Franchising involves a franchisor granting exclusive rights to a franchisee to distribute products or services in a specific territory. The franchisee pays initial and ongoing fees in exchange for use of the franchisor's brand name and business model. Key aspects of franchising include mutually agreed terms between the two parties, franchisor support for the franchisee through training and operations guidance, and obligations of the franchisee to follow procedures and pay fees. Franchising provides benefits for both parties such as business expansion for the franchisor and a proven system for the franchisee, but also risks such as reduced control and profit sharing. Potential franchisees should carefully evaluate opportunity costs and support when considering a franchise.

1. Franchising
Chapter Four

2. Meaning of Franchise
• Franchise is the rights provided by a franchise
contract.
• It is an option to enter a small business.
• It is an agreement which grants the right to
use a brand name for specific activity in return
for a royalty.
• It is getting popular and is one of the best
ways to succeed in small business.

3. Definitions
• William Megginson, “Franchising is a marketing
system whereby an individual owner conducts
business according to the terms and conditions
set by the franchiser.”
• International Franchise Association, “A franchise
is an arrangement by the manufacturer or sole
distributor of a trademarketed product or service
that provides exclusive rights of local distribution
to independent retailers in return for their
payment of royalty”

4. Characteristics of a franchise
• It is a marketing system for well-known brands
or trademark.
• It involves two parties – franchisor and
franchisee. The franchisor owns the brand.
• It provides exclusive rights for local
distribution of specific products or service to
franchisee.
• It involves payment of royalty by the
franchisee to the franchisor.

5. Characteristics of a franchise
• It is based on mutually agreed upon terms and
conditions.
• It covers a specific territory.
• The franchisee is the owner of local business. But
the business is planned, directed and controlled
by the franchiser.
• The franchiser provides marketing and operating
system as well as equipments to franchisee.
Quality is assured and training is provided.

6. Types of Franchise
• Product franchise
• Service franchise
• Business franchise

7. Franchisor support services to
franchisee
• Business plan
– Marketing
– Operations
• Site selection
• Financial help
• Staffing needs
• Training
• Operating system (Billing, Payables, others)
• National advertising
• Legal services

8. Franchisee obligations to franchisor
• Initial fees payment
• Royalties payment
• Inventory costs
• Leasing and rental fees of equipment and fixtures
• Advertising fees
• Makes investment
• Follows procedures
• Controls quality
• Maintains relationships

9. History and evolution of franchising
• Manufacturer-wholesaler
• Manufacturer-retailer
• Wholesaler-retailer

10. Discussion
• Reasons for growth of franchise
• Future of franchising

11. Advantages to franchisee
• Proven product
• Quick start-up
• Ongoing assistance
• Clear market
• Standardization
• Lower operating costs
• Low risk

12. Disadvantages to franchisee
• High start-up costs
• Long term obligations
• Lack of independence
• Unfulfilled promise
• High price
• Termination and renewal

13. Advantages to franchisor
• Better resource utilization
• Multiple revenue sources
• Motivation to succeed
• Bulk purchasing
• Expansion

14. Disadvantages to franchisor
• Reduction of control
• Disputes
• Profit sharing
• Costs of assistance

15. Factors for evaluating franchising
opportunities
• Type of opportunity
• Reliability of franchisor
• Financial stability of franchisor
• Profit potential
• Service support
• Costs of franchise
• Professional help
• Needs of buyer

16. Scope and Practice of Franchising in
Nepal

17. Case Study – Buying a Franchise

18. THANK YOU!!!