Agend

a
Concept of Franchising

Evolution of Franchising

Types of Franchising

Advantages & Disadvantages of Franchising

Franchising in India
Concept of Franchising
A franchise is the agreement or license between two legally
independent parties which gives:

 The trademark of another business.

 Operating methods of the franchisor.

 Obligation to pay the fee for these rights.

 Obligation to provide rights and support to franchisees.

Concept of Franchising
Evolution of Franchising
“franchise” derived from liberty.

Franchising has promoted economic liberation, synergy,

and opportunity.

The desire to expand and control.

Limitations on human and financial capital.

The need to overcome great distances.

Early Franchise Entrants

1898 - Automobile Manufacturers

Division of responsibilities:
- manufacturers - design & production
- dealers: sales & service
Coca Cola Company

1886 : coca-cola invented

1899 : Thomas & Whitehead 600-word contract
promised to open a bottling plant
• 1901 : no capital to open the bottling plant …?
• 1919 : 1,000 franchised Coca-Cola bottlers
Gas Stations

1930’s - Depression Era Franchising

First example of Conversion Franchising
Taxation of all company-owned gas stations
Why pay that? …. let’s FRANCHISE
Also quicker local response to price changes
Fast Food Fifties
Harlin Sanders - gas station
closed pumps: 142 seat restaurant
1950’s: turned down $164,000
1960 (200) 1980 (6,000)
2007: 13,433 KFC’s world-wide

• San Bernardino, CA 1940

• Dick & Mac McDonald
• inspired by Henry Ford’s assembly
line
• Ray Kroc - multi-mixer salesman
• world’s largest chain of FF-rest’s
• over 31,000 locations world-wide
1960’s, 1970’s, 1980’s,
1990’s
Franchising Timeline
 Kings, Courts and Lord – Franchising
Pre-1800.

Drinks, Cars and Sewing Machines

--1800 to 1900.

A Period of Steady Growth – 1901 to

1950.
Franchising Timeline…
Build Along the Highway – 1951-1969.

New Regulation and an Oil Embargo – 1970 to

1985.

The Current Status and Reasons for New Growth

– 1996 to the Present
Types of Franchising
Business to Business service.

Retail Franchise.

Investment Franchise.

Management Franchise.
Types ……
Single operator Franchise.

Executive Franchise.

Sales and Distribution Franchise.

Advantages of
Franchising
Branding.

Advertising.

Name Recognition.

Reputation.

Support.
Advantages ….
Expansion .

Legal considerations.

Operational Considerations.

Bulk purchasing power.

Disadvantages of
Franchising
Their way or the Highway.

Ongoing costs

Ongoing support.

Cost
Disadvantages……
Price

Conflicts

Control

Shark - Infested waters.

Franchising in India
VIBRANT ECONOMY

GDP GROWTH RATE OF OVER 8% OVER LAST THREE YEARS.

AIMING FOR A FURTHER RISE IN GDP.

CONTINUING PROCESS OF SUSTAINABLE REFORMS

TO LIBERALIZE ECONOMY.
CHANGING INDIAN
LIFESTYLE
LARGE & INCREASING CONSUMER BASE WITH DISPOSABLE INCOME.

RAPIDLY INCREASING INDIAN MIDDLE CLASS SEGMENT WITH

GOOD PER CAPITA INCOME & PURCHASING POWER.

RAPIDLY INCREASING DEMAND FOR BRANDED & IMPORTED

PRODUCTS & SERVICES.

REDUCTION IN INTEREST RATES BY BANKS.

IMPLICATION OF VAT (VALUE ADDED TAXATION).

RECENT POSITIVE
FACTORS
RAPIDLY GROWING ORGANIZED RETAIL.

51% FDI IN SINGLE BRAND RETAIL.

LARGE CONSUMER BASE.

Franchising current
scenario
 While Franchising has been growing rapidly over the last 4-5
years , it is now at a take off stage. Currently Franchising
accounts for just over 4% of the country’s gross domestic
product, Franchising is a sector that is waiting to happen.

 Industries such as clothing, footwear, computer education, F&B,

healthcare, entertainment, beauty, fashion & fitness, distribution,
automotive and many more have already found their presence in
the Indian Franchise arena.

 Currently there are more than 750 Franchise system operating in

India, which includes both national & International Franchisors.

 There are over 50,000 franchisees (across sectors) in India today.

 The Franchise industry has been growing at a rapid pace of

around 30-35% during the last 4-5 years.
Annual Turnover from
Franchising
Annual Turnover from Franchising

More than 500

50 - 100 crores
100 - 500 crores crores
4% 5% 2%

20 - 50 crores
11%
Les s than 5
crores
5 - 20 crores
54%
24%
AND DON'T FORGET…

… dinosaurs sometimes