strategic management

FRANCHISING

INTRODUCTION TO FRANCHISING
A sizeable proportion of the Indian population still lives in the villages and has limited purchasing power, India also has a large and growing middle class and a much smaller wealthy segment of consumers. The Indian market has a segment of approximately 150-200 million people with growing purchasing power, who seek products and services for a better lifestyle. Approximately 2 percent of Indians have a per capita income in excess of $13,000, which translates into a segment of 20 million relatively well-off consumers. This is small in comparison to India's total population, but still comprises a substantial market segment. Approximately 8 percent of Indians have a per capita income of more than $3,500, or about 80 million people; more than 100 million Indians have a per capita income in excess of $2,800.

Franchising in some form has been operating in India for several decades. One well known example of this is the Bata shoe chain, started in the 1960's. However, franchising in its Page | 1

FRANCHISING
modern concept has become popular in India only in recent years. The industry is still very much in an evolutionary stage. New franchise business concepts now span across diverse sectors as education, specialized food services, healthcare, garments and apparel, entertainment, fitness and personal grooming clinics, stationery and gift shops, and courier services to name a few.

As the service economy grows in India, opportunities for franchising will increase. Given the current boom in the retailing and entertainment sectors in India, an increasing number of players are seeing franchising as a growth option. According to industry experts, the Indian franchise economy currently accounts for 5 percent of the country’s GDP. According to a study conducted by the Federation of Indian Chambers of Commerce and Investments (FICCI), there are approximately 600 active franchisers and more than 40,000 franchisees in India currently across various sectors.

The same study estimates that total annual sales turnover achieved by franchised businesses in India is in the range of $1.6-2.1 billion. Franchising is poised to spur economic growth because it encourages private enterprise with no danger of flight of capital, and because it offers the potential to establish products and services that meet global standards. Unlike in the U.S. and some countries in the west, India does not have a specific law on franchising as yet. Franchising is covered within the broad definition of transfer of technology contained in domestic legislation. A legal framework for new franchisers interested in setting up master franchises in India exists, in terms of brand protection and rules regarding payment of franchise fees. However, there is a growing need to improve this regulatory framework.

Following the economic liberalization of 1991, several foreign companies with strong brand names established a presence in India through franchising. In the hospitality and food service industries, this has been the preferred method for starting operations in India. Some international companies that operate through franchises include: Hertz, Avis and Budget for car rental; Radisson, Best Western and Quality Inns for hotels; Kentucky Fried Chicken, Dominos Pizza, TGI Friday, Ruby Tuesday, Subway, and Baskin Robbins for food. Pizza Hut and Dominos Pizza have opened many outlets and McDonald's has been open for business since 1996. Similarly, Indian companies with strong brand recognition are also using the

Page | 2

FRANCHISING
franchising route to expand business volumes. Archies for giftware, MRF for automotive tires, NIIT for computer training schools and Apollo Hospitals for healthcare are examples.

What is Franchising?
Franchising in general means granting of certain rights by one party (the franchisor) to another (the franchisee) in return for a sum of money. The franchisee then exercises those rights under the guidance of the franchisor. The above definition is a very general in its nature and encompasses many different forms of licensing arrangements. The business format of franchising, being the important one, can be defined as the contractual license granted by one person (the franchisor) to another (the franchisee) which:    Permits or requires the franchisee to carry on a particular business using the

franchisor‘s know-how under the franchisor‘s brand as an independent business; Allows the franchisor to exercise continuing control over the manner in which the

franchisee carries on the franchised business; Obliges the franchisor to provide the franchisee with ongoing support in carrying

on the franchised business. As a commercial matter, the agreement inevitably requires the franchisee periodically during the period of the franchise to pay to the franchisor sums of money in consideration for the franchise and / or goods and / or services provided by the franchisor to the franchisee. The International Franchise Association (IFA) defines franchising as a ―continuing relationship in which the franchisor provides licensed privilege to do business, plus assistance in organizing, training, merchandising and management in return for a consideration from the franchisee‖.

Who is a Franchisor?
He is the owner of the franchised system. It owns the know-how of the concept and the brand name. It grants franchises to third parties.

Page | 3

FRANCHISING

Who is the Franchisee?
He is the one who has been granted the right by the franchisor to carry on the business using the franchisor‘s know-how and the brand name. Now, depending on the rights granted, franchisee‘s can be classified into:
1.

Unit Franchisee – This is the simplest and most common form of franchising. This franchisee is granted the right to operate one unit or outlet of the franchised business.

2.

Master Franchisee – He is generally granted the right to a substantial territory. It will then grant unit franchises to unit franchisees throughout the territory. The Master Franchisee needs to have sufficient drive and resource to fully exploit the territory and control the unit franchisees territory.

3.

Regional Franchisee – In a geographically large area a franchisor, or a Master Franchisee may decide that it is commercially appropriate to further divide the territory up with separate regions and grant a Master Franchise for each separate region. These franchises are known as regional franchises or sometimes area franchises.

4.

Multiple Franchises – Some unit franchisees operate not just one unit, but several. These are referred to as multiple franchises and usually have a large number of individual unit franchise arrangements – one for each unit.

5.

Developers – Large Corporations sometimes prefer to exploit their territory by opening outlets themselves. These are known as developers. They have a single developer agreement, which allows them to open many units. These are pilot operations so that they become fully familiar with the business at an operational level and can localize it so as to improve its chances of success.

Business Format Franchising
Business format franchising offers a variety of services to the franchisees. They provide the franchisee use of trademarks and logos, as well as a complete system of doing business. They Page | 4

FRANCHISING
will assist the franchisee with site selection, interior layout and design, hiring and training, advertising and marketing, product supply and more. The franchisee pays an up front franchise fee and agrees to pay continuing royalties to the franchiser that help the franchiser provide research, development and support for the entire system. There are many examples of business format franchising, including – fast food restaurants, automotive services, estate agents, convenience stores, recruitment agencies, hairdressers etc.

The type involves three characteristics:

1. The franchisee sells goods or services which meet the franchisor's quality standards
(in cases where the franchisee operates under the franchisor's trade mark, service mark, trade name, advertising or other commercial symbol designating the franchisor ("mark") or which are identified by the franchisor's mark;

2. The franchisor exercises significant assistance in, the franchisee's method of operation.

3. The franchisee is required to make a payment to the franchisor or a person affiliated with the franchisor at any time before to within six months after the business opens.

