First year Franchise Management and Operations Paper-580/1.8 Assignments Submit by- Submit to- Kawinder jit Rakesh Kumar Enroll no.-5800800101 Checked by-
Contents <ul><li>Unit I – Introduction to Franchising </li></ul><ul><li>Assign: Contact a business which has been newly franchised. Understand from the franchisor what made him franchise out the business? </li></ul><ul><li>Unit II-.Preparing for Franchising by the Franchisor </li></ul><ul><li>Assign.-Find out the guidelines given by the Franchising Association of India to would –be franchisors. </li></ul><ul><li>Unit III- Preparing for Franchising by the Franchisee . </li></ul><ul><li>Assign.- Pick any successful computer franchise. Speak with the franchise to understand how they view the franchise contract and its stipulations, which portions of it protect their interests, and which portions of it they are not really happy about, but are forced to include so as to attract the right kind of franchisee. </li></ul><ul><li>Unit IV- The Process of Franchising </li></ul><ul><li>Assign.-. Which provisions of the Contract act play a determinative role in defining the relationship between a franchisor and a franchisee? </li></ul>
Query Contact a business which has been newly franchised (between 2 & 3 yrs ago). Understand from the franchisor what made him/her franchise out the business? Ask if the results they have achieved so far justify the expense and trouble of franchising. Also ask that if they knew when they are starting out ,the things that they know now about franchising ,would they still go ahead with franchising the business?
Introduction The story of Oxford Bookstore began in 1920 at Park Street, Calcutta. Initially known as Oxford Book and Stationery, the bookstore soon carved a special niche for itself in the Eastern region, in an era dominated by Thacker & Spink and Newman's. 75 years later in 1995, the store was reinvented as Oxford Bookstore – Gallery by Apeejay Surrendra Group - the primary aim being to stay ahead of times, to provide more than what was expected, and in the process re-define the future of bookshops. The new facilities include well-stocked and well-researched book sections, India's first Alternative Art Gallery, audio section and top of the line amenities and services
Franchisor: Oxford Bookstore AN APEEJAY – SURRENDRA GROUP COMPANY <ul><li>Head Office :– Calcutta </li></ul><ul><li>Outlets :– 12 </li></ul>
Reasons for franchise out business:- <ul><li>Rapid expansion </li></ul><ul><li>Presence beyond geographical limits </li></ul><ul><li>Brand reorganization </li></ul><ul><li>Source of earning </li></ul><ul><li>Better management performance </li></ul><ul><li>Local knowledge of particular area </li></ul><ul><li>Greater control by the franchisor </li></ul>
According the manager the opening of the franchises of OXFORD BOOK STORE can be shift to the future. They are seeking to build a community of committed readers which will enhance their brand name as well. Though company has faced lot of problems but ,it is happy with the market results and will plan to open new outlets.
Franchising opportunities <ul><li>Changing lifestyles </li></ul><ul><li>Growing incomes </li></ul><ul><li>Demand in the market </li></ul><ul><li>Business with minimum investment </li></ul><ul><li>Return assured </li></ul>
Unit-2 Query Visit the website of the franchising association of India . Find out the guidelines given to would –be franchisors ,and present these in a report.
