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aConcept of Franchising

Evolution of Franchising

Types of Franchising

Advantages & Disadvantages of Franchising

Franchising in India

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Concept of FranchisingA 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.

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Concept of Franchising

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Evolution of Franchisingfranchise 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.

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Early Franchise Entrants

1898 - Automobile ManufacturersDivision of responsibilities:

- manufacturers - design & production

- dealers: sales & service

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Coca Cola Company

1886 : coca-cola invented1899 : 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

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Gas Stations

1930s - Depression Era Franchising

First example of Conversion FranchisingTaxation of all company-owned gas stations

Why pay that? . lets FRANCHISE

Also quicker local response to price changes

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Fast Food FiftiesHarlin Sanders - gas stationclosed pumps: 142 seat restaurant

1950s: turned down $164,000

1960 (200) 1980 (6,000)

2007: 13,433 KFCs world-wide

San Bernardino, CA 1940

Dick & Mac McDonald

inspired by Henry Fords assemblyline

Ray Kroc - multi-mixer salesman

worlds largest chain of FF-rests

over 31,000 locations world-wide

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s, s, s,1990s

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Franchising TimelineKings, Courts and Lord Franchising

Pre-1800.

Drinks, Cars and Sewing Machines--1800 to 1900.

A Period of Steady Growth 1901 to1950.

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Franchising TimelineBuild Along the Highway 1951-1969.

New Regulation and an Oil Embargo 1970 to1985.

The Current Status and Reasons for New Growth

1996 to the Present

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Types of FranchisingBusiness to Business service.

Retail Franchise.

Investment Franchise.

Management Franchise.

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Types Single operator Franchise.

Executive Franchise.

Sales and Distribution Franchise.

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Advantages of

FranchisingBranding.

Advertising.

Name Recognition.

Reputation.

Support.

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Advantages .Expansion .

Legal considerations.

Operational Considerations.

Bulk purchasing power.

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Disadvantages of

FranchisingTheir way or the Highway.

Ongoing costs

Ongoing support.

Cost

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DisadvantagesPrice

Conflicts

Control

Shark - Infested waters.

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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.

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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).

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RECENT POSITIVE

FACTORS

RAPIDLY GROWING ORGANIZED RETAIL.

51% FDI IN SINGLE BRAND RETAIL.

LARGE CONSUMER BASE.

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Franchising current

scenarioWhile Franchising has been growing rapidly over the last 4-5years , it is now at a take off stage. Currently Franchisingaccounts for just over 4% of the countrys gross domesticproduct, 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 inthe Indian Franchise arena.

Currently there are more than 750 Franchise system operating inIndia, 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 ofaround 30-35% during the last 4-5 years.

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Annual Turnover from

FranchisingAnnual Turnover from Franchisin

5 - 20 crores

24%

20 - 50 crores

11%

More than 50

crores

2%

50 - 100 crores

4%

100 - 500 crore

5%

Less than 5

crores

54%

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AND DON'T FORGETAND DON'T FORGET

dinosaurs sometimesdinosaurs sometimes