Product & Trade Name Franchising
Product and trade name franchising generally is associated with industries such as automotive, petroleum and soft drink. This type of franchising does not include royalty fees. The franchiser provides trademarks and logos, national advertising campaigns, but most importantly, product.

This type, also offers three characteristics:

1. The franchisee sells goods or services which are supplied by the franchisor or a person affiliated with the franchisor;

Page | 5

FRANCHISING
2. The franchisor assists the franchisee in any way with respect to securing accounts for the franchisee, or securing locations or sites for vending machines or rack displays.

3. The franchisee is required to make a payment to the franchisor or a person affiliated with the franchisor at any time before or within six months after the business opens. Franchising may seem like an easy way to start ones own business and many times it is just that. However, investing in a franchise is no guarantee that you will be successful.

Thus, success in franchising will depend on three key factors; the ability to make the investment to secure the franchise and open it for business, the care with which you select the franchise, and most importantly the drive and ambition to make it successful.

What is a Franchise fee?
A fee paid by franchisee to a franchiser. US standard accounting practice requires that franchise fee revenue should be recognized when all material service or conditions relating to the sale have been substantially performed or satisfied by the franchiser. It is the royalties or a certain fees paid to the franchisee by the franchisor in exchange of the rights to market the product or the service. The principal fee in franchising—other than the franchise fee—is the royalty fee or, in some systems, the continuing royalty. This refers to the checks that needs to be sent to the franchisor on a routine basis throughout the term of the agreement. You pay this for staying in the system. While it varies from franchisor to franchisor, the royalty is typically calculated as a percentage of your sales. One may be required to send the payment each month, each week or on some other regular schedule to the franchisor. Many franchisors today don't even need to send them a check. When you sign the franchise agreement, you give them permission to reach into your checking account and wire transfer the payment directly to them.

Page | 6

FRANCHISING

EMERGING TRENDS IN FRANCHISING
As well as developing into a truly international concept, business format franchising has managed to extend its reach into many different industry sectors and this trend is set to continue. Initially, the concept was the domain of fast-food operators. However, franchising can easily be adapted to the needs of almost any industry sector that requires an effective and efficient distribution channel. Today, a large variety of business sectors are expanding successfully under the umbrella of franchising. Other trends are emerging that will affect all franchisors, no matter which industry sector they belong to. Some of these are discussed below. 1. Technology A relatively new impetus for franchising comes from the need to keep up with technological advances. In addition to issues involving management control and internal communications, IT is becoming increasingly important in the field of Web-based selling. 2. Growth prospects continue to look bright Although franchising is extremely well established in the USA, observers report that the sector is at the threshold of a new growth spurt. This is a clear signal that other countries, where franchising has not reached even a third of the penetration levels recorded in the USA, can expect to see franchising take off like never before. 3. Shift towards services Populations in many of the more developed countries experience a shift towards 'rich in assets, short on time'. This drives the development of personal services franchises, from pizza delivery to home cleaning, home repair services and even care for the bed-ridden or aged. 4. Franchise legislation One major change that has taken place in franchising worldwide is in the field of legislation. While most countries initially accepted that franchising could be controlled through a

Page | 7

FRANCHISING
combination of existing contract law and self-regulation, an increasing number are now moving towards specific franchise legislation. This has become necessary because the well-documented success of franchising has attracted a number of reckless or even fraudulent operators. The USA was the first country to introduce specific franchise legislation. More recently, Australia and several countries within the European Union followed suit, although it must be said that their legislation is less severe than that introduced in the USA. 5. Franchisee profile In the past, franchisors preferred to attract franchisees who would be content to operate one unit hands-on. Many franchisors continue along this path but there is pressure on them to change their approach. With the notion of a job for life becoming increasingly obsolete, corporate managers are entering the franchise arena as prospective franchisees. These individuals want a larger piece of the pie than one unit can offer them, and they have the expertise and the funds to support this. Franchisors have been quick to realize that it is easier to grow the brand with the help of a smaller group of aggressive franchisees rather than with a large number of yesteryear's franchisees who were content to look after one unit as long as it earned them a reasonable living. This change in attitude creates significant new challenges.


Not every type of business lends itself to multi-unit ownership. Unless systems,

processes and workflows can be standardized, an absentee-owner could soon lose control. In effect, the franchise network would soon find itself in a similar situation to a branch operation that depends on salaried managers.


Not every franchisee is cut out to be a multi-unit owner. This demands advanced

management skills and the willingness to play for high stakes. Individuals must be carefully assessed to ensure successful placement.
 

Not every franchisor can handle multi-unit franchisees effectively. The calibre of franchisee who qualifies for multi-unit ownership is likely to be a no-

nonsense person who expects 'top service plus' from the franchisor. This helps drive the

Page | 8

FRANCHISING
growth of the brand but franchisors need to be adequately prepared for the challenges it poses.


The danger exists that a very strong multi-unit franchisee begins to exert undue influence

on the network's strategic direction. The franchisor must be on the lookout for this and reassert his/her leadership position the moment a challenge is presented.


Another important trend in franchising is the inclusion of individuals who tended to play

a lesser role in franchising in the past. Women are still a minority but catching up fast. In South Africa, the black majority which was formerly excluded from the economic mainstream is assuming an ever-increasing role. Franchising is the ideal vehicle for the implementation of sustainable BEE initiatives. 6. Fickle consumers Traditionally, consumers expected branded offerings to be standardized and predictable and essentially, this has not changed. However, a new generation of consumers is emerging that expects a customized approach. For example, franchisors moving into foreign countries can no longer rely on blind acceptance of their standard offering by local consumers. To maintain brand consistency under these circumstances can be extremely difficult. A middle-of-the road approach is usually best, but this requires careful testing of every aspect of image, product range and delivery mechanisms. This route is not recommended for the faint-hearted.

Page | 9

FRANCHISING

EVOLUTION OF FRANCHISING IN THE WORLD

Franchising is a term that comes from the French language and means `to be free from servitude'. It was developed as a business method in the United States in 1850s. But there are some historians who argue that as a method of licensing, franchising developed much earlier in feudal times when the head of the Roman Catholic Church gave his clergy the right to collect church taxes locally. Franchising is a low-capital rapid growth market share gaining option. The goal of a franchisor is to provide a consistent product and consumer experience 'indirectly' through a franchisee. This is achieved through operational processes that are transferred to the franchisee organization, and managing them for performance. An organization that does franchising is required to develop systems, structures, and processes for inter-organizational collaboration focused upon accountability and control of performance of an 'external' business. Franchisees, view themselves as independent business people, and see their relationship with the franchisor as one between business partners. By the very nature of the franchising process, it is a business method more suited to generic services that evolve around a recognized brand, a basic standardized process capable of delivering a consistent product or service through a wide network of operational units. The importance of franchising as a potential business option can be assessed based upon research in 1997 that estimated that nearly 40% of all retail sales reached consumers through the franchise route. The hospitality industry has traditionally used the franchise route for international growth. The importance of the franchising process is reflected in the retail and hospitality industries where nearly every retailer (in malls) and every major hotel are franchisees of international as well as major national chains. Internationally, Franchising is very well accepted and is entrenched deeply within USA & Western Europe.

