet of the franchised business - a unit franchise. This is the simplest and most common form of franchising. A single franchisor may ultimately have several hundred different unit franchises.
Regional franchisee
In a geographically large area a franchisor, or master franchisee may decide that it is commercially appropriate to further divide the territory up with separate "regions" and grant a master franchise for each separate region. These franchises are known as regional franchises or sometimes area franchises. The area term is commonly used in large countries such as the USA, where regional franchise for one or several of the different states are felt to be appropriate. .
Characteristics of a Franchise
Mantra – Minimize and Control rather than Maximize and Own” For the successful Entrepreneur goal is not to own resources but to use resources to exploit the opportunities
Franchisor provides with Name, Logo, Copyright to use the logo, trade name, image, and goodwill, systems and procedures, products and services for a fixed territory for fixed period
Franchisor helps to assist in finding place, permissions, licenses, supply equipments Franchisor helps to promotions, ad campaign, training, staff selection Franchisor also helps to day to day of working thro’ their Manual Franchisee pay for place, furniture and fixture Franchisee pays a continuing royalty, for the backup services Both the parties are at liberty to end the contract as per their wish.
How is franchising different to other third party relationships?
From Franchisor’s point of view Advantages of Franchising
Low Capital Expenditure Personal Commitment and Motivation
Reduced Daily Involvement
Disadvantages of Franchising
Loss of ownership Low profits Interdependence
From Franchisee’s point of view Advantages of Franchising
A proven track record
Initial help and advice
An established name / brand Continual support and guidance
Disadvantages of Franchising
Hard work and effort Constant payments Inflexible rule Mutual dependence
Types of Franchise
Job Franchise Business Franchise Investment Franchise
Broader Classification
Bussines format Franchising
Product Franchising
5 Key Market Demand Question
Who is the customer ? Is the customer reachable? Is the price-value relationship attractive to the customer? What is the growth in number of Franchisee in current/past year How is brand perceived by the customer – In terms of Salience, Performance, Image, Feeling, Judgment and Resonance
Brand / Name Image Building / Location Image Product Image Quality Image Service Image Behavior Image Price Image Ambience Image Range Image
Areas of Franchise in India
Beauty Salons & Supplies Business Services Clothing Computer & Internet 1 Consultancy Consumer Services Education & Training 2 Entertainment 1 Play School & Activity Centre Retail 2 Financial Florists Food and Beverages 1 Health Care & Fitness Immigration Interior Jewellery Others 1 Travel
Areas of Franchise in India
IT education and franchises such as APTEC, NIIT, and STG
Local Food chains like Chawla’s, Nirulas, Nilgiris, Coffee Day, Café Nescafe, and Sagar Ratna
Health clubs like VLCC have come up along with hair and beauty parlours who often sell their products like Shanaz Hussein, Biotique and Habibs
cargo and courier companies like Blue Dart, ADL, Dartmail, Blaze Flash, First Flight, Professional Couriers and DTDC
Few Current Hot Brands of Franchise in India
CEAT TRADESWIFT Shemrock Schools Mr & Mrs Idly Cliniminds Movie Mart Abacus Mathematics Mind Lab Group Mr Orange Sirf Biryani Berkowits Clinic Kwality Wall's Timex Live-in Home Store
Shahnaz Husain US Dollar Store Dosa Plaza Coffee News Red Tape Junjharji Investment Sky Academy Caba Innovatives Pumpkin Academy corn company Global Aviation Hello Kids Coffee Beanz Bigshoebazaar.com Coffee Culture
British Academy GoldenGate IHT Network Crazy Noodles Trimax International
• • • • • • •
Unit:Investment: Rs. 10,00,000 - Rs. 20,00,000 Master:Investment: Rs. 30,00,000 - Rs. 50,00,000 Countries Available: India, Multi Units: Investment:-- NIL Countries Available: India, What areas are available International,Nationwide for Unit franchise?:
• Is there a unit franchise fee included in this figure?: Yes • How much working capital is required in unit franchise addition to this?: 2,00,000 • Is there exclusive territorial rights given to a unit franchise?: Yes • Are any performance guarantees given to unit franchisees?: No • What is the anticipated percentage return on investment?: 20 • What is the likely pay back period of capital for a unit franchise?: 2 and a half to 3 yrs. • Are there other investment requirements?: No
