BLS Institute of Management
         Feb 6, 2010
What is Franchising?


“A franchise operation is a contractual relationship between
the franchisor and franchisee in which...
Why Franchise?

• Legal and commercial arrangement
  concerning the successful business of a
  franchisor
• Use of franchi...
Fundamentals

 Why Franchising?
   – Model for Multiplication, Synergising
   – Profitability – For both


 Key attribut...
Why buy a Franchise ?

 • Group Advertising power
 • Owning your business & making day to day decisions
   guided by franc...
Types of franchise

1. Product distribution franchise




2. Business format franchise




3. Management franchise




   ...
Types of franchise: Product distribution franchise

•       A product distribution franchise model is very much like a sup...
Types of franchise: Product distribution franchise


                                                  Produces the syrup
...
Types of franchise: Business Format franchise

•   In a business format franchise, the integration of the business is
    ...
Types of franchise: Business Format franchise




                                                                     Out...
Types of franchise: Management Franchise

•   A form of service agreement.
•   The franchisee provides the management expe...
Key dimensions


   Financial
   Marketing
   License Agreements
   Territory Management
   Systems & Communications
...
Financial


 Financial Model: Win-Win
   – And not that of squeezing the franchisee profits
   – Risk vs. reward balance
...
Marketing

 Branding
  – Centralised, Local Marketing
  – Standard designs / messages

 Understanding Customer needs &
 ...
Marketing


 Advertising and Branding

 Trademark Usage

 Product / Price:
   – Being competitive
   – Meeting customer...
Systems & Communications


 MIS: Franchisee & franchisor
 Systems & Processes:
    For managing the franchise outlet
 ...
License Agreements

• Contains details of the relationship like:
   –   IPRs
   –   Fee to be paid: Initial and ongoing
  ...
Territory Management


 Territory/Area of operation

 Carve territories with a long term
  perspective

 Do not create ...
Engagement


 Training of Franchisee & their
  Employees
 Ongoing support
 Franchisee Meets
 Recognition & Awards for
...
Conflict Resolution

  Three levels of conflicts:
    – Operational – Resolve at field level
    – Policy matters – Resol...
Principles of Continuity:


   1. Win-Win relationship

   2. Business sense to each other

   3. Alignment of Values &
  ...
NIIT's ten commandments of partnership


                        Rationale
                         Customer success
    ...
Customer Delight Council: Objective & Focus Areas




Objective:
To create sustainable competitiveness by pooling in
the r...
Think Tank
of Senior
franchisees




       24     24
Involvement in Strategic Issues




       25                  25
Be in each other’s shoes
           26              26
Nurture openness,
mutual trust & respect
                27       27
Franchising is all about




                           28
Leadership in the Century of the mind




                                        29
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Franchising - Fundamentals And Managing Relationships

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Franchising - Fundamentals And Managing Relationships