Page | 10

FRANCHISING

EVOLUTION OF FRANCHISING IN INDIA

In India, acceptability is growing by the day and it has a fairly conventional industry spread. Approximately 600 franchisors spread across industries like education, retailing, professional services, healthcare etc. There are close to over 40,000 franchisees, with an annual turnover anywhere between Rs.8000-Rs.10, 000 crores from franchising. It is estimated that the total investments made by Franchisees is over Rs.5000 crores and over 300,000 people are directly employed by franchised businesses. Opportunities in Franchising in India exist in the following areas like Beauty Salons & Supplies, Business Services, Clothing, Computer & Internet, Consultancy, Consumer Services, Education & Training, Entertainment, Financial Services, Florists, Food and Beverages, Health Care & Fitness, Immigration Services, Interiors, Jewellery, Play School & Activity Centre, Retail and Travel. Retail franchising within India, grew initially in the apparel & footwear sectors and has gradually grown to cover a wide variety of sectors including food, consumer durables, jewelry, books, home décor etc. in this type of business model, there are two varieties of Retailers.

The first ones are the manufacturer-retailers - typically Product Distribution Franchises and other ones are the aggregators – typically Business Format Franchises. Substantial action is also happening in non metro locations, thereby spreading organized retailing over a larger footprint. Franchising affords India an opportunity to build its commercial infrastructure and develop its domestically oriented businesses in an efficient, profitable and pan-national manner. It also offers India the opportunity to import and develop foreign concepts in a way, which ensures that the equity of the business remains in India, so avoiding the politically undesirable situation whereby successful domestic businesses are owned by foreign corporations.

Page | 11

FRANCHISING The key attractions of franchising in India are as follows:
1. Lower Capital Requirements – Franchising is an excellent way for both Indian and foreign corporations to expand their businesses and make their brand names known in India without having to risk large sums of money by way of direct investment. The franchisees finance the expansion of the business in India. In return they have the opportunity to make substantial income and capital profits. 2. Geographical extent of the country – Franchising can enable a company to take advantage of the vast Indian market of over 1000 million people and growing at a rate of 1.9% p.a. There is an ever-growing demand of goods and services such as fast food and beverages, clothing, electronic goods, computer hardware and software and professional services. The infrastructure is poor, however, and operating a corporately owned distribution system that fully exploits the geographical expanse of the country is extremely difficult and inefficient. Empowering participants in the distribution system by granting them an equity interest in it (i.e. by granting a franchise) can substantially improve the efficiency in the distribution system. 3. Cultural Empathy – Franchising well suits the entrepreneurial side of Indian culture. Indian business people are fiercely proprietary and feel a need to have ownership and control over their business operations which they can pass on to future generations. However, at the same time they are keen to benefit from the goodwill and technology that can be provided by the foreign franchisor. Franchising allows them to reconcile these conflicting ambitions. 4. Harnessing local market knowledge – Indian master franchisees offer the foreign franchisors direct access to substantial market knowledge and a considered and sophisticated approach to its exploitation. A company needs a great deal of knowledge of the different regional markets in India. What holds good for Punjab may not be relevant for Kerala. Franchising provides a sure and easy way of accessing the right level of relevant local market knowledge.

Page | 12

FRANCHISING

THE 4 R’s OF FRANCHISING
American corporate history is replete with instances of franchising‘s outstanding success and also many failures. Learning from them, franchising can succeed if the franchisee has a right combination of the four R‘s prescribed. These are: 1. Realism – The franchisee should be very realistic in assessment of his business strengths and weaknesses. Certain key areas where realism is a must while deciding to go into franchising includes questions like are you prepared for the financial insecurity, are you capable of developing a frame of mind when you can smile and be cordial even when the customer is totally wrong. More important is the need for realism in evaluating the products and services offered by the franchisor. 2. Resources – Many franchisees, during the early periods of their business when resources constraints are common, tend to sometimes overlook sending in the royalty cheques to the franchisor. Franchisors keep feeling and rightly so that their royalty is as much a key business expenditure of the franchisee as payment for purchases or payroll is and any delay in handling this area would lead to unfortunate consequences of a long term nature. Therefore, while planning resources on a periodic basis, consider the payments that are to be made to franchisor. Another area where most franchisees have problems is to manage their resources while living within the franchising system. The franchising agreement, in most cases, clearly indicates systems, procedures and methods of managing the resources. The franchisee will do well to either be mentally prepared to accept the resource management terms of the franchisor or make it clear at the beginning that he needs the requisite leeway to manage his own resources. 3. Research – Research on the franchisor is a must for the success. Various published sources also provide fairly detailed information on most of the franchises that are on offer but to what extent that will suffice for the Indian conditions needs serious examination. Whatever be the methodology, the prospective franchisee will do well to build comprehensive information on the franchisor, the products or service of offer, competing and substitute products and services before he makes any move committing his financial resources on a long term basis. 4. Resolve – Resolve to be part of the franchising system. The problem starts when a person gets into franchising only because he has an entrepreneurial instinct but the Page | 13

FRANCHISING
instant he becomes a franchisee, the true entrepreneur in him starts resenting the shackles that are imposed by the franchising system. The options are clear – either stay within the system and fully learn the nuances of the business and prosper or try one‘s fledging entrepreneurial talent and get into trouble.

Franchising Framework THE OFFER DOCUMENT
The franchisee offer document gives comprehensive information to the prospective franchisee. On the basis of the franchising framework, the offer document is filled. The contents of the documents have to be organized under various heads as explained below.

1. Details of the franchisor
This includes the franchisor‘s registered key address, type of company, history, business, markets etc.

2. Experience
This documents the experience the company or the employees of the company have in the conduct of the business. This part reinforces the legitimacy of the franchisor‘s claim of having a franchisable product.

3. Franchise fees
In business format franchising, there is an initial fee which gives rights to the franchisee for a given period of time to operate in a certain territory using the know-how from the franchisor. This franchisee fee also covers the cost of training of the franchisee and his personnel at the time when the unit starts the business.

