Franchising :
Franchising is the most common type of distributor in the services and accounts for most of the retail sales. According to the International Franchise Association of America, “A franchise operation is a contractual relationship between the franchiser and the franchisee in which the franchiser offers or is obligated to maintain a continuing interest in the business of the franchisee in such areas as know-hold and training, where in the franchisee operates under a common trade name format and/or procedure Owned and controlled by the franchiser and in which the franchisee has or will make a substantial capital investment in his business from his own resources.”
Location of Franchisee.
The franchisee should be located at convenient and accessible places. The following factors influence the choice of franchise location:
i) Area of potential demand
ii) Competition in the area.
iii) Requirement of space
iv) Presence of another franchisee of the same firm.
v) Other physical needs of the firm.
Benefits of Franchisee:
To the Franchiser:
i) Franchisees are self-motivator.
ii) They share business risk.
iii) They have a thorough although knowledge of the local market.
iv) They maintain consistency in quality.
v) Franchiser gets wider distribution network.
To the Franchisee:
i) Obtain ready-made business.
ii) Reduction of risk.
iii) Benefit of training and counseling and advice on local promotion of business.
Franchising in India with Examples:
As the service economy grows in the country, opportunities for franchising are going to be plentiful. The franchisers in the product market like Titan, Raymond, Bata or Reebok are well known. More names will be added to this list as franchising is catching on in service industries like in education I. T. kids, NIIT, Aptech; Healthcare – Arvindlal; Entertainment – AMF, Bumswick; Specialty food services -Subway, Cafe Coffee day and Personal grooming -Personal Point, VLCC.
I. T. kids: Business concept: education through computers.
Numbers planned: 300 in one year
Company investment: Rs. 37 crores (in next one year)
Franchisee investment: Rs. 12 -15 lakhs
Chennai based computer firm with the novel concept of educating children aged between 4 to 14 years through computers. The curriculum is divided into several modules and gives a good chance of retaining the customers for many years. To include trials I.T. kids plans short duration programmes during summer vacations. As it is a niche market I.T. kids rely on franchising. They have rolled out swiftly and grab the first mover advantage.
Cafe Coffee day – Business concept’. coffee cafes
Numbers planned: 100 by 2001
Company investment: Rs. 5 crores
Franchisee investment: about Rs. 40 lakhs
The Rs. 200 crore Bangalore based Amalgamated Bean Coffee, India’s largest coffee chain has set up a chain of cafes that mirror the successful day offers a variety of coffee blends and also a limited menu of snacks like sandwiches and pastries.
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