  1. 1. BLS Institute of Management Feb 6, 2010
  2. 2. What is Franchising? “A franchise operation is a 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 in such areas as know-how and training; wherein the franchisee operates under a common trade name, format and/or procedure owned or controlled by the franchisor, and in which the franchisee has or will make a substantial capital investment in his business from his own resources.” - Definition by International Franchise Association NIIT Confidential – Perspective Plan 2011-13 2
  3. 3. Why Franchise? • Legal and commercial arrangement concerning the successful business of a franchisor • 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 3
  4. 4. Fundamentals  Why Franchising? – Model for Multiplication, Synergising – Profitability – For both  Key attributes of a Franchisee – Is an entrepreneur / Owns the Business – Invests money, time & emotions into managing operations – Return on investment a key driver – Trust 4 4
  5. 5. Why buy a Franchise ? • Group Advertising power • Owning your business & making day to day decisions guided by franchisor’s experience • Benefit of identification of trademarks, proprietary information, patents & designs • Systematic training from experts • Lower risk of failure and/or loss of investments • Being a part of uniform operations throughout the country • Assistance in financial & accounting matters from the franchisor, as well as ongoing support • Enhancement of management abilities 5 5
  6. 6. Types of franchise 1. Product distribution franchise 2. Business format franchise 3. Management franchise 6 6
  7. 7. Types of franchise: Product distribution 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. • Some Examples: 7
  8. 8. Types of franchise: Product distribution franchise Produces the syrup concentrate Sells the syrup concentrate Produces the final drink FRANCHISEE Retail Stores Vending Machine Restaurants & F&B Operators Outlets 8
  9. 9. Types of franchise: Business Format franchise • 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. 9
  10. 10. Types of franchise: Business Format franchise Outlet in France Outlet in Australia Outlet in India NIIT Confidential – Perspective Plan 2011-13 10
  11. 11. Types of franchise: Management Franchise • A form of service agreement. • The franchisee provides the management expertise, format and/or procedure for conducting the business. 11
  12. 12. Key dimensions  Financial  Marketing  License Agreements  Territory Management  Systems & Communications  Engagement  Conflict Resolution  Principles of Continuity 12 12
  13. 13. Financial  Financial Model: Win-Win – And not that of squeezing the franchisee profits – Risk vs. reward balance  Cost of Franchise: – Uniform and consistent across franchisees – Initial fee – Royalty fee / Management fee – Capital required 13 13
  14. 14. Marketing  Branding – Centralised, Local Marketing – Standard designs / messages  Understanding Customer needs & environmental trends – Technology – Customer needs, requirements – Customer profile – Competition (familiar, unfamiliar) – Feedback from Franchisees – Inputs from independent sources 14 14
  15. 15. Marketing  Advertising and Branding  Trademark Usage  Product / Price: – Being competitive – Meeting customer needs – Introduction of new products and phasing out of existing products 15 15
  16. 16. Systems & Communications  MIS: Franchisee & franchisor  Systems & Processes:  For managing the franchise outlet  Support  Physical Monitoring  Communications – Communicate actively – Document communications, meetings, decisions 16 16
  17. 17. License Agreements • Contains details of the relationship like: – IPRs – Fee to be paid: Initial and ongoing – Duration of the Agreement – What Franchisor is expected to do – What Franchisee is expected to do – What none is expected to do – What is that we exist for – What are the conditions under which we would not continue with this relationship Standardise Agreements 17
  18. 18. Territory Management  Territory/Area of operation  Carve territories with a long term perspective  Do not create competition for existing franchisees 18 18
  19. 19. Engagement  Training of Franchisee & their Employees  Ongoing support  Franchisee Meets  Recognition & Awards for Franchisees & their Employees  Do not treat Franchisee & their Employees as subordinates: – Strong tendency among front end executives of the franchisor to do so. 19 19
  20. 20. Conflict Resolution  Three levels of conflicts: – Operational – Resolve at field level – Policy matters – Resolve at corporate level – Major disputes – Address at appropriate level  Transactional conflicts are likely to arise. – Resolve them proactively – Don’t let them come in the way of long term relationship  Remedy non-conformances speedily – Corrective actions matching with the degree of non-compliance. Avoid Litigation & Arbitrations 20 20
  21. 21. Principles of Continuity: 1. Win-Win relationship 2. Business sense to each other 3. Alignment of Values & Business Ethics 21 21
  22. 22. NIIT's ten commandments of partnership Rationale  Customer success  Shared vision of future Rules of engagement  Win-win or no deal  Nurture openness, trust and mutual respect  Co-invest, co-promote, co-benefit  Entrepreneurial and people development Outcomes  Partner Success comes first  Continual growth is imperative Building a future  Reinvent, rejuvenate, reinvigorate  And keep falling in love again and again….. 22
  23. 23. Customer Delight Council: Objective & Focus Areas Objective: To create sustainable competitiveness by pooling in the rich experience of seasoned NIIT-ians • Customer Delight • Market Addressal • Pain reduction
  24. 24. Think Tank of Senior franchisees 24 24
  25. 25. Involvement in Strategic Issues 25 25
  26. 26. Be in each other’s shoes 26 26
  27. 27. Nurture openness, mutual trust & respect 27 27
  28. 28. Franchising is all about 28
  29. 29. Leadership in the Century of the mind 29
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