4. Royalty and other payments
Normally, it is the percentage of the gross revenue of the unit. Maximum businesses also fix a minimum royalty fee per annum. The percentage of the royalty varies with the industry and type of product and is dependant upon the norms prevalent in the industry for discounts to dealers and distributors. Under this head, it is also necessary to record any other fees that the franchisor will charge to cover the costs of other services like visits by specialists, additional training and any material, replacement fees for manuals, promotional literature and media expenses. Renewal of the Page | 14

FRANCHISING
agreement at the expiry of the franchise term is normally done by charging the franchisee a nominal renewal fee.

5. Franchisee’s initial investment
Initial investment includes all the expenses incurred on real estate, interiors, machinery, equipment, furniture and fixtures, working capital, initial training, insurance, promotional investment, obtaining licenses from regulatory bodies etc. Since the costs vary from location to location, a range indicating the normal costs maybe given for all the items.

6. Sourcing of raw materials, promotional materials and other services
Normally the franchisor gives clear specifications of all materials required for the operation of the unit and conduct of the business. If the franchisor wants to put any restrictions on the procurement of these, those can be mentioned here.

7. Obligations of the franchise
A clear list of obligations of the franchisee needs to be made. This would include acquisition and obtaining licenses, recruitment, training, customer service, insurance, maintainance of records, audit requirements, expense on promotion etc all of which need to be covered in detail.

8. Franchisor’s obligations
Similarly the franchisor has to give certain rights to the franchisee for the use of the brand name in a given territory, accord approvals for sites, manpower and interiors, provide specifications for equipment and signage, procure material and create advertising programmes. Details of the training provided visits made to the franchisee‘s unit etc also need to be included under this head.

9. Renewals, termination, transfer, dispute resolution
These need to be explained along with the situations and conditions under which they will become applicable. This offer document should be properly created with utmost care as this is the main document which the franchisee will use as a basis for deciding whether he wants to take up the franchise or not and which the franchisor will use as the basis of the formal franchise agreement.

Page | 15

FRANCHISING

MODES OF FRANCHISING

There are following methods of international franchising mediums stated below1. Direct Franchising – Under this system, the franchisor grants franchises to individual franchisees in the foreign country through the execution of an international contract. The main problems associated with this type of franchising is the difficulty of franchisors to control the performance of the franchisees as these are located in another country, the assistance to be provided to the franchisee during the operation of the contract. The question of intellectual and industrial property rights in the foreign country also needs to be considered. Taxation is another issue which receives due consideration. Furthermore, how the franchise arrangement is structured that direct franchising is not used extensively internationally. 2. Subsidiary or Branch Office – Franchising through a subsidiary or a branch office are two methods which are often treated together, although there are differences which derive from the fact that a subsidiary, albeit controlled by the franchisor, is a separate legal entity whereas a branch office is not. Whatever be the difference, an advantage of this approach is that the franchisor is present in the foreign country as a corporate body. The contract will in this case be a domestic contract and thus subject to local legislation. The problems associated with this type are similar to direct franchising. In addition, the franchisor will be required to send his personnel to the foreign country for the start up operations thus involving work permit and residence formalities. 3. Area Development Agreements – Such agreements traditionally involved an arrangement whereby the developer is given the right to open a multiple number of outlets to a predetermined schedule and within a given area. These arrangements in the past have been used mostly in domestic franchising, but are now being used increasingly in international franchising. Items that are to be considered here include the number and density of the outlets to be opened, detailed development schedule and the consequence of non-complying of the

Page | 16

FRANCHISING
schedule. In such arrangements, the developer will need to have substantial financial resources so as to be able to open the required number of outlets. 4. Master Franchise Agreements – In the international scenario, this is widely used. In respect to such agreements, the franchisor grants a person in another country, the subfranchisor, the exclusive right within a certain territory to open franchise outlets itself and/or to grant franchises to sub-franchisees. In this case, there are two agreements involved: an international agreement between the franchisor and the sub-franchisor (the master franchise agreement) and a national franchise agreement between the sub-franchisor and each of the sub-franchisees (the sub-franchise agreement). The franchisor transmits all its rights and duties to the sub-franchisor, who will be in charge of the enforcement of the sub-franchise agreement and of the general development and working of the network in that country. All the franchisor will be able to do is to sue the sub-franchisor in case of breach of obligation to enforce the sub-franchise agreement as laid down in the master franchise agreement. The advantages of this system are that the sub-franchisor is familiar with the local habits, tastes, culture and laws of its country and that it will know ways about the local bureaucracy for necessary permits as and when necessary. The disadvantages include that the financial returns of the franchisor will be reduced by the amount due to the subfranchisor and also that the franchisor will have to rely on the sub-franchisor for the performance of the franchise system. 5. Joint Ventures – In the case of joint ventures, the franchisor and a local partner create a joint venture. This venture then enters into a master franchise agreement with the franchisor, and proceeds to open franchise outlets and to grant sub-franchises just as a normal sub-franchisor would do. An arrangement such as this will have to consider legislation on joint ventures in addition to all the other legalities that are involved. Problems may also arise with the fact that the double link may create conflicts of interest for the franchisor. The advantages accruing from this arrangement may include that it could be a way to solve the problem of financing franchise operations in countries where financial means are scarce.

Page | 17

FRANCHISING
6. Miscellaneous forms – There is no limit to the refinement that can be made to the above forms of franchising to accommodate the differing demands of potential franchisor and / or franchisee. New forms of franchising, or combinations of different forms of franchising, appear at regular intervals. Examples of these are stated as follows: -Multi-unit Franchising -Affiliation or conversion Franchising -Franchise within a Franchise -Subordinated Equity Arrangements -Management Agreement -Franchise Buy-ins

ADVANTAGES & DISADVANTAGES OF FRANCHISING
6

The many advantages and disadvantages of owning a franchise should be carefully evaluated before deciding to purchase one.

ADVANTAGES:
1. ―Owning a franchise allows you to go into business for yourself, but not by yourself.‖

2. A franchise provides franchisees with a certain level of independence where they can operate their business.

3. A franchise provides an established product or service which already enjoys widespread brand name recognition. This gives the franchisee the benefits of customer awareness which would ordinarily take years to establish.

4. A franchise increases your chances of business success because you are associating with proven products and methods. Page | 18

FRANCHISING

5. Franchises may offer consumers the attraction of a certain level of quality and consistency because it is mandated by the franchise agreement.

