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PROJECT REPORT

ON

“FRANCHISING”

Submitted to:

Ms. Kishori Ravi Shankar

Faculty, SSCBS

Submitted by:

Aaina Aggarwal (4939)

Pratiksha Sharma (4940)

Saloni Lakhotia (4943)

Jitisha Malhotra (4951)

Laksh Bhambhani (4708)

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 ACKNOWLEDGEMENT

Our first step towards this project started with the motive –“Learning
about Franchising” and henceforth we began our research on franchising
and its importance.

Firstly, our deepest gratitude to our project mentor, Ms. Kishori Ravi
Shankar, Faculty, SSCBS, for her invaluable support and guidance.

Our heartfelt thanks to all the authors of the various articles referred to by
us as well as to all those people who shared their valuable time and
knowledge with me.

This project would not be complete without thanking my institution

“Shaheed Sukhdev College of Business Studies” for giving us an
opportunity to have an enriching experience in terms of this project.

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TABLE OF CONTENTS

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WHAT IS FRANCHISING?

Historically, many people have viewed franchising as an industry or as a

method of distributing goods or services. Franchising is much more.

Franchising may be defined simply as: a business opportunity in which the

owner (franchisor) of a service or trademark product grants rights to an
individual for local distribution and/or sale of the service or products and,
in return, receives a payment or royalty in conformance to quality
standards. This definition encompasses more than a distribution system
and is not limited to specific industries. This explanation of franchising
also specifies activities of the primary parties including the franchisor and
franchisee.

Franchising embraces many different forms of business relationships and

marketing techniques in providing and delivering a vast plethora of
products and services to the end consumer. Large and small companies in
a variety of industries, such as automotive products and services, book
stores, business brokers, clothing and shoe stores, construction and
service operations, convenience stores, fast food, restaurants, hair salons
and services, home furnishings, hotels and motels, optical aids and
services, travel agencies, and even telecommunications services have
developed and adopted the franchising method of doing
business. Franchising involves the proper utilization of management
techniques and functions, marketing, distribution, promotion, financial,
accounting, and legal systems.

HISTORY OF FRANCHISING

The origins of franchising can be traced back to the middle ages (400
A.D.-1500 A.D.). At that time, it was an accepted practice for local
governments to offer important persons, even high church officials, a
license granting them the right to maintain civic order and to make

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special tax assessments. Courts or lords could also grant rights to others
to operate ferries, hold markets, and perform the business activities today
carried out by professionals and craft guilds. The licensee (or franchisee)
would pay the licensor (franchisor) a specific fund from the tax revenues
collected or assessments made and in return receive military or other
forms of protection.

Queen Isabella of Spain probably used (invented) a franchising system

when she awarded Christopher Columbus a "franchise" in 1492 to develop
travel and trade with the new world. It is fascinating that from the new
world franchising would be introduced and reestablished in the 20th
century.

Additional progress was made during the early 19th century in England
when tavern and pub owners, while experiencing financial hardship,
turned to brewing companies for financial assistance. The tavern and pub
owners in return for financial assistance, were required to purchase all of
their beer from that specific brewer. Once again, the franchising system
was an inaugurated even though the brewers did not regulate or restrict
the tavern owners in any other way. This method assured the brewers an
outlet for distributing their products and allowed the tavern or pub owners
to conduct their business any way they desired.

In the United States franchising developed in the 1850's when the Singer
Sewing Machine Company formed a franchise in 1851. Singer had been
experiencing difficulty in marketing its new product. Singer needed to
educate customers before they would purchase a "machine for
sewing." Because the sewing machine industry was in an infant stage of
development, Singer did not have the necessary capital to develop a large
sales force or to open a series of company branch offices. Agents were
then commissioned to demonstrate, sell, and repair the Singer line of
sewing machines. This was done through a franchise
system. Interestingly, once the sewing machine caught on, the company

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changed its marketing approach and began selling its machines
exclusively through company owned stores during the 1860's.

In the late 1800's a significant change occurred because of the industrial

revolution. Automotive manufacturers became involved in efforts to sell
and distribute their products. In 1898, William E. Metzger of Detroit
because the first official franchisee of the General Motors
Corporation. General Motors, up to that time, had been selling directly to
customers from assembly plants or through agents on a consignment
basis. The General Motors Corporation lacked the capital to open retail
outlets. Because of this, they began selling autos through their franchise
system of dealers. From that simple beginning, franchising has spread
throughout the American economic system.

