Retail Franchising Levi's Strauss
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Transcript of Retail Franchising Levi's Strauss
Franchising is the marriage of both the franchisor and the franchisee.-Dwarika Prasad Uniyal Asst, Prof., Retail Management, Mudra Institute of Communication, Ahmedabad.
Presented by: Ram Niwash Singh Yadav Rol 21, FMS 1
Franchising overview Retail Franchising Retail Franchising in India Franchisor-Franchisee Relationship Franchising case study: Levis Strauss & Co.
It is the granting of certain rights (commercial, technical, nontechnical & intellectual knowhow) by one Party (the franchisor) to another (the franchisee) in return for a sum of money. The franchisee then exercises those rights under the guidance of the franchisor.
Franchisor This is the proprietor/owner of the franchised system. It owns the know-how of the concept and the brand name. It grants franchises to third parties. Franchisee This entity is granted by the franchisor the right to carry on business using the franchisor's know-how under the franchisor's brand.
Ranking 1 2 3
Value Proposition (Franchisors View) Brand Name Economies of Scale Proven Business Format
Value Proposition (Franchisees View) Brand Name Economies of Scale Proven Business Format
Source: Annual Surveys of the Indian Franchise Sector, conducted by FirstFranchising
Ranking Value Proposition (Franchisors View) 1 2 3 Local Market Knowledge Business Experience / Background Investment / Real Estate
Value Proposition (Franchisees View) Investment / Real Estate Business Experience / Background Local Market Knowledge
Source: Annual Surveys of the Indian Franchise Sector, conducted by FirstFranchising
CUSTOMER RELATIONSHIP MANAGEMENT
SUPERIOR LEADERSHIP
BUSINESS AND FINANCIAL PLANING
EXCELLENT FRANCHISES
OPERATING SYSTEM THAT MANAGE RESULTS
EFFECTIVE MANUALS
EXCELLENT FRANCHISOR FRANCHISEE RELATION
FOCUS FIELD STUFF
EFFECTIVE TRAINING PROGRAMME
Model Player Input Premises Interiors Equipment Stocks Management Franchisee s Returns
Pure Franchise Franchisee Franchisor
Management Contract Franchisee Franchisor Franchisee
Hybrid* Franchisor
D
U U U U U
U U
U U U
(50%) (50%) U
U (50%) (50%) U
(Consignment)
Margin on Sales
Rent + %age of Sales
Higher of Minimum Guarantee or Margin on Sales
*many more varieties of the hybrid model exist.
Evaluation
of own skills, interests, and financial
situation Research of opportunities Research of the market Selection of prime location Securing of financing and choosing a franchise Attending training/hiring staff Collecting the necessary permits and insurance
International soft drink and hotel franchises arrived in India as early as in 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 1990s as the market opened, foreign franchises started coming in gradually, and faced many difficulty along the way especially KFC, Schweppes etc.
Pepsi, Coke, Baskin Robbins, Movenpick, Subway, McDonalds, TGIF, Geoffrey's, Taco Bell, Pizza Hut, Pizza Piazza, Dominos Pizza, KFC, Schweppes, OBrians Sandwich Bar, Ruby Tuesdays & Barista, Levis Strauss Co., PUMA, Marks & Spencer, West Side, Evita Peroni, Pepe Jeans and Adams, Reebok, Air Action and DHL
Approximately 600 franchisors spread across industries like education, retailing, professional services, healthcare etc Over 40,000 franchisees Annual turnover from Franchising anywhere between Rs.8000-Rs.10,000 crores Total investments made by Franchisees over Rs.5000 crores Over 300,000 people directly employed by franchised businesses Variety of hybrid formats in practice Number of International franchises already existing, more coming in Acceptability growing by the day Fairly conventional industry spreadSource: Annual Surveys of the Indian Franchise Sector, conducted by FirstFranchising
The Education sector dominates the Indian franchising scenario, although Retail is fast catching up Most of the franchisors are relatively new and small Several large Indian corporates are also going the franchising way Newer & innovative concepts being introduced Substantial interest from international franchisors as well as Indian business houses for master franchises
Positive
Factors
Huge consuming class Fast-growing consumerism Shift towards Services from Agriculture &
Manufacturing Franchising has already proven to be successful in several sectors Large entrepreneurial pool
Negative
Factors
Lack of regulatory framework Financing mechanisms not in place Skewed real estate markets
Herd mentality both franchisors as well as franchisees Several wrong standards of franchisors as well as franchisees To an extent: many franchisees commitment to service quality is
missing many franchisors commitment to provide the promised support to their franchisees is in doubt
Result a tense relationship, which doesnt help anyone
Financing for franchises is a problem area with financial institutions soft expenses not recognised as part of project cost by
many institutions
Legal & disclosure framework for franchises is not in place increases chances of fraud by fly-by-night franchisors
makes it difficult to resolve disputes
Real Estate markets completely unstructured & unrealistic make Franchising unviable for start-up entrepreneurs
Need
for a Controlling Body on Franchising to identify problem and decide solution for open norms & legal framework on the regulatory side importantly, Franchisors as well as Franchisees need to understand & honour promise & responsibilities towards each other
Need
Most
Franchise
India Holdings Limited (FIHL) is Asias largest integrated franchise and retail solution provider since 1999. Franchise India is an authority on franchising, licensing, retail, real estate and marketing.
Levi
Strauss Asia Pacific Division was established in 1995 Strauss & Co.'s Asia Pacific Division is comprised of subsidiary businesses, licensees and distributors throughout Asia Pacific, the Middle East and Africa. division sources, manufactures and markets Levi's, Dockers, and Levi Strauss Signature products through affiliates.
Levi
The
Design developed in Europe
Asia-Pacific head choose design
Arrange fashion show in Mumbai & Delhi
Fashion show attended by Franchisor & Franchise
Franchisee like some product
Franchisee gives order based on sales data and forecasting
Franchisor, Asia division accepts and gives order to vendor
Franchisor source raw material & give to vendor
Vendor manufacture s & give to franchisor
Franchisor distribute product to franchise
Franchisee sell product and earn profit
Franchisee gives margin on sales to franchisor