6. Franchises offer important pre-opening support: • Site selection • Design and construction • Financing (in some cases) • Training • Grand-opening program

7. Franchises offer ongoing support • Training • National and regional advertising • Operating procedures and operational assistance • Ongoing supervision and management support • Increased spending power and access to bulk purchasing (in some cases)

Disadvantages:

1. The franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchise agreement. These restrictions usually include the products or services which can be offered, pricing and geographic territory. For some people, this is the most serious disadvantage to becoming a franchisee.

2.

In addition to the initial franchise fee, franchisees must pay ongoing royalties and

advertising fees.

3. Franchisees must be careful to balance restrictions and support provided by the franchisor with their own ability to manage their business.

Page | 19

FRANCHISING
4. A damaged, system-wide image can result if other franchisees are performing poorly or the franchisor runs into an unforeseen problem.

5. The term (duration) of a franchise agreement is usually limited and the franchisee may have little or no say about the terms of a termination.

ISSUES IN FRANCHISING IN THE INDIAN MARKET
International franchising is here to stay, a larger number of multinational corporations are seeking entry into emerging and developing markets of the world including China, India, Latin America and other Asian countries. However, they haven‘t been successful as they did not take any adequate precautions before entering into the markets. If an organization wants to penetrate into India using the franchising method, he should keep in mind the following aspects:

1. Copyright Protection
In most of the emerging markets, the intellectual and copyright protection laws are inadequate. However countries like India and China, which are serious about attracting foreign investments have amended many of their existing laws and provide reasonable protection. The corporation has to understand these laws and make the statutory applications under trademark, copyright and patent laws of the country to protect its rights. Legal help from local counsel has to be taken in these matters.

2. Royalty
Many countries have strict foreign exchange laws that restrict the payments of royalties to parent organizations. This type of law existed in India too but royalties are not allowed now. Many countries have an upper cap on the percentage of royalty that can be charged from the franchisees.

3. Legal Recourse
It is necessary for corporations to check the effectiveness of the legal system prevailing in the country. Many countries which do not have a well developed legal system may not be Page | 20

FRANCHISING
suitable for an international organization to venture in. India has an elaborate legal system, but there are delays in system which the franchisor should be aware of so that incase of legal disputes, the implications and method of action are clearly understood and implemented.

4. Cultural issues
India is a sensitive market especially if it‘s related to culture and religion. The franchisor has to ensure that no action taken by the franchisee with respect to the advertising, promotion etc should hurt these sentiments. The franchisor also has to take care while designing the product.

FRANCHISE LAWS IN INDIA
A healthy legal environment is of great importance for franchising and should include provisions pertaining to all areas that fall within the ambit of franchising. This includes, inter alia, commercial law relating to contracts and joint ventures and intellectual property law for protection of trade marks and know-how. Franchise arrangements are subject to an array of laws and regulations in addition to those regulating commercial contracts and intellectual property rights. There are no specific laws governing franchising in India. As a result a franchise agreement may be governed by different laws. Primarily a franchise agreement is a contract between the franchisor and the franchisee. The first law which comes into the picture is the Contract Act 1872 which governs contracts in India. A franchise agreement will be governed by the Indian Contract Act, 1872 and the Specific Relief Act, 1963 which provides for both specific enforcement of covenants in a contract and remedies in the form of damages for breach of contract. If a party to the franchise agreement commits a breach of contract, the aggrieved party has the option to initiate a suit for specific performance in Indian courts and apply for relief in the form of a temporary or permanent injunction, which may be granted at the discretion of the court considering the balance of convenience and the interests of justice. An order granting or rejecting an injunction may be appealed by an aggrieved party. Laws relating to taxation, property laws, insurance law and labour laws also apply to franchise transactions. Additionally, laws and regulations applying to specific sectors of goods and services will also apply depending on the franchised laws. Page | 21

FRANCHISING
The following are the reasons why a comprehensive franchise law is required in India: 1. Application of Multiple Legislation A well-defined legal structure is indispensable for the effective functioning of any business operation. The international business environment demands a well-defined suitable legislation that is complete in all respects. The lack of a comprehensive legislation on franchising in India leads to the applicability of multiple laws to a franchise transaction. This poses the following problems: a. Complexities: Parties to a contract normally prefer agreements with a simple approach and encompassing all the required law procedures and rules required to be complied with. However the application of different laws to one agreement makes it complex to decide various issues arising from the agreement.

b. Ambiguities: Due to the necessary application of multiple legislation, ambiguities are created as to certain issues. For example, a franchisor would imagine that a certain issue is the franchisee‘s responsibility under one law, whereas the franchisee would think the opposite based on a different law.

c. Time-Consuming: Referring to multiple laws consumes a lot of time at the initial stages of a transaction as well as other points of time when the agreement is sought to be enforced. This proves to be detrimental to the smooth functioning of franchising operations in India and also makes time-bound operations involving new enterprises difficult. 2. Absence of Disclosure Requirements Countries with specific franchising legislation make it imperative for parties to a franchise agreement to disclose certain factual information pertaining to the business of the parties. This ensures transparency and facilitates an informed decision. A franchisor should be required, by law, to make certain disclosure to the prospective franchisee wherein he is Page | 22

FRANCHISING
supposed to reveal detailed information regarding himself, his litigation and bankruptcy history, his financial position, the facilities he offers etc. In India, in the absence of effective disclosure norms, a prospective franchisee is rendered helpless as the franchisor is under no statutory obligations to make disclosures.

In the absence of a specific statute governing the franchise agreement, the franchisor refrains from providing any information that is likely to prejudice or make a franchisee reconsider the business proposition of the franchisor. The lack of proper disclosure requirements provides a golden opportunity to a franchisor to abuse his position of importance as he is virtually under no statutory obligation to make the requisite disclosure. 3. Applicability of Laws of other Countries Normally, the absence of franchise laws enables foreign franchisors to make the laws of their own country applicable to the agreements entered into with the franchisees in India. The same is the case with franchisors who enter into franchising agreements with franchisees from other countries. This proves to be an additional burden on the parties, particularly the franchisee. 4. Lack of Proper Format for Franchising Agreements Due to lack of a specific format, franchisors from other countries draft agreements which are in the same format as is approved or followed in their countries. Such agreements are made to suit the specific environment of their respective countries and hence are not suitable for Indian environment. 5. Liability of Parties Uncertain Due to the lack of specific legislation, the liability of either party is either determined by the agreements entered into between them or on the basis of general prevailing law. The liability clause is different in different countries, and this leads to a great discrepancy among the courts which try such disputes on liabilities. Now with all the details of Franchising given, below is a huge, massive and successful franchising company in the world known to be the largest ice cream franchisor in the world Page | 23

FRANCHISING
with more than 2700 outlets in USA and around 3100 outlets internationally, Baskin Robbins. Baskin Robbins has its global presence felt all over the world and the term ice-cream is synonymous to Baskin Robbins. Talking about its presence in the Indian market, Baskin Robbins is one of the fastest growing food brands in India. Currently there are more than 290 franchised outlets across the nation. More than 100 franchisees are multiple franchisees who own more than one BR store. This in itself ratifies the kind of confidence BR generates in the franchising world. Baskin Robbins is renowned for its World Class Ice Creams, Sundaes, Beverages and Ice Cream Cakes.