<ul><li>There are going to be variances from industry to industry because of the nature of the business. The bottom line is that you should expect to receive assistance and expertise for all the factors that are important in opening a new unit in any franchise. The following list includes some common areas: </li></ul>Introduction
<ul><li>Location assistance. The typical support, for any business that is site-dependent, should include guidelines for locating a good site and checking its viability. There should also be guidelines for the general terms of a lease agreement that are standard for this business in this type of a location. Great support would include an on-site review by the franchisor of any proposed site and direct assistance in the negotiation and execution of the lease </li></ul>Some common areas are:-
<ul><li>Construction assistance. The typical support should include detailed instructions outlining all the components that need to be ordered and assembled to build the business as well as sources for each component. Great support will include direct ordering and construction assistance and perhaps turn-key store delivery to the new franchisee. </li></ul>
<ul><li>Marketing assistance. The typical support will include a complete marketing plan for the new business that covers all activity for at least the first three months of operation. This plan should include the timing, promotional material and costs for every effort to be made during the plan. Great support would include franchisor representatives actually booking the advertising for the new franchisee to make sure nothing is missed. </li></ul>
<ul><li>Training-operations. The initial training should cover all aspects of the operation of the business unit, with enough repetition so that new franchisees are able to operate the business from the day they open the unit. Great support would involve the franchisor sending an experienced operation's staff person to assist in the on-site operations of the new unit for as long as it takes to make sure the competency actually exists. </li></ul>
<ul><li>Training-other. The initial training should also cover all the other issues associated with the operation of the business. These would include aspects of the business related to recruiting and retaining employees, back-office bookkeeping and other record-keeping. You should also receive complete written documentation on all of this training in the form of reference manuals or other written materials. </li></ul><ul><li>The items listed above are just the basics. You will also need assistance and support in relation to dealing with governmental agencies for permits and signage. A more complicated business like a restaurant is also going to have numerous health-code compliance issues and other matters that you'll need help dealing with. </li></ul>
<ul><li>The most important thing you can and should do in the investigation of any franchise opportunity is to talk at length with existing franchisees of the system. In reference to support issues, you need to carefully explore how prepared they were to operate the business after the support was delivered by the franchisor. </li></ul><ul><li>Just ask them the question. Find out what their biggest surprise was. Ask what they would do differently now that they've gone through the process for themselves. Get a good idea of how prepared they felt both before and after their unit opened. If everything was great (other than the minor stuff that always happens), then you've probably found a company that's focused on delivering great support to new franchisees. </li></ul>
Unit III Pick any successful computer franchise. Speak with the franchise to understand how they view the franchise contract and its stipulations, which portions of it protect their interests, and which portions of it they are not really happy about, but are forced to include so as to attract the right kind of franchisee.
To demystify we take the example of prominent computer education franchise NIIT. Over 25 years ago NIIT committed itself to developing manpower for India 's slowly awakening IT sector. In doing so, it not only pioneered a brand new industry, the IT training segment, it also fuelled the fire of entrepreneurship in India. Asia’s No. 1 trainer & leading Global Talent Development Corporation, NIIT has recently been conferred by Dataquest as 'Number One IT and IT Enabled Training Company in India' (2007).
Why they are at advantage? <ul><li>NIIT has over 25 years of experience in providing IT education. It has advanced curricula, unique teaching methodology and associations with leading IT companies like Intel, Microsoft, Oracle, Sun Total, Thomson Prometric, IBM, Sun, BEA, Compaq, Siebel and Computer Associates. With more and more students opting IT as a career and NIIT being their preferred destination for quality IT education, this doesn’t really call for much explanation. Still, here are some of the highlights that have made thousands of entrepreneurs join hands with NIIT: </li></ul><ul><li>Unique Franchisee Business model. </li></ul><ul><li>Equips Franchisee with cutting-edge curriculum and courseware that makes it a preferred choice of individuals and enterprises. NIIT has the second largest library of courseware in the world, for IT and Management studies. </li></ul><ul><li>The umbrella of a highly reputed and credible Brand Name. NIIT is a household name in India and a leading global IT education provider. </li></ul><ul><li>A network of 3500 centers that are spread across 32 nations. </li></ul><ul><li>An alumni base of 5 million students worldwide. </li></ul><ul><li>Detailed operation manuals and process. </li></ul><ul><li>The authority to provide Official Curriculum Training from leading Technology Providers. </li></ul><ul><li>NIIT allows Franchisees to grow by providing them with the facility of multiple education centers. </li></ul><ul><li>Offers Franchisees a wide array of products </li></ul>
Franchisor talks- excerpts taken from business2.0 by Om-Malik Rajendra Pawar is co-founder and chairman of National Institute for Information Technology (NIIT), a computer education company that since creation in 1981. Pawar started NIIT based on an idea that everybody told him would never work, flirted with financial ruin, and then came up with an ingenious model; to franchise NIIT called as Mc.Programmers. Franchisees have spread NIIT everywhere from China to Ghana to Russia.
What they view important in Franchise contract? Mr. Pawar say franchising was a way to grow a business rapidly. After months of pondering, he came up with a uniquely Indian twist on the model. He would try to get the most respected families in small communities to sign up as his franchisees. Indians put great emphasis on the concept of pride and respect (izzat). To lose izzat to loose everything. Pawar figured out that if he could get respected families to be franchisees they’d have powerful incentive to manage the schools well, protecting their Izzat- along with NIIT brand name.
How franchise contract works? NIIT’s twist on franchising works like this: The franchisees pay for marketing and infrastructure- space, desks, computers, NIIT provides all the course materials and selects and trains all the faculty members. In return, the company gets royalties of roughly 20 percent on student tuitions and also reimbursed for the teaching materials it supplies.