• What type of property is required for this franchise opportunity? :malls, high street,food courts,highways, multiplex • Floor area requirement: 400- 1200 . • Preferred location of unit franchised outlet: highstreet, malls, highways, multiplex
IMPORTANCE OF LOCATION DECISION
Location is a major cost factor because it
Involves large capital investment Affects transportation costs Affects human resources cost e.g. Salaries
IMPORTANCE OF LOCATION DECISION
Location is a major revenue factor because it
Affects the amount of customer traffic
Affects the volume of business
IMPORTANCE OF LOCATION DECISION
st 1 nd 2 rd 3
LOCATION LOCATION LOCATION
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS IN FRANCHISHING
SELECTION OF A CITY
SELECTION OF AN AREA WITHIN CITY IDENTIFICATION OF A SPECIFIC SITE
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS
SELECTION OF A CITY
POPULATION & GROWTH TRENDS
CURRENT POPULATION POPULATION DYNAMICS –
Apartments V/S Homes, Population Density Likelihood of Growth, Decline, Constant
THEIR INCOME LEVEL SEASONAL CHANGES / PERIODICAL INCOMES AGE GROUPS & SEXUAL COMPOSITION
SELECTION OF A CITY
SIZE OF THE CITY’S TRADING AREA
PRIMARY , SECONDARY, TERTIARY
PURCHASING POWER & ITS DISTRIBUTION
DISPOSIBLE INCOME
TRADE POTENTIAL NUMBER,SIZE,QUALITY OF COMPETITION
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS
SELECTION OF AN AREA WITHIN CITY
AREA WITHIN CITY
CUSTOMER ATTRACTION OF SHOPPING DISTRICT QUANTITATIVE & QUALITATIVE COMPETITION TRAFFIC AND TRAFFIC PATTERNS NATURE OF ZONING REGULATION DIRECTION OF THE AREA EXPANSION VISIBILITY OF THE AREA
LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS
IDENTIFICATION OF A SPECIFIC SITE
SITE DECISION
ADEQUACY AND POTENTIAL TRAFFIC COMPLEMENTARY NATURE OF ADJACENT STORE ADEQUACY OF PARKING TENANCY MIX – IF MALL / SHOPPING CENTRE OWNERSHIP OR LEASE
OWNERSHIP V/S LEASE
OWNERSHIP
ADVANTAGES
# Increase in real estate value can be solely enjoyed by the Owner # Physical Changes in the property can be done # Liberty to rent a store # No Interference of Landlord
DISADVANTAGES
# Huge Initial Investment # Heavy Interest # Maintenance costs # Decrease in real estate value has to be borne by the Owner
OWNERSHIP V/S LEASE
LEASE
ADVANTAGES
# No Initial Investment except Deposit (if any) # No Initial Interest # Opportunity to move elsewhere at the expiration of the lease # Ability to concentrate on merchandising instead of on real estate
Site selection Template
Excellent
Good
Fair
Poor
Total population Growth Projection Income per Capita Disposable income Average Customer expenditure
Over Market assessment
Site selection Template
Excellent
Good
Fair
Poor
Trade area definition Commercial Development Retail Development Future Development Competition Traffic count Other assessments
Over Trade area assessment
Site selection Template
Excellent
Good
Fair
Poor
Site Location – Corner/Main Street/Noncorner, side street, III side street,
Visibility of signage
Visibility of store
Adequate parking Complementary retail activity Other commercial activity High Pedestrian Traffic High Automobile Traffic Speed of Automobile traffic Ingress / Egress
Over Site location assessment
TYPES OF LOCATION
BROADER CLASSIFICATION RELEVANT IN INDIA
DESIGNED (MAIN)
TYPES OF LOCATION
BROADER CLASSIFICATION RELEVANT IN INDIA
AREA WHICH CAN BE CONVERTED
TYPES OF LOCATION
BROADER CLASSIFICATION RELEVANT IN INDIA
LOW RENT DISTRICT
Category specific Locations
Food Retailing (Catering) –Take home / Instant food / Pizza, Subs, Burgers, Coffee Beauty salons and suppliers Health care and fitness Garment – Elite brands, Un-branded
Interior and Furniture
Education and training Computer and Internet Complementary versus Contradictory Neighbor
THE SPREAD OF FRANCHISE IN INDIA
BANGALORE CHENNAI MUMBAI DELHI KOLKATTA HYDERABAD PUNE GURGOAN NOIDA INDORE CHANDIGARH NAGPUR BHOPAL JAIPUR UDAIPUR NASIK AHEMDABAD COCHIN MADURAI
CATCHMENT AREA
CORE OUTER CORE EXTENDED
HOW FAR IS THE CUSTOMER WILLING TO TRAVEL
5 4 3 2 1
Jewellery 4.5 km Apparel 2.32 km Music 2.54 km Books 2.74 km Grocery 1.5 km Cosmetics 4.5 km
KSA Technopak Consumer Outlook 2005
Central Place Theory – by Losch
Threshold : Minimum amount of consumer demand that must exist for a store to survive Range Threshold ATLEAST
Range : Maximum distance that a consumer is willing to travel for a particular product / service
Threshold PREFERABLE
Range
Range Threshold
IDEALLY
MARKETING IN A FRANCHASE
Franchisor Marketing and Franchisee Marketing
Local Marketing v/s National Marketing
Joint Advertisements Cross Promotions Print Media Out doors Sales Promotion in Stores Paper insertions/ Handouts
doc_287201500.ppt