Page | 24

FRANCHISING

HISTORY OF BASKIN & ROBBINS

Three-quarters of a century ago, two brothers-in-law shared a dream to create an innovative ice cream store that would be a neighborhood gathering place for families. Burton [Burt] Baskin and Irvine [Irv] Robbin had a mutual love of old-fashioned ice cream and the desire to provide customers a variety of flavors made with ingredients of the highest quality in a fun, inviting atmosphere.

As a teen, Irv worked in his father's ice cream store. During World War II, Burt was a Lieutenant in the U.S. Navy and produced ice cream for his fellow troops. When the war was over, the two entrepreneurs were eager to capitalize on America's love of ice cream. They started out in separate ventures at the advice of Irv‘s father. In 1945, Irv opened Snowbird Ice Cream in Glendale, California. His store featured 21 flavors and emphasized high-quality ice cream sold in a fun, personalized atmosphere. A year later, Burt opened Burton's Ice Cream Shop in Pasadena, CA. By 1948, they had six stores between them. This concept eventually grew into Baskin-Robbins.

Page | 25

FRANCHISING
As the number of stores grew, Burt and Irv recognized that to maintain the high standards they set in the beginning, each store would require a manager who had an ownership interest in its overall operation. Even though they didn't realize it at the time, the two founders had pioneered the concept of franchising in the ice cream industry. In 1949, there were more than 40 stores in Southern California when Burt and Irv purchased their first dairy in Burbank. This business decision allowed them to have complete control over the production of their ice cream, and the development of new ingredients and flavors. It wasn‘t until 1953 that the ice cream chain dropped the separate identities of Snowbird and Burton's and became Baskin-Robbins. A local advertising agency, Carson/Roberts, advised a uniform identity and image under the name Baskin-Robbins 31 Ice Cream. Their recommendations included the "31" logo to represent a flavor for every day of the month, Cherry (pink) and Chocolate (brown) polka dots to be reminiscent of clowns, carnivals and fun and lastly, the use of cartoons to bring their flavors alive with personality to graphically highlight the name and delicious ingredients. With this over-arching branding, BaskinRobbins' iconic pink spoons were created with the belief that people should be able to try any of their many flavors without cost.

In 1954, Baskin-Robbins put their product on the line against their competitors at the Los Angeles County Fair. That year they won their first Gold Medal and set the pattern for county and state fair participation, earning Gold Medals for Baskin-Robbins Ice Cream every year since that first contest. "Not everyone likes all our flavors, but each flavor is someone's favorite." — Irv Robbins

Baskin-Robbins continued to expand, and by the mid-1960s, the company had become an ice cream empire with more than 400 stores throughout the United States. In the 1970s the chain went international, opening stores in Japan, Saudi Arabia, Korea and Australia. The franchise model created by Burt and Irv decades ago is still used by Baskin-Robbins today. We are 100% franchised, with each owner holding a stake in the business' success, while product development and merchandising are handled at Baskin-Robbins headquarters. This hands-on, small business approach allows franchisees the ability to create a strong presence in local communities all over the world. Through this franchise business model, we continue to provide innovative, high-quality ice cream treats to more than 150 million Page | 26

FRANCHISING
customers worldwide. And as a result, Baskin-Robbins has grown to become the world's largest chain of ice cream specialty stores, with more than 2,800 locations throughout the United States and 5,800 around the globe.

Since 1945, we've introduced more than 1,000 unique, fun and delicious ice cream flavors. Our original top-selling flavors like Mint Chocolate Chip and Pralines 'n Cream continue to delight millions worldwide. Still, we continue to consistently introduce new, exciting flavor combinations, as well as ice cream industry-leading innovations such as hand-packed ice cream quarts, a unique flavor ribbon technique, the use of traditional dessert ingredients and the introduction of mousse-textured ice creams. From our introduction of signature ice cream cakes and the growing line of beverages, including our signature Cappuccino Blast, our commitment to creating new and exciting products is unsurpassed in the industry. It‘s all part of our mission to make the Baskin-Robbins neighborhood a tasty, fun place for our customers.

"In the moments of greatest pride, Baskin-Robbins is composed of those who contribute in a special way to our fellow humans—helping to nourish that quality of childlike enjoyment, which is perhaps the most precious and hopeful part of our humanity."

America's Favorite Neighborhood Ice Cream Shop
There are many forms of enjoyment in life: there‘s spontaneous pleasure, anticipated pleasure, there is long-term happiness and there are spur-of-the-moment joys. For people everywhere, ice cream has probably generated each of those types of pleasure. Baskin-Robbins has long been dedicated to making the experiences of eating ice cream an enjoyable one. ―America‘s Favorite Neighborhood Ice Cream Shop" is a philosophy at Baskin-Robbins shared by everyone. Each employee, store owner and corporate team member is proud of our heritage, and they are dedicated to upholding the flavor, the fun, and the local, neighborhood feel that make the experience unique to Baskin-Robbins. There is nothing quite as thrilling as the face of a child enjoying his favorite ice cream flavor, or the delight of a mother surprised with an ice cream cake on Mother‘s Day in a store you call ―my Baskin-Robbins‖. Page | 27

FRANCHISING
From the ages of one to ninety-nine, people visit Baskin-Robbins anticipating the pleasure of enjoying their favorite ice creams served any way they want. Because of our dedication to being ―America‘s Favorite Neighborhood Ice Cream Shop‖, Baskin-Robbins stores are visited by over 300 million happy customers year after year. A number that continues to grow as Baskin-Robbins spreads throughout the world.