Henry Ford followed the example of General Motors and, after establishing
a mass production system for the Model T, he looked for an efficient
mechanism for the distribution of the product. The answer:
franchising. Henry Ford focused on establishing dealers in as many
communities as possible throughout the United Stated. His vision is the
same as yours or mine. The number of dealers would only be limited by
the anticipated production levels of the Ford Motor Company. Other
franchises began soon after. Rexall Drugstores began developing
franchising in 1902 by Lewis Ligget. Western Auto began franchising in
1909 by establishing dealership programs out of their company-based
operation in Kansas City. In 1925 Howard Johnson offered his three
flavors of "superior" ice cream from his Wollaston, Massachusetts,
drugstore. His franchised ice cream business expanded to a group of
restaurants of the east coast and in 1940 appeared on a turnpike followed
by the first Howard Johnson Motor Lodge in 1954.

The franchise boom did not begin until the early 1950's and probably the
most famous franchising story occurred in 1955 when Ray Kroc started
McDonald's by stressing quality, service, cleanliness, and value (QSCV). It
was that same year that Harlan Sanders also found his niche by

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establishing Kentucky Fried Chicken, and in 1959 the International House
of Pancakes opened its doors and have sold countless millions of
breakfasts since.

Franchising continues to grow and expand today. It is one of the most

unique business methods ever conceived or developed and provides the
opportunities for both the parent headquarters organization and
independent business people to join together in an effort to promote
products, services, and receive profits.

TYPES OF FRANCHISING

There a four types of franchising opportunities available with varying

levels of qualification requirements.
• Single Franchise - This is the beginning level and common form of
franchise participation. The Franchisee is awarded the exclusive
rights to operate a single unit franchise in a specified geographic
area. It could be a home-based business or have a physical
location. The franchisee is typically a hands on operator of the
business.
• Multi Unit Franchise - The franchisee owns and operates more
than one franchise unit. Units may be in random areas of your
choosing. The franchisee is typically less involved with each
individual unit, but manages the multiple unit operations.
• Area Development Franchising - The franchisee will own an
exclusive territory and will agree to a development schedule for the
number of units they must open and operate. There is typically a
significant reduction in franchise fees and possibly ongoing
royalties. Area Developer franchisees usually have managers for
each unit.
• Master Franchising - Sometimes called a master or regional
developer, a master franchisee has the exclusive franchise rights in
his or her area (usually a metropolitan area or even an entire
state). He acts as the business development partner for the

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 franchise company in his specific territory or region, i.e., a state,
counties or metropolitan area. The master, in addition to opening
franchises, sub-franchises (selling a single unit and multi unit
franchises), keeping a significant portion of the franchise fee as well
as ongoing royalties from the franchisees within his or her area.
There may also be additional income available from distribution of
products through the franchisees in the area. The master
essentially becomes a franchisor in his or her own area without
having the costs of the trial and error the original franchisor went
through.
• Absentee Investor - For the right kind of business, with the right
employees running that business, it is possible to own a franchise
business and not be directly involved in its day to day
management. With this approach, you can keep your job and build
equity and wealth toward your retirement years through business
ownership.

ADVANTAGES OF FRANCHISING

A franchise is a right to market, create, and sell another company’s

products or goods. That right is granted to the franchisee to work within a
specific geographical area while abiding by specific company rules. Most
people think of Subway, McDonalds and pizza chains when they think of

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franchises, but there are many other types of franchises including auto
stores, UPS stores and even senior living centers.

Most people buy and open a franchise business to be their own boss, to
follow a passion or because they’ve heard that a franchise can be quite
profitable. Whatever the reason for wanting to open a franchise, there are
several measurable advantages.
There are seven main advantages to buying a franchise:
Name Recognition
When you open a franchise you immediately have an established brand
and/or product people are already familiar with. The name is
a trademark and identifies your company or service. You have name
recognition from the beginning. In contrast, when you open your own
business there’s no familiarity; a franchise offers what you need to get
customers in the door from day one.
People today want guarantees like never before and name/menu/brand
recognition gives them that assurance. Everyone knows what to expect
when they stop at your franchise because the majority of them are repeat
customers even if it’s the first time in your store. You get to take
advantage of the fact that a family from out-of-state, for instance, who
has previously enjoyed your franchise’s products and services, will think
nothing of visiting your facility because of their past positive experiences.
In fact, like an old friend, they are counting on you to be there.