Stipulations affects the franchise model With the I.T boom, there create an insatiable demand for coders in Silicon Valley (Bangaluru/california), and an NIIT diploma became an almost sure ticket to a sweet stateside gig. Student poured in, and so did would –be franchisees. It was like trying to get a franchise for Krispy kermes. People were lining up outside NIIT’s offices trying to sign up as a franchisee. But NIIT fell into a trap that ensnares many franchisers when things are rocking. That causes angering the established franchisees, who lost many of his schools.
Some of the NIIT’s Alliance partners speak out. “ Alliance that we have shared with NIIT from the last 18 years was productive, pleasurable and revitalizing. NIIT has emerged as a true collaborator in terms of its contribution towards creating industry endorsed education products and thereafter in-depth support in delivering those to our customers. The emotional bond that we enjoy today with NIIT is a clear evidence of sincere relationship we had with them and we look forward to have continuous association with them.” Partap Aggarwal, Chandigarh
“ When I look back at the last 18 years of my association with NIIT, operating the IT Training Centers has been challenging and rewarding. Right from the start, NIIT has always been there, supporting me in good and bad times, always enabling me in sustaining the undisputed leading position. Today, having endured these long years with a super brand, I enjoy a position of prestige and pride in my locality and people of all strata accept my contribution towards success of what their children are doing all over the world in reputed IT companies.” Kalyan Mohanty, Bhubaneswar “It's been eventful years as a Business Partner with NIIT at Dehradun. It gives me a feeling of immense satisfaction of having enabled hundreds of students to learn the latest technologies & build good careers in leading organizations. There has been tremendous personal learning and growth through inputs on quality management , workshops & conferences. I look forward to a long journey together with NIIT and climb even greater heights.” Alok Tandon, Dehradun
Unit IV Which provisions of the Contract act play a determinative role in defining the relationship between a franchisor and a franchisee?
Meaning franchisor/franchisee The Indian law does not define franchising. However, simplistically put, franchising is a method of distributing products or services. The Blacks Law Dictionary defines a franchise as a license from the owner of a trademark or trade name permitting another to sell a product or service under that name or mark. In a normal franchise agreement, there are at least two parties involved: (a) the franchisor, who lends his trademark or trade name (or other intellectual property rights) and the business system ; and (b) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and business system.
Enforceability and validity of the franchising agreement Fundamentally, every franchising relationship is a contractual relationship and therefore, the Indian Contract Act, 1872 (“ Contract Act ”) would be applicable to all franchising arrangements. Under the Contract Act, a “ contract ” is an agreement enforceable by law. The following elements are required to constitute a contract: (a) an agreement, i.e. an offer and an acceptance of the offer; (b) lawful consideration for the agreement; (c) lawful object and purpose of the agreement; (d) free consent of the parties to the agreement; and (e) capacity of the parties to enter into an agreement . Every franchising agreement would have to necessarily meet the above five criteria in order to be legally enforceable. For example, if the franchising agreement is entered into for distributing arms and weapons in India, the same may not be for a lawful object and hence invalid. While the Contract Act does not stipulate that a contract has to be in writing, it is advisable to have a formal and written franchising agreement to precisely lay down the rights and obligations of the franchisor and the franchisee. This would assist in resolving any future deadlocks and disputes .
Another issue that could arise is of competing with the franchisor’s business during the term of the franchising relationship . In the landmark case of Gujarat Bottling Co. Ltd. and others v. Coca Cola Co. and others , the Coca Cola Co. had imposed a restriction on Gujarat Bottling Co. Ltd from entering into an agreement with any other beverage manufacturing company during the term of their contract.
When the case came up before the Supreme Court as being in restraint of trade, the Court held the following: “ There is a growing trend to regulate distribution of goods and services through franchise agreements providing for grant of franchise by the franchiser on certain terms and conditions to the franchisee. Such agreements often incorporate a condition that the franchisee shall not deal with competing goods. Such a condition restricting the right of the franchisee to deal with competing goods is for facilitating the distribution of the goods of the franchiser and it cannot be regarded as in restraint of trade .”
The Court therefore held that a negative agreement restraining the franchisee from manufacturing, bottling, selling, dealing or otherwise being concerned with the products or beverages of any other brands or trade marks/trade names during the subsistence of a franchise agreement including the period of the period of one years' notice, is not violate of Section 27 of the Contract Act. However, the Court did not address the issue of a negative covenant post-termination of the agreement. This is an issue that the parties must bear in mind while formulating the contract