PRESENTATION
ON
CONCEPT OF FRANCHISING
SUBMITTED BY
Ravi Verma
Roll No.-44
MBA-5th sem.
INSTITUTE OF MANAGEMENT STUDIES
K.U.K
What is franchising?
A franchise is the agreement or license between two
legally independent parties which gives: A person or group
of people (franchisee) the right to market a product or
service using the trademark or trade name of another
business (franchisor) The franchisee the right to market a
product or service using the operating methods of the
franchisor The franchisee the obligation to pay the
franchisor fees for these rights The franchisor the
obligation to provide rights and support to franchisees.
A specialized license where the franchisee is allowed by
the franchisor in return for a fee to use a particular
business model and is licensed a bundle of IP rights (TM,
service marks, patents, trade secrets, copyrighted works)
and supported by training, technical support and mentoring
TYPES OF FRANCHISE
Main types of franchise:
– Product distribution franchise;
– Business format franchise
PRODUCT DISTRIBUTION
FRANCHISES
• A product distribution franchise model is
very much like a supplier-dealer
relationship.
• Typically, the franchisee merely sells the
franchisor’s products. However, this type
of franchise will also include some form of
integration of the business activities.
• Examples of famous product distribution
franchise:
PRODUCT DISTRIBUTION
FRANCHISES
• Produces the
syrup concentrate
Sells the syrup
concentrate
FRANCHISEE Produces the final
drink
Retail Stores
Restaurants & Vending Machine
F&B Outlets Operators
BUSINESS FORMAT
FRANCHISING
• In a business format franchise, the integration
of the business is more complete.
• The franchisee not only distributes the
franchisor’s products and services under the
franchisor’s trade mark, but also implements the
franchisor’s format and procedure of conducting
the business.
Famous Examples Business Format Franchising
BUSINESS FORMAT FRANCHISING in
SUBWAY outlet in SUBWAY outlet in
Sale, Australia France
BENEFITS OF FRANCHISE OWNERSHIP
• ADVERTISING AND PROMOTION
• OPERATIONS
• BUYING POWER
• RESEARCH AND DEVELOPMENT
• CONSULTING SERVICES
DRAWBACKS OF FRANCHISE OWNERSHIP
• COST
• LIMITED CONTROL
• APPEARANCE
• TERM OF FRANCHISE AGREEMENT IS LIMITED.
Why is franchising important to SMEs?
• Enhancing business image
• Ensuring consistent quality
• Attaining higher productivity/better
motivated staff
• Access to good locations
• Economies of scale
• Reducing risks of failure
WHY FRANCHISE?
• Franchises offer important pre-opening support:
– site selection
– design and construction
– training
– grand-opening program
• Franchises offer ongoing 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
Franchisor–Franchisee relationship
Regulated by contract which usually covers:
• Initial fee
• Royalty fee/Management fee
• Capital required from franchisee
• Duration of license and renewal
• IPRs
• Termination