Proven Business Model

You can work from an established and proven business model that’s been
in use since the first store was opened under the company. Basically, a
business model is a plan that a company devises to be profitable. All of
the math is already done for you too; you know from the beginning how
much cheese you can put on every pizza, how much bread to bake, or
how much motor oil to buy. There’s no guessing and no trial and error.
You’ll also have access to successful business plans, making writing your
own business plan much less painful.
Training

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You are trained in all aspects of the business by professionals who know
the business. As part of the franchise deal, you’ll get onsite training in all
facets of the industry including, but not limited to, how to make pizza
dough, how to use the computer software and how to manage the books.
Additionally, you’ll have ongoing access to support and resources,
including franchisee seminars, classes and continuing education.
Advertising
Advertising can be one of the biggest expenses for any new business and
for good reason. You can’t survive without effective advertising and
effective advertising is expensive. These days, even if you have a prime
location, if customers are unfamiliar with what you have to offer they
won’t come in. Franchises offer national advertising campaigns that are
included in your franchise fee. This is a huge benefit when considering a
franchise.

National advertising campaigns are often included in your franchise fee.

You can be sure that the company will advertise because they want you to
be profitable; these advertisements are broadcast nationally.

Turnkey
Franchises are a turnkey business. With everything already in place,
tested, and working, you can open a business quickly.
• Branding
The first thing Franchises offer franchisees is a strategic identity that is
not only effective, it has cumulative market impact. Corporate Brand
Identities are proven. Mega-brands like McDonald’s and Dunkin’ Donuts
have literally spent millions on their brandings and logos and the
franchisee gets to take full advantage. Most Franchisors have already
survived decades in their respective industries and are easily identifiable
to the public. A successful brand is one that is remembered, and
Franchises have some of the most successful brand identities in the world.

• Support

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Unless you were raised in the specific business you are trying to start, you
will need special training. Franchise Head Quarters will train you in
everything from the technology involved, to the accounting, to standing
behind the counter and taking money. Ongoing and online support is
always available as well as special alerts and continuing education.
Franchisors want you to be successful and they make themselves
available every step of the way. After all, they want to keep selling
franchises and high success ratios keep potential franchisees coming.

DISADVANTAGES OF FRANCHISING:
There are several disadvantages to buying, owning, and managing a
franchise. The top 7 disadvantages to buying a franchise are outlined
here.
• Initial Cost
The money you’ll have to obtain to start a franchise can be quite steep.
Many franchises cost $50,000 or more to purchase. In addition, you’ll have
to purchase equipment, purchase and manage inventory, and lease a
building or a space in a strip mall.
• Strict Guidelines
You’ll have to follow a long list of guidelines, and you’ll have to follow
them to the letter. These restrictions can limit how you can advertise,
what you must charge for the products you sell, and how much of an
ingredient you can put on a food product. Some people are better at
following these guidelines than others, and thus are better suited to be a
franchisee.
• Lack of Guidance and Support
While guidance, support, and training can be an advantage, lack of such
tools quickly becomes a disadvantage. Most larger companies offer plenty
of support and access to resources, but smaller companies may not.
• Ongoing Royalty Payments
A company has to make money on their product. When they sell franchise
rights, they earn a royalty on each store. It’s up to the franchise owner to
make these royalty payments.

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 • Limited Growth Potential
If you own a franchise, you own one business that's governed by someone
else. If it’s a Subway restaurant, you’re only ever going to have so many
customers. In contrast, if you own your own successful business, you can
grow, hire more employees, and perhaps eventually even offer your own
franchises. If you really want to grow a business, you may be better suited
for a family business you create.
• Fallout
If a Wendy’s patron claims to have found a severed finger in their
hamburger, and you happen to own a Wendy’s franchise, you can expect
your business to suffer. Even though your restaurant is not guilty of the
offense, you will be deemed guilty by association.
• It’s Your Headache
You have to interview and hire your own employees. Often, as in the case
of fast food restaurants, your employees will be new to the workplace.
They may have difficulty performing the duties of the job, acting and
dressing professionally, or arriving on time, for instance. When an
employee doesn’t come to work, you’ll have to step in or find someone
else to take their shift. Some franchises only require one employee during
certain times of the day, and if that employee doesn’t arrive at work,

you’ll be the one to take over.

