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FRANCHISING
International Business MethodInternational Business Method
Institute of Business and Information Technology
Maria Iqbal F07B110
Maleeha Ghaffar
F07b117 Anum Shehzad
F07b120 Nayab Nasir
F07b127 Saher Javed
F07b131
GROUP MEMBERSGROUP MEMBERS
Institute of Business and Information Technology
Singer sewing machine (1850)
Coca-Cola
Fast food establishments (1933)
BackgroundBackground
Contractual relationship between the franchisor and franchisee in which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee.
The agreement is governed by a contract, the Franchise agreement, which runs for a defined period of time, generally renewable and ranging from five to 20 years.
What is FranchisingWhat is Franchising
Use of franchisor’s trade name, format, system and/or procedure under license
Means to raise capital and expand quickly Assistance to franchisee
Marketing, management, advertising, store design, standards specifications
Payment by franchisee by way of royalty, licensee fee or other means
FranchisingFranchising
Franchising is more than distributorship
Extends to an entire operation or method of business
Greater assistance, control and longer duration
Distributor merely re-sells products to retailers or customers
FranchisingFranchising
TYPES OF FRANCHISETYPES OF FRANCHISE
Institute of Business and Information Technology
3 main types of franchise:
1. Product distribution franchise;
2. Business format franchise; and
3. Management franchise.
A product distribution franchise model is very much like a supplier-dealer relationship.
Typically, the franchisee merely sells the franchisor’s products. However, this type of franchise will also include some form of integration of the business activities
1. PRODUCT DISTRIBUTION FRANCHISES
1. PRODUCT DISTRIBUTION FRANCHISES
Examples of famous product distribution franchises :
EXAMPLESEXAMPLES
1. PRODUCT DISTRIBUTION FRANCHISES
1. PRODUCT DISTRIBUTION FRANCHISES
Produces the syrup concentrate Sells the syrup
concentrate
FRANCHISEE Produces the final drink
Retail Stores
Restaurants & F&B Outlets
Vending Machine Operators
In a business format franchise, the integration of the business is more complete.
The franchisee not only distributes the franchisor’s products and services under the franchisor’s trade mark, but also implements the franchisor’s format and procedure of conducting the business.
2. BUSINESS FORMAT FRANCHISING
2. BUSINESS FORMAT FRANCHISING
EXAMPLESEXAMPLES
A form of service agreement.
The franchisee provides the management expertise, format and/or procedure for conducting the business.
3. MANAGEMENT FRANCHISE
3. MANAGEMENT FRANCHISE
EXAMPLESEXAMPLES
Advantages of FranchisingAdvantages of Franchising
Buying a name/reputation
Established markets
Technical/management assistance
Standardized procedures
Quality standards
Selection of location
Facility design
Quicker cash flow
Disadvantages of FranchisingDisadvantages of Franchising
Loss of independence
High initial fees
High royalties and advertising allowances
Contractual restrictions
Inapplicable advertising
Termination clauses
Not receiving promised help
Unsuitable products
Lack of competitive advantage of parent company
Franchise Your Business SuccessfullyFranchise Your Business Successfully
To franchise your business in a fruitful manner, just get answers to some questions such as :
• Do you have a successful business?• Do you wish to see its branches in different corners of the nation? • Do you want to increase your brand visibility? • Is franchising right for you? Is your business expandable?• Will the target audience like your products or services?• Well, to achieve all this why don’t you franchise your business?
BE CAREFULBE CAREFUL
The franchisee is not completely independent.
In addition to the initial franchise fee, franchisee must pay ongoing royalties and advertising fees.
Franchisee must be able to balance restrictions and support provided by the franchisor with their own ability to manage the business
BE CAREFULBE CAREFUL
A damaged image or franchise system can result if other franchisees perform poorly or the franchisor has financial problems.
The duration of a franchise is usually limited and the franchisee may have little or no say concerning termination
Common Mistakes of Prospective Franchisees
Common Mistakes of Prospective Franchisees
Not reading, understanding and/or asking questions about the franchisee agreement and other legal documents
Not understanding the responsibilities of a franchisee and the rights and obligations of a franchisor
Not seeking sound legal and financial advice Not verifying oral representations of franchisor
Common Mistakes of Prospective Franchisees
Common Mistakes of Prospective Franchisees
Not analyzing the local market in advance Not analyzing the competition Not making thorough due diligence of the
franchisor Not choosing the right location
FRANCHISING IN PAKISTANFRANCHISING IN PAKISTAN
Institute of Business and Information Technology
Reason for Franchising
2/3 of franchisees felt that economies of scale in
bulk purchasing encouraged them to consider
franchising
FRANCHISING IN PAKISTANFRANCHISING IN PAKISTAN
Pakistan has a viable middle-class with ample purchasing power. Pakistan offers good opportunity international firms seeking to establish franchise operations in the country.
In Pakistan the concept of franchising was introduced as far back as in early 1950's when soft drinks, such as Coca-Cola, were introduced by local bottlers who manufactured under a license from their foreign principals.
No government restriction on investors who wish to establish a franchise in the country.
U.S. FRANCHISE OPERATIONS IN PAKISTAN
U.S. FRANCHISE OPERATIONS IN PAKISTAN
1.Restaurant: McDonald's, Kentucky Fried
Chicken, Pizza Hut, Subway2.Hotel/Motel: Sheraton, Marriott, Best Western, Ramada 3.Security: Brinks, Wackenhut 4.Car Rental: Avis5.Printing: Alpha graphics 6.Mineral Water: Culligan
U.S. FRANCHISE OPERATIONS IN PAKISTAN
U.S. FRANCHISE OPERATIONS IN PAKISTAN
7.Soft Drinks: Pepsi-Cola, Coca-Cola, Seven-up, 8.Courier Service: DHL, TNT Skypak, Federal Express9.Apparel: Walt Disney, Jockey, Hang Ten10.Footwear: Hush Puppies, Caterpillar11.Entertainment: Time Warner12.Consulting Services: Dunn & Bradstreet
NON-U.S. FRANCHISE OPERATIONS IN PAKISTAN
NON-U.S. FRANCHISE OPERATIONS IN PAKISTAN
1. Apparel: Benetton (Italy), Schieser (Germany) 2. Hotels/Motels: Serena Group3. Restaurant: Pizza Express (U.K.) 4. Education: Asia Pacific Institute of Information Technology (APIIT) of Malaysia
ConclusionConclusion
Franchising – a great model for minimizing risks and maximizing returns
Proven formula for success ready and waiting to be adopted by the new entrepreneur.
Provides proven operating systems, solid research and development, established marketing methods and instant credibility, plus extensive training and support -