Franchise India

The science of
reproducing success

Synopsis

The classic bestseller by the man who enjoys the confidence of franchise leaders of the world! Franchising provides an ambitious business aspirant with the benefit of the skills, knowledge and best practices in management, from people who have run a successful business over many years.

At the same time franchising offers successful business enterprises with a fast-track route to growth, that bypasses the obstacles of finance and human resources.

Franchising has now emerged in India as a growth industry with great potential. It is franchising that will provide the last mile connect in the world's largest consumption market.

There still is little available literature on the subject. Across Asia, consulting and management knowledge in franchising is the preserve of only those practicing in this field. Franchising: The Science of Reproducing Success has proved to be the best primer on this subject. The fifth edition has been updated with fresh case studies and made more reader-friendly. The text rings with the authenticity of the leading expert in the field of franchising in India.

Contents

Chapter 1:  The Foundation of Franchising
Chapter 2:  What a Franchisee Needs to Know
Chapter 3:  What a Franchisor Needs to Know?
Chapter 4:  Franchisor-Franchisee Relationship

Detailed Contents

Acknowledgments xi

Preface xiii

Chapter 1: The Foundation of Franchising

  • What is Franchising?
  • Why Franchise?
  • Categorizing Franchising
  • The Franchise Scenario
  • Case Study 1: Investing in the Future: Pre-school Franchise
  • Case Study 2: Walk-in Clinics: Franchising: Options in Healthcare in India

Chapter 2: What a Franchisee Needs to Know

  • The Deliberation Stage
  • Are You Ready for a Franchise?
  • Choosing the Right Franchise
  • Step 1: Examine your opportunities
  • Step 2: Examine franchisor and franchise
  • Step 3: Evaluate options
  • The Planning Stage
  • Plan Franchise Finances
  • Evaluate Demand for the Franchise Products
  • Find The Ideal Location
  • Select a Business Entity
  • Financing a Franchise
  • The Franchise Business Plan
  • The Management Stage
  • Find Good Employees
  • Design Promotional Strategies
  • Manage Franchise-Franchisor Relations
  • An Exit Strategy
  • Franchising in India Today

Chapter 3: What a Franchisor Needs to Know?

  • Do You have a Growth Vision?
  • Why Franchise?
  • The Deliberation Stage
  • Qualities of a Successful Franchisor
  • Evaluate Your Enterprise
  • Evaluate the Market
  • Franchisor Feasibility Study
  • The Planning Stage
  • Business Planning
  • Strategic Planning
  • Documentation Stage
  • The Management Stage
  • Nature of Managerial Work
  • Developing the Franchise Systems
  • Setting up a Franchise Network in India

Chapter 4: Franchisor-Franchisee Relationship

  • A Partner or a Parent?
  • The Legalities of the Relationship
  • Important International Laws
  • Important Indian Laws
  • Franchise Documentation
  • Negotiating a Franchise Agreement
  • Future Trends in Franchising

  • Appendix A: Franchise Categories
  • Appendix B: Outline of Franchise Business Plan
  • Appendix C: A Sample Income Statement Format
  • Appendix D: Draft Franchise Agreement

Excerpt

What Is Franchising?

Franchising in Brief The dictionary defines the word 'franchising' as 'an authorization granted by a company to someone to sell or distribute its goods or services in a certain area'.

In legal terms, franchising is 'rights of privilege granted'. It is the granting of certain rights by one party (the franchisor) to another (the franchisee) for a sum of money. The franchisee obtains the authority to exercise these rights under the guidance of the franchisor.

The International Franchise Association, the major trade association in franchising, defines a franchise as a 'continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising and management in return for a consideration from the franchise'.

Franchising is a Symbiotic Relationship

"I give, you take, and you give, I take"

As mentioned above, at least two participants are involved in a franchise relationship. The franchise relationship is symbiotic, as both the franchisor, who lends his trade name and business system, and the franchisee, which pays for the right to do business under the franchisor's name and system, stand to mutually benefit. In a way, the franchisor is a true blood entrepreneur who has set up a firm from scratch and is now looking for expansion. The franchisee is an entrepreneur whose job is to take care of the franchisor's legacy like a guardian. Both benefit from this relationship. The franchisor finds the franchisee necessary for his business growth, and the franchisee sees the franchisor as a model for his own personal growth to a true blood entrepreneur. See Figure 1.1

Technically, the contract binding the two parties is the franchise, but the term is often used to mean the actual business that the franchisee operates.

Whose business is it anyway?

To Reproduce Success

Rather than just sell a business, what franchise companies really do is sell an idea. They sell the formula that they have developed and have been successful with. This formula can come in various combinations, but generally it comprises a trademark, a uniform operating system, training and consultation, and promotion.

The franchisee has simply to follow that formula for success for its own success. And all that it has to give in return is an initial franchise fee, and ongoing royalty payments.

So apart from acquiring the formula of a proven and efficient method of conducting business which is provided by the franchisors, the franchisee also benefits from the management assistance and training, as well as marketing assistance which are provided by the franchisors. Franchisors normally conduct national or regional marketing campaigns developed by professional advertising agencies and help franchisees run local ad campaigns. The acquired cumulative experience of the franchisor is available to the franchisee at a nominal cost and through which the franchisee can give his own business that much more impetus for success.

Sometimes franchisees are helped by their franchisors not just in preparing business plans and strategies but also in obtaining financing for their outlets. Financial institutions too may be more willing to lend the necessary fund to the prospective franchisee if a well known franchisor is backing the applicant. It would be easier to obtain the funds when approached as a franchisee with a well established franchisor, than as an entrepreneur with a new business concept.

But what's in it for the franchisor?

Surprisingly, a lot! Franchisors stand to benefit from the explosive growth potential as seen with KFC and McDonald's in the international space and VLCC and Crossword book stores in India, without spending a penny of their own.

Expansion of any business is risky and it requires significant investments of both capital and human resource to run the locations. But when franchised, the franchisee provides both the capital as well as the labour or human resource required for expansion.

Thus, the franchisor would be limiting the risk factor involved in the growth of his business. He would be allowing expansion to occur without himself having to give in the vast amounts of operating capital. The principle of Other People's Money (OPM) is what franchisors use to fund their own growth.

Often a lack of funds or workers can cause a company to grow slowly. But by opting for the franchising route, the franchisors benefit by allowing for their companies to expand much more quickly than they would have done on their own.

The franchisor can also be assured of having highly competent and motivated owners or managers at each outlet. Since each franchisee or manager will be responsible for the success of the franchise, no efforts would be spared by them to ensure a successful business.

Another advantage the franchisor has in franchising is that he might not necessarily have to sell shares of his company to raise the required capital for expansion.

While it is the franchisee that provides all the expansion capital, assumes all operating and management responsibilities, and shoulders virtually all risk, the franchisor simply earns more and more, for doing less and less. In other words, the franchisor earns more and more for what he has already done by allowing others to do the same. That is the beauty of franchising.

The franchisor not only gains on the economic benefits of opening identical successful units across the country or the world, but also receives profitable revenue from initial franchise fees and ongoing royalty payments.

Further, a franchise company only needs a limited number of personnel to sell franchises and then provide training and ongoing assistance. As franchisees learn how to operate the business, they require less attention and yet continue paying an ever-increasing sum to the parent company as royalty.

However, the franchisor cannot simply rest on his laurels. As the franchisee brings in more money, it is up to the franchisor to innovate with more products and services, and actively promote them.

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Franchising
The Science of Reproducing Success
Gaurav Marya, President, Franchise India

Size: 6” x 8½“
Binding: Paperback with gatefold cover
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