THE PROCESS OF BUYING A FRANCHISE

The process of buying a franchise is a very long process that should be
pursued very carefully. There are many factors to consider, and many
steps to take during the franchise-buying process. The following 5 stages
will help you better understand the franchise buying process.

1. Choosing the Right Franchise

This is by far the most crucial step of the franchise-buying process.
Deciding which franchise to buy is very difficult since there are thousands
to choose from. You should choose a franchise you have interest in, or

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choose an industry in which you have past experience. Also, you must
choose a franchise that is financially right for you. Remember, this will be
a life-changing experience, so make sure you make the right choice.

2. Deciding What Franchise You Can Afford

You must remember to ask a lot of questions and find out exactly what
your overall investment is. If a franchisor is advertising “$50,000 Initial
Investment,” this does not mean that this amount is all you are required
to invest. This $50,000 will probably represent your down payment and
possibly a part of your franchise fee. There are many other costs involved,
including the franchise fee, legal fees, build-out costs, supplies and
working capital. Get an overall list of the items that make up the total
investment and make sure it is something you feel comfortable with.

3. Steps to Take After You Choose Your Franchise

Once you have decided on a franchise that fits your lifestyle and budget,
the next step is to investigate the company. When you buy a franchise
you are not only buying a system but you are also at the beginning of a
(hopefully) long-lasting relationship. You want to make sure it is the right
relationship. Take your time and investigate the company thoroughly.
Meet with all of the top executives in the company. Track down existing
franchisees on your own and ask lots of questions.

4. Hiring a Franchise Attorney

Anyone who is considering buying a franchise should consult with a
franchise attorney. This will help you to make sure you understand exactly
what is expected of both you and the franchisor. You will do this by
reviewing all of the franchise documents with your franchise attorney. It is
imperative that you understand all of the terms and all of the
documentation up front.

5. Preparing Your Business Plan

If you are borrowing money to buy your franchise you will need a business
plan. Creating a business plan will not only help you receive financing, it
will also become your guideline for success. Another reason you need to

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create a business plan when buying a franchise is to set your own
personal goals. Any investment you make should always be researched,
well thought-out, and follow a certain structure. Creating a business plan
will keep you on the right track and help you focus on achieving your
goals.

FRANCHISING IN INDIA

Franchising is in its early stages in India, and has become increasingly

popular as a means of doing business in the past few years, both in terms
of international franchises and domestic ones. As a result, the Franchising
Association of India was set up in Mumbai, in 2000 which has links with
other such associations around the world. The Franchising Association is
still considering whether it should have a Code of Conduct or whether they
should press for specific legislation in relation to franchising. The difficulty
with a Code of Conduct is that not all franchisors and franchisees are
members of the Association and it is difficult to enforce.

Regarding the background, international soft drink and hotel franchises

arrived in India as early as in the 1960s, but in 1977 the Government of
the day had expelled foreign brands from India. The foreign brands
started returning gradually from the mid ‘80s. In the 1990’s as the market
opened, foreign franchises started coming in gradually, and faced many
hiccups along the way especially KFC, Schweppes etc. Since then there
has been progressive entry of international franchises, some have been
successful and others not so fortunate. The well-known franchises relating
to soft drinks, ice-cream parlours or restaurants include Pepsi, Coke,

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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. Retail franchises include Marks & Spencer, West
Side, Evita Peroni, Pepe Jeans and Adams. Courier companies like Air
Action and DHL are there along with computer and software related
franchises. The Government has liberalised the rules and regulations in
relation to the retail industry and a boom in this sector is on its way.

Franchising has also become a popular method of doing business within

India with the franchisor granting numerous unit franchises in a wide
range of areas. This has been the case in respect of IT education and
franchises such as APTEC, NIIT, and STG. Then there are 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.
There are numerous cargo and courier companies like Blue Dart, ADL,
Dartmail, Blaze Flash, First Flight, Professional Couriers and DTDC.
Clothing retail outlets especially for designer clothing include Bentley, L.F
Couture, Ritu Beri and Deewan Sons. Other retail chains include Shopper’s
Stop, Lifestyle and Ebony. There are Indian travel agencies which now
want to franchise abroad like Uniglobe or expand locally like Travel Port.
Now the major area for local franchises seems to be healthcare with
Apollo Hospitals and various diagnostic centres. Shanaz Hussein beauty
saloons and products is already an international franchise, and slowly
other Indian franchisors are likely to look to expand internationally with
the easing of restrictions by the Government especially since 2000.

It took some time for international franchises to become acceptable

because of certain attitudes of Indian businesses towards foreign
franchises whereby they could not understand why the Indian party had to
make all the investments in India and on top of that had to make hefty
payments in foreign exchange to the Master franchisor. Indians feel the
foreign franchisor or business should also invest, participate and have
some interest in the development and success of the entire business. If

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the brand name is very well known world wide and the product is
marketable in India, then the attitude can significantly change, as it is
obvious that the local business would profit just by riding on the back of a
well known brand. If the brand is well known in another country but not in
India or to Indians travelling abroad, then it is difficult to convince an
Indian businessperson to pay lump sum payments or royalties as its worth
is not the same in India. That again can be overcome if the product or
service provided by the franchise is in short supply in the country and
important to its development. Market research and pilot projects can
assist in assessing the prospects of any international franchise in India.

The lower the price a product or service can be sold at, the more
customers they are likely to have. Some products may be designed to
appeal to the masses and other high price items can be marketed just for
a select clientele like those in big business, professions, the film industry
or celebrities. Expensive cosmetics and beauty therapy from abroad is for
the latter. The needs of the affluent has been met already with many
expensive products in the market, however there is still scope in the retail
sector for cheaper goods in terms of clothing or cosmetics. In the soft
drink and fast food sector, Coke, Pepsi, McDonald and Pizza Hut have
already captured the mass market.

In many instances the products sold by the franchise outlets may have to
be significantly tailored to local taste, which may go against the
franchising concept or principle that outlets should be identical, and a
customer should find identical quality of goods. If one goes to a
McDonalds or TGIF or Pizza Hut in India, the food tastes different and the
menus are geared to local taste and culture. For instance, people like
spicy food, and beef and pork have to be absent in the menu to avoid
offending religious sentiments. In relation to Restaurants and pubs, even if
families would like to go together, the licensing laws in many states
prohibit entry of persons less than 21 years to go to an eating place or
restaurant where liquor is sold. Regarding retail franchises involving
clothing, the children’s wear and men’s wear is similar to any other

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western country except that the material has to suit the tropical climate
and relatively milder winters. The women’s fashion however, is
significantly different with the majority wearing salwar kameez or saris.
Western clothes like suits, trousers, skirt and tops for women are
becoming popular among teenagers and women in cosmopolitan areas of
large cities.

A foreign franchisor needs to be aware of local culture and custom, and

when deciding on franchise fees or other payments they have to consider
realities about the buying power and people’s habits about spending and
not make assessment on the basis of population numbers. Research
should be done on the viability of any product or service in any given
state in India.

LAWS

There is no specific legislation or rules applicable to franchising. There is

considerable discussion going on the aspect of whether disclosure laws
should be introduced. It is advisable that parties disclose and exchange
information on each other and due diligence is carried out before entering
into a formal agreement. There are remedies however, under the Indian
Contracts Act and Specific Relief Act for breach of contract or
misrepresentation.

It is also advisable that the franchise is structured in such a manner that it

fits around the rules and regulations and also best protects the interests
of the parties. There are several Governmental permissions that would be
required before an international master franchise can be granted in India.
There are also restrictions on the number of shares a foreign company or
person can hold in an Indian company if the joint venture option is taken,
and there are restrictions on payment of royalties if it is a technical
collaboration agreement between the foreign master franchisor and Indian
master franchisee. Payments for Master franchisors are best spread out
between lump sum fees, royalties, consultant’s fees, and design and

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engineering fees. One needs to check the areas where incentives are
given by the Government in terms of allowing more foreign shareholding,
tax breaks and royalties. It is often in the area in which franchises exist,
like in the hotel and tourism industry.

