Concept and terminology, rationale , downsides and implications

FRANCHISE MARKETING CHANNELS

Franchise marketing channels

Franchise a legal agreement between 2 independent parties whereby one of those parties grants a license to the other party to sell a trademarked product or service. A method of distribution Types Product distribution franchise Business format franchise Franchise channel structure Single unit franchise Multi unit franchise /sub franchise

Franchise marketing channel

Franchise fee One time flat fee paid by the franchisee to the franchisor usually when franchisee sign the contract with the franchisor. This is pay to play payment for using franchisors business model. Royalty fee Fixed Percentage to sales Rationale for franchise marketing channels Capital advantage Potential to reduce distribution costs The high level of managerial motivation fostered by franchising

 Franchisee fee is a major source of working capital of franchisor. Franchisee perspective Reduced uncertainty Consumer acceptance Systems, processes and know how of the business.

Down sides of franchise channels Limited flexibility for franchisor Case of burger king $1 double cheeseburger. High expectations of franchisor from the franchisee

Elements of franchise agreement

Use of trademarks Territory Rights and obligations standards., procedures, training, assistance, advertising etc. Duration of the franchise Payment to be made Termination and transfer rights Franchisees point of view Go into business by yourself, but not by your self. Royalty payments fixed A negative halo effectbad images of other franchisee has to effect the others franchisee.

Implications
Channel design High level of control and channel motivation Evaluation of franchise performance Degree of control Importance of channel members Nature of products Number of channel members

McDonald's
25000 units in 115 countries 1.5 million employees World largest private employer Nilgiri and Titan Bata , Petrol pumps, Pepsi, Arrow, Van heusen , Amul etc. The brands which have recently entered in India are Quiznos and Dunkin Donut. Now, more of the American brands like Dennys, Ritas, Pollo Tropical, Applebees and Johnny Rockets are ready to take plunge in Indian QSR market. Cooperative franchising in India concessionaire Automated vending machine for selling liquid milk. FRO for milk products