FRANCHISING PRESENTED BY: Beant Singh Roll No. 120425720 MBA I (F)
INTRODUCTION Franchising refers to the methods of practicing and using another person's philosophy of business. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.
Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees.
OVERVIEW The term "franchising" is used to describe business systems which may or may not fall into the legal definition provided above. For example, a vending machine operator may receive a franchise for a particular kind of vending machine, including a trademark and a royalty, but no method of doing business. This is called "product franchising" or "trade name franchising".
HISTORY Franchising dates back to at least the 1850s; Isaac Singer, who made improvements to an existing model of a sewing machine, wanted to increase the distribution of his sewing machines. His effort, though unsuccessful in the long run, was among the first franchising efforts in the United States. Franchise Registry concludes that franchising there is continuing to grow and that franchising is growing in the national economy.
BUSINESSES FOR WHICH FRANCHISING WORKS BEST Businesses for which franchising is said to work best have the following characteristics: Businesses with a good track record of profitability. Businesses built around a unique or unusual concept. Businesses with broad geographic appeal. Businesses which are relatively easy to operate. Businesses which are relatively inexpensive to operate. Businesses which are easily duplicated.
ADVANTAGES For franchisors Expansion Legal considerations Operational considerations DISADVANTAGES Limited pool of viable franchisees Control
ADVANTAGES For franchisees Quick start Expansion Training DISADVANTAGES For franchisees Control Price Conflicts
SOCIAL FRANCHISES In recent years, the idea of franchising has been picked up by the social enterprise sector, which hopes to simplify and expedite the process of setting up new businesses. A number of business ideas, such as soap making, wholefood retailing, aquarium maintenance, and hotel operation, have been identified as suitable for adoption by social firms employing disabled and disadvantaged people. EVENT FRANCHISING Event franchising is the duplication of public events in other geographical areas, while retaining the original brand (logo), mission, concept and format of the event. As in classic franchising, event franchising is built on precisely copying successful events.
INTERNATIONAL FRANCHISE ASSOCIATION The International Franchise Association is the world's oldest and largest organization representing franchising. Founded in 1960, it is a Washington, DC based trade group and non-profit association that represents a growing membership of more than 1,300 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry.
TRADE MARKS IN INTERNATIONAL FRANCHISING PROTECTION OF TRADE MARKS INTERNATIONALLY One of the first realizations typically made by a franchisor attempting to expand his activities into other countries is that foreign laws are often derived from legal traditions and systems different from his own, frequently resulting in frustrating delays and seemingly incomprehensible restrictions on planned expansion.
WEAK VERSUS STRONG TRADE MARKS Generally speaking, the inherent distinctiveness or "strength" of a trade mark will very much determine whether it is likely to be accepted for registration in a particular foreign country. Inherently distinctive trade marks are the most easily cleared for use and registration. INTERNATIONAL CLASSIFICATION OF GOODS AND SERVICES It should be borne in mind that most countries adhere to the International Classification of Goods and Services, which divides all products into thirtyfour classes, with eight additionalclasses reserved for services. An applicant then selects the class(es) to be included in his application(s) and often must specify the goods or services of interest in each class
ECONOMIC POTENTIAL OF INTERNATIONAL FRANCHISING IN EMERGING MARKETS International franchising has grown significantly since the 1960s because of both push and pull factors. Domestic saturation, increased competition and diminishing profits at home have pushed franchisors to examine their opportunities abroad, while favorable macroeconomic, demographic and political conditions abroad pulled them into specific markets.
CURRENT TRENDS AND RESEARCH IN INTERNATIONAL FRANCHISING As globalization plays an increasingly prominent role in the world economy, businesses are prudently seeking to expand their operations abroad. The rise of giant franchisors, such as McDonalds in China, are sending an urgent signal to large franchise behemoths and newly established franchises alike that international franchising is here to stay.
CASE OF MCDONALDS AS A FRANCHISEE IN INDIA McDonald's India is an employer of opportunity, providing quality employment and long-term careers to the Indian people. The average McDonald's restaurant employs more than 100 people in 25 different positions from cashier to restaurant manager. McDonald's world class-training inputs to its employees can be seen in the present close to 2000 employees currently in Mumbai and Delhi.
Worlds Oldest McDonald s Worlds Oldest McDonald s This 44 year-old site is the oldest in the worldwide chain of 20,000 restaurants and the last one with red-and-white striped tile exterior. After opening in 1953, it immediately became the standard for the fast food franchises across the country. The building and its 60-foot high neon sign with "Speedee the Chef" are eligible for listing on the National Register of Historic Places.
MCDONALD S IN INDIA Around the world, McDonald's traditionally operates with local partners or local management. In India too, McDonald's purchases form local suppliers. McDonald's constructs its restaurants using local architects, contractors, labour and - where possible local materials. McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards.
CONCLUSION International franchises have become one of the fastest-growing franchise areas as the world recognizes the benefits of franchising and franchises look to expand globally. International franchising offers a unique opportunity for entrepreneurs to tap into the potential of the rapidly expanding global marketplace.
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