It is important that the trade marks and copyright in relation to the

product or service provided by the franchise is registered by the master
franchisor in India if it intends to expand into that territory. The new Trade
Marks Act 1999, which came into force in 2003, protects both trade marks
and service marks. The master franchisee can be registered as
permitted/licensed user. This would protect the franchise from
infringement by third parties and make it easier to obtain injunctions if
necessary. Various remedies are available under common law and
criminal law against violation of intellectual property. In relation to
opening outlets in various parts of India, it is necessary to check the state
and local laws relevant to the town or city.

The new Competition Act 2002 is aimed at promoting free trade and
ending protectionism. The main areas that are dealt with by the Act are
the prohibition of anti-competitive agreements; prohibition of abuse of
dominant position and regulation of combinations. This prohibits
franchisors and franchisees from entering into agreements, such as those
involving tied sales, price fixing and other monopolistic trade practices.
This Act interprets agreements in a very wide sense including all kinds of
arrangements and understanding whether formal or informal, written or
oral which has the desired effect, whether or not such arrangement,
understanding or action is intended to be enforceable by legal
proceedings.

For Indian master franchisors seeking to expand to other countries,

significant positive changes have been made since the Foreign Exchange
Regulation Act 1973 was replaced by Foreign Exchange Management Act
2000 and rules made under it. Still permissions have to be sought under
the latter before doing business abroad and there are limits or caps

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regarding the foreign exchange available. It is much easier for Indian
companies who are earners of foreign exchange and those that have
foreign branches or subsidiaries.

FUTURE OF FRANCHISING IN INDIA

Franchising, today contributes roughly about 1% of the total retailing
activity in India. This is no doubt a very grim picture for the franchising
community. When carefully observed behind this gloomy image India has
a very big opportunity. With the internationalization of franchising and
emergence of new technology, it is a dynamic method of doing business.
It is in keeping with the liberal philosophy according to which without
freedom, the human spirit languishes and the economy stagnates. With
the issue of global governance, there seems to be a growing trend of
drinking water being supplied as a commodity with a profit motive.
Though the issue of global governance and water is debatable as the
same can be conceived as commodification of water, the possibility
cannot be denied that the future may involve corporatization of water and
provide opportunities of franchising! As Asian and world economies, grow
with the ever increasing populations and the move toward free market
economies, new franchise concepts will come on the scene and the solid,
well-managed existing Franchise companies will continue to grow. The
well-known practice of Latin America is of getting a government franchise
for a particular business.
Economic development is the precursor to social development. The vital
component of a progressive economy is the number of entrepreneurs.
Franchising clearly offers aspiring, new business owners the best possible
chance of succeeding with the least risk. The major advantage is that the
system, the means for distributing goods and or services, has been
developed, tested, and associated with the trademark. Within two to three
decades or less, franchising in India and most parts of the world shall
comprise over 50% of the retail economy, and will employ millions of
people and will enable hundreds of thousands to realize their dream of
successful business ownership. Programs exist that are designed for low-

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income individuals aspiring to be entrepreneurs to provide franchise
opportunities.

In around mid 2006, India’s GDP (on a Purchasing Power Parity basis) is
going to cross the magical figure of USD 3300. After crossing this figure
what can be expected is a sudden growth in demand of consumer
durables, mobile phones, better utilities and everything that is needed for
a better standard of living.

The hotel industry is at the forefront. Brands that dominate the Indian
hospitality market place. Chain affiliation is the key word. A chain can be
effective if its components adhere to brand standards. Customer
satisfaction at one member hotel is directly proportional to customer
preference for the brand. Networking and teamwork are the positive
characteristics associated with success in this field.

Therefore, an environment conducive to franchising seems to be

developing. There is a move toward better protection of franchisee rights
and over time, this should push more franchisors towards structuring their
Relationships with their franchisees in a totally win-win manner. It is a
common perception that the current regulatory framework affords little
opportunity to small business franchisees to obtain redressal in the event
of conflict with the franchisor. The power equation is generally in the
favour of the franchisor. The attorney of the franchisor who drafts the
agreement could err by overemphasizing the rights of the franchisor and
magnifying the obligations of the franchisee. Progressive attorneys now
seem to have realized that there should be no room for ambiguity in the
agreements. Vague agreements written in bad language underplaying
rights of the franchisee can be rejected. This encourages a review of
outdated agreements. The best franchisee support structures are
provided by franchisors to protect them. The mutual goal is success for
both parties. The franchisor contributes his brand, products, mode of
operation, system, and marketing. The franchisor also sets the rules,
guidelines, and product quality to be followed by all of its franchisees. The

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expertise of the franchisor and the hard work of the franchisee translate
into a strong partnership.

