FRANCHISING

By-Sapana Agarwal 08-702Vaibhav Alone 08-705Smita Bommera 08-712Pramod Kamble 08-743Neha Vyas 08-757

Franchising is a business method that involves the licensing of trademarks and methods of doing business. 

Owner (franchisor), affiliated dealers (franchisees)

it is one that's providing increasing opportunities for companies and individual entrepreneurs.

Today franchise concepts span over 70 different product and service sectors, including such businesses as

o auto-repair shops,

o children's art centers,

o fitness clubs,

o law & consulting practices, and

o many home based businesses.

Historical background of franchising

The oldest franchise system- “Pub Network”McDonald's founder – Ray KrocDuring Roman occupation of Britain, Major supplier of food, drink, accommodations – ChurchTwo days food and lodging – FreeResulted in growth of commercial enterprises

Contd…Institutions of common standardsEstablishment of monitoring systemBirth of FranchisingRecognition of need to secure market shareBeginning of Franchising in United States - 1840

Contract Parameters Construction Specifications & SupervisionTrainingContinuing ServicesPerformance & Standards MonitoringField SupportOperational Research & DevelopmentMarketing, Advertising & PromotionSpecialist SupportThe Operations ManualTerm of agreementLicense Agreement Termination

Non contractual considerations of buying a franchise – Financial

Analysis

Estimating the startup cost / Initial InvestmentCalculating Profit & Loss / Income StatementConstructing a balance sheetCash-flow projections

Costs associated with buying a Franchise

Initial Franchise fee : Varies depending on Franchisor.

Capital Requirements : Include costs of, 1. Buying Real estate

2.Constructing a building 3. Purchase of initial inventory

4. Obtaining business license.

Cont…

Continuing royalty payment : 1.Payment on the basis of monthly or weekly

gross income.2.Franchise may have to pay royalty even if

business is loosing money.3.Royalty payment is usually around 5% of

gross income.

Cont…

Advertising fees : 1.Payment of national and regional

advertising fees.2.Less than 3% of the gross income.

Other fees : Include charges on training additional staff, providing management expertise when needed, computer assistance and support services.

Factors determining Franchising decision

Why do you want to own a franchise?Are you willing to take orders? Franchisors are typically very particular about how outlets operate? Are you willing to be part of a franchise “system” rather than an independent businessperson?How will you react if you make a suggestion to your franchisor and your suggestion is rejected?

What are you looking for in a business? How hard do you want to work?

How willing are you to put your money at risk?

How will you feel if your business is operating at a net loss but you still have to pay royalties on your gross income?

Who is the Customer?Is the customer reachable?Can the business achieve 20% market share?Can the business grow at an aggressive annual rate?Find out how other franchisee are doing?

Franchisor’s perspective Enter global markets with low investment and low risks Get information regarding markets, culture, customs and environment of host country Learns more lessons from experiences of the franchisees. e.g. McDonalds Control of location Faster growth ,expansion Lower capital requirement

Franchisee’s perspective

Proven Business formula Early start of business with low risk Established and proven product and operating system Benefits of R &D with low cost Established and recognized brand ,low marketing expenditureFranchisor finds the suitable location

Franchisor’s perspectiveReduced control Profit sharing Leakage of trade secrets Friction with franchisees Differences in required business skills Reputation at stake if d franchisee doesn’t live upto expectation of quality

Franchisee’s perspective

Loss of independence and creativity High initial fees High royalties and advertising allowances Contractual restrictions Termination clauses Not receiving promised help Unsuitable products Lack of competitive advantage

DHEERAJ GUPTA- THE VENDOR OF VADAS

Entrepreneur : Dheeraj GuptaCompany : Jumbo King Foods Pvt. Ltd. Based In : MumbaiFounded In : August, 2001Industry : Hospitality/ Service

The Journey…

• 23rd August 2001 – First Outlet was opened

• 23rd August 2003 – 2 outlets existed

• 23rd August 2004 – Jumbo King reached to a figure of 6 outlets

• 23rd August 2005 – 15 outlets were in the operation mode

• 43 stores in Mumbai &1,50,000 vada pavs are sold every day

• JumboKing Plans to Open 250 Store This Fiscal year

• Grandfather built a business of vending stall.

• Later built the restaurant and hotel business.

• Decided to set up his own business of selling packaged Indian sweets in 1998.

• Set up a company called Manali Foods.

• When he was tapping the export market & made a trip to London came in the contact of a person who was a Burger King franchisee.

IDEA GENERATION

Worked in a McDonald’s for ten days.

Start the largest fast food chain specially VADA PAV.

Borrowed Rs 200,000.

Set up an outlet, which the family owned, near Malad station and called it Chaat Factory.

The name JUMBO KING came into existence.

Used the western models in the Indian food industry.

• Quality• Hygiene• Size

CORE COMPETENCIES TARGET AUDIENCE

• Urban Population• Age Group: 18-30 YRS• College Students• Working People • Executives

• Jumbo King Foods Pvt Ltd plans to open around 500 food joints across the country by March 2011.

• Aims to increase its turnover 10-fold to Rs200 crore.

• The projected turnover for the current financial year is Rs25 crore.

SCOPE

Territory: Fast Food Retail Chain

Training Provided: Nationwide

Agreement Term: Initial Franchisee Certification Programme for 2 days and then continuous up gradation

Number Of Units: Initial Terms 9 years, to be renewed every 3rd year of operation.

Units Outside Country: Presently 45 Franchisee

Investment Required: Plan to operate internationally in future 5, 00,000.00 to 1, 00,00,000.00

Business Established: 2001

Franchising Commenced: 2004

Qualifications Required: Business Experience of 4 to 5 years; preferably in food and beverage industry; Time commitment of 10/12 hours in a week; Minimum graduate, with

knowledge of Local and English Language

“If a Burger can get listed, why not a VADA PAV?”

HH

HistoryHistory

History

1948 - Burt and Irvin opened six stores

1949 - co’s own production facility opened in Burbank

1953 - hired Carson-Roberts Adevertising

1962 – First to introduce Cakes

1972 – Co went public

Global Presence

Local Focus

Outsourcing

Startup Cost

Franchise Fees

Baskin-Robbins

Baskin-RobbinsFun facts

Fun facts

• Baskin-Robbins "31®" stands for a different ice cream flavor for each day of the month.

• Pralines 'n Cream ice cream was created by Irvin Robbins and his wife Irma in their California home kitchen in 1970.

• Baskin-Robbins has created more than 1,000 delicious and unique ice cream flavors in its 62 year history.

• Baskin-Robbins Franchisee, Cohen, currently holds the Guinness World Record for scooping the most ice cream cones in one minute (19 cones).

Thanks…