The original flavors when baskin-Robbins first opened in 1945 were: Banana Nut Fudge Black Walnut Burgundy Cherry Butterscotch Ribbon Cherry Macaroon Chocolate Chocolate Almond Chocolate Chip Chocolate Fudge Chocolate Mint Chocolate Ribbon Coffee Coffee Candy Date Nut Egg Nog French Vanilla Green Mint Stick Lemon Crisp Lemon Custard Lemon Sherbet Maple Nut Orange Sherbet Peach Peppermint Fudge Ribbon Peppermint Stick Pineapple Sherbet Raspberry Sherbet Rocky Road Strawberry Vanilla Vanilla Burnt Almond

Page | 28

FRANCHISING

MARKETING STRATEGIES OF BASKIN & ROBBINS
The last three years Baskin & Robbins have really seen our economy go into an overdrive. What they were witnessing now is only a preview of larger things to come in the next couple of decades. While their stunning strides in the IT business have been largely responsible for driving our growth, they could see more and more industries and services joining the curve. Typically, one will always see between one and three growth engines on any growth curve, but what really excites them is their potential for so many different growth leaders in this phase.

One key problem with the growth over the past 50 years has been the complete lack of focus on infrastructure development, something that has propelled China to where it is today. But again this is something any Government or people can only ignore for so long at their own peril. They believe that in the coming years, infrastructure development will become the most important engine in our economy. Growth prospects in India in general are tremendous. With the size and population, there is very little danger of the traditional fear of slowdown in demand. Even as saturation starts to build up in the metros, there are hundreds of small cities and towns that aspire to be metros in the future and step in to provide new markets. The telecom revolution in this country is a case in point.

However, history will not necessarily support this viewpoint given that over the past few years, the ice cream industry has never really grown faster than 10% per annum. But this time the demand will big because of product as well as the change in the retail landscape, which will provide more opportunities for sellers and buyers to our model is tailor made to take advantage of the boom in the retail.

One disadvantage about meet in a better environment. This is true not only of ice creams but also of practically every food category that can deliver on product, quality and service. Ice creams has been that it is treated largely as an impulse purchase in this country. While that perception will not change easily, the development of new consumption drivers like malls, hypermarkets, multiplexes, etc opens up new avenues for this company.

Page | 29

FRANCHISING -Demand Drivers
Growth of malls and multiplexes across the country is boon for Baskin Robbins to access good locations and tap the ready consumers. There is an increase in customers who demand the best without compromises. People are very happy to pay more if they are given a quality product at par with the best available internationally. Also, burgeoning disposable incomes lead to increased consumption.

-Trends
There is an increase in tilt towards premium products (as opposed to expensive), where one pays a price but gets quality and service. You will see more and more companies heading into the hinterlands in an attempt to penetrate the smaller towns and rural belts, as they promise to offer the next surge of growth.

-Issues and Concerns
For the ice cream industry, development and availability of a good cold chain covering the country is essential without which they cannot reach the market target. Another issue of concern is escalating price of real estate.

The reasons for this might vary, but the single undeniable fact is that real estate prices are reaching levels that can no longer be termed as only a bubble. In fact a bubble might be welcome if it helps bring prices down to realistic levels, but unfortunately there is no sign of it happening. If this trend continues, retail business is going to find it increasingly hard to deliver returns. Lack of quality and increase in prices are the biggest concern threatening to throw all growth plans completely out of gear for Baskin Robbins.

Page | 30

FRANCHISING -Outsourcing/Logistics
Baskin Robbins ice creams for the entire South Asian market are manufactured in their factory in Pune. They have opted for outsourcing as a better business model. One of their best decisions, which has paid them a handsome dividend over the past few years, has been their move to outsource their distribution and logistics to core players. Cold chain logistics is central to the ice cream business but the irony here was that it was not their core competency. As a result when they operated it, they were expending valuable resources to conduct this. Five years ago they decided to completely outsource this part of their business (from factory to the last mile). This has helped them immensely in allocating valuable resources to more gainful activities. Over the past 13 years, the Baskin Robbins brand has grown rapidly in the country to become the single largest premium ice cream brand and today it operates over 200 franchised stores in 35 cities.

While technological advances do help in delivering greater customer satisfaction, it is definitely not easy managing the very technology. Given the rapid changes and strides in technology, it is a difficult task to continuously keep oneself abreast of the latest developments, evaluate their relevance to their business and manage the cost/benefit matrixnot to speak of the implementations. They have embarked upon an ambitious plan to link all their stores through a comprehensive computerization initiative, which will include a point-of-sale solution for the customer at the front end. Once completed, they hope to have seamless flow of information/MIS in real-time across all verticals. This will create value right from marketing to production to inventory planning to distribution. They have a current IT workforce of five. Head office forms the point of control from where all information is disseminated as well as collected, compiled and analyzed. The regional MIS/IT guys are points of coordination for all our franchisees in the respective areas. Their role involves implementation, training and offering back up and trouble-shooting.

Page | 31

FRANCHISING -Focusing on the Customer
As part of their customer satisfaction efforts, they have created an internal call center for their home delivery service in Mumbai. This was a decision they took after trying third party call centers to handle incoming calls from customers using their Single Number Dial-in service. Over time, they realized that in order to truly deliver the right experience to the customer calling online, it was necessary to have people who understood the ice cream business from within. As a result we decided to create our own call center with our staff trained completely in all aspects of the business.

They wanted to ensure that the customer who calls gets the same service over the phone as they would expect when walking into one of their 200 outlets nationwide. Bandwidth has been an issue for several enterprises. While nowhere near the speed seen in the West, they are getting there slowly but surely. Efficiency is a bit of a problem, but again there are teething issues, which will get sorted out as the market matures.

-Future plans of Baskin Robbins
Overall, as they said they would target the Tier-II cities as well, Baskin Robbins is now planning to ramp up its store count in smaller cities seeing a rise in demand and consumer spending. In the next two years, the company aims to double its number of stores across the country from 300 by increasing the store density in tier-II cities. Prior to 2000, the average size of its stores was 1,000 sq ft. In 2002, the company consciously adopted a strategy to compress its store size. In 2005, the average size of its store dropped to 250 sq ft.

Interestingly, its strategy of going to smaller cities would enable it to have bigger stores, taking the average size of its stores to 400 sq ft. Getting the right franchisees would also be crucial to its success as it will not market its ice cream range through the mom and pop stores. However, growth in modern retail, multiplexes and fine-dining have helped generate demand for its brand. The ice cream maker is looking at tie-ups with airlines as well. Since Baskin Robbins imports most of its vital ingredients, such as chocolate and other flavours,the company hiked prices by 10 per cent in April on the back of a rise in commodity

Page | 32

FRANCHISING
prices. With a turnover of nearly Rs 60 crore in FY08, the company is growing at the rate of 35 per cent a year as compared with the industry average of 12 per cent.