The growth of franchising is inevitable, because of the inescapable logic of

the underlying concept. Business owners realize the importance of finding
ways of reaching out and creating a distinctive brand image with respect
to customers. This synergy creates competitive strength. Franchising to
reiterate is a WIN-WIN-WIN. The Franchisor wins by having a presence,
whereas the franchisee wins by owning a profitable business and the
society wins at large by having superior products and services.
Franchising in this century will be highly influenced by Technology and
Internet. Technology improvements, notably in telecommunications,
computers and the Internet, are having a major influence on franchised
businesses. Technological developments including the Internet are having
a significant impact on franchising. The Internet is still moderately new,
yet it is rapidly shifting the business environment, changing the way we
process information, network and carry out business activities. Several
franchised businesses are in the pursuit to be on-line, and to consider an
appropriate Internet Marketing and Advertising Strategy

They are looking to make the most of the opportunities this new
technology provides (reduced costs, rapid expansion, increased sales),
whilst simultaneously attempting to protect themselves from a new class
of competitors (e.g., new, often global competitors) accompanying it.

The Internet is threatening the survival of retailers. Brick and mortar

travel agents are almost extinct. Consumer centric E-commerce sites are
mushrooming the virtual market. Many franchisors have already taken the
initiative towards building their brand on-line by establishing and updating
a web site. Most provide information to the market for end users of
products/services, as well as the market for franchisees and investors. In
addition, some franchisees are establishing their own sites .

In this era of co-operative competition, Franchisors today are collaborating

with competitors and complementary product/service providers to explore
co-marketing and other strategic synergetic opportunities. The

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development of the Internet is also responsible for a new range of
challenges to the franchise relationship. While the Internet provides a
wonderful opportunity to build sales globally, there are a number of issues
between franchisors and franchisees that need be resolved.

One key question is who can develop what? It appears most franchisors
want to control Internet developments centrally, and do not want
franchisees starting their own web sites. There are exceptions, however
with others believing multiple sites help build brand awareness. However
franchising is synonymous with uniformity and ensuring uniform websites
would call for a different set of rules.

Another question involves who bears the expense for setting up the
website? In addition, critical to this is yet another - how are profits
distributed? These are particularly pertinent issues given the company's
web site may compete for customers in the franchisees territory. Some
franchisors want to keep profits for themselves, claiming that while the
web site may take some sales, the increased awareness it provides to
local franchisees far outweighs this. Franchisees argue however, that such
web sites cannibalize sales and diminish the value of the franchise.

Technology and Internet has led to a whole new set of franchised

businesses. An Internet company, World Sites assists small and medium
businesses establish affordable websites and a wide range of other
services. It would be difficult to imagine such unique concepts without the
role of technology. Overseas, the number of Internet related businesses
has been growing consistently; the same trend can be expected in India,
in the coming years.

FRANCHISING IN NICHE MARKETS

Niche markets are developing around a new set of consumers. These

consumers are small in number and look at specific services. Eg. Senior
Care services are popular globally, however they have not yet penetrated
in India. These consumers are over 55 years of age, and affluent and they

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are now looking at enriching their lives by being involved in their hobbies,
they would not want to be involved in trivial day-to-day activities.

As a consequence, more franchised businesses are developing marketing

campaigns specifically for them. Some have gone further and added new
products and services. In yet a further illustration of the importance of this
segment, whole new franchise concepts are emerging. Further growth in
these areas seems inevitable. Such franchise business flourishes here by
catering to a few, but very profitable consumers.

Competition, Franchisors face competition in every segment, and it is

going to intensify. Also indicative of the potential for increased
competition are the plans of strong overseas franchise systems. Most
international franchise companies are bullish on the potential of
franchising in India and are willing to invest for a long-term basis. Many
seek additional growth and believe their home markets to be nearing
saturation. Further, many in fact need growth, in order to satisfy analysts
following their stock.

SOURCES

• http://www.wikipedia.org

• http://www.evancarmichael.com

• http://www.businesslink.gov.uk

• http://www.franchisebusiness.in

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• http://www.franchiseindia.com

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