The ice cream chain spends 8 to 9 per cent of its revenues on advertising each year which includes more advertisements based on hoardings, banners, word-of-mouth and unlike other brands, have kept the Television advertisement absolutely nil. A few years ago, they were reducing the size of their formats, but in the past six-eight months, they have been aggressively ramping up because there's great potential for eat out today.

Hence in such a scenario, presentation and packaging is key. Thus, their future plans involve better packaging efforts and giving the customer reasons for coming back by retaining classic favorites and experimenting with new flavors constantly. Also, they are going to undergo flavor revamping. So now we would not just get the regular variants like chocolate, strawberry and vanilla, but also green apple, bubblegum and blue mint and couple of other fruit flavors also in the near future. Franchise network

A firm believer in the franchise business model, The Loot has a network of 12 franchised stores in cities like Bangalore, Mysore, Jabalpur, Raipur, Mumbai (Chembur & Hughes Road), Surat, Ahmedabad, Aurangabad, Jalandar and Amritsar of the 30 they operate panIndia. ―At The Loot, we strongly believe that our franchisees are not merely franchisees but our partners,‖ says Gupta, further stating that ―we started as a franchisee ourself with 12 super-brands and understand the entire journey of the franchisee. Our franchisee model has been specifically designed keeping in mind all these factors.‖

Elaborating, Gupta reveals that his company follows a unique franchising system and offers facilities that no other retailer does. ―We are the only retail organisation that offers our franchisees a 100% buy-back on unsold stock. Moreover, we also have higher sales per sq.ft., thereby increasing the productivity of the franchisee. Furthermore, we do not charge anything by way of franchising fees and we also do the interiors of our outlets, and help our franchisees in staff and systems training,‖ he explains.

Page | 33

FRANCHISING

With regular promotions and advertising initiatives playing a key role in business development, Gupta is also quick to stress that The Loot does not differentiate between its own company-owned stores and a franchise outlet, with all the promotional activites being the same across all their outlets. ―On the advertising and PR front, all the national advertising efforts are done by the company,‖ according to him. ―These include things like introduction, celebrity expenses, PR and launch-related expenses which are borne by the company. Local advertising is done on a 50:50 ration by both the company and the franchisee, but not exceeding 2% of the franchisee turnover.‖

Franchisee Selection Choosing the right franchisee is an area where due diligence is done. Gupta stresses that ―we consider our franchisees as our business associates and partners rather than mere investors and thus the selection depends on factors like entrepreneurial spirit, personal involvement in the store, relevant retail experience if any.‖ So what does he look for specifically before appointing a new franchisee? ―Well, the person has to show serious interest, have some basic fashion knowledge and a demonstrated capability of handling a team of atleast 20 people. He need not be from the same industry, but should have good market credentials. For example, Om Prakash who runs one of my most successful franchise outlets at Mysore, has a background in the construction business and is now planning on opening two more outlets in the city.‖ Asked about the exit options for a franchisee, Gupta replies: ―We buy back 100% of the merchandise, which incidentally no other franchisor does. Hence the franchisee has most no liability except the cost of the interiors which in any case is quite basic. He also gets back his Rs.5 lakhs refundable deposit.‖ Gupta has more by way of information. He avers, ―We have very clearly defined and planned the geographies for our presence. We intend to open our outlets in all cities that have an airport, and every state capital and all the cities and towns with a population of more than seven lakhs. As The Loot offers a wide range of price points and product categories, we are Page | 34

FRANCHISING
adaptive to operate in almost all geographies in India. The Loot follows a ‗buy and sell‘ franchisee model. We are the only Indian retailer to have the biggest franchisee outlet with an operational capacity of 15,000 sq. ft.‖

The company offers five basic store formats that include: Xtra Small (500-1,000 sq. ft category stores), Small (1,000-2,500 sq. ft. Men‘s/Footwear/Accessories), Medium (2,5004,000 sq. ft. Men‘s/Women‘s/Footwear/Accessories), Large (4,000-8,000 Men‘s/Women‘s/Kids/Footwear/Accessories) and Xtra Large (8,000 sq. ft. + Mens/Womens/Kids/Lifestyle Products/Coffee Shop and space for shop-in-shops).

Journey So Far It was in 1996, after completing his post-graduation from Mumbai‘s S.I.E.S College, that Gupta began his mission to set up a thriving business. A dream that he pursued by opening franchisee stores for brands like Color Plus, Adidas, Nike and Weekender. However, it wasn‘t long before Gupta had to fight a growing feeling of not being able to provide his customers with a satisfying shopping experience, compounded by an increasing number of complaints from customers about the lack of choice at affordable price points.

It was this feeling of dissatisfaction that acted as a catalyst for the launch of the first The Loot outlet in the year 2004, positioned as a ‗Value Retail‘ store. This was a move that has since been followed up with the launch of 30 outlets. It‘s clearly been a satisfying retail journey for Gupta thus far, one that has brought a lot of accolades along the way. In 2005, The Loot was nominated in the India Fashion Forum in the ‗Best Value Store in India‘ category, and again in 2006, when the company was re-nominated in the same category, this time at the India Retail Forum (IRF). In the recent 2007 edition of the IRF, The Loot bagged nomination in not one but three prestigious categories that included: Most Admired Retailer of the Year: Retail Marketing Campaign, Most Admired Retailer of the Year: Retail Design and Visual Merchandising and Most Admired Retailer of the Year: Innovative Concept.

Page | 35

FRANCHISING
Way ahead

Already on a track to touch a total turnover of nearly Rs. 60 crores before the end of this financial year, The Loot has now set its sights on achieving Rs. 100 crores by 2009. ―We also hope to have 100 stores by then,‖ adds Gupta stating that his unique business model is designed to succeed in any metro, tier-II and tier-III town within the country. While acknowledging the cut-throat competition in the branded apparel business, Gupta counters by saying that the trick of survival in the face of increasing competition is to add USPs into your own business plan. ―It is this strategy that has made The Loot a distinct player in the field of value retailing in the multi-branded store category,‖ he claims. As for ensuring that his ambition future plans are met without a hitch, Gupta informs that the company has invested skillfully into IT, besides giving an added focus on effective personnel training and cementing the back-end of their operations. As for his success mantra, Gupta quips, ―Life is always tough, but one can make it easier by sharing one‘s dreams and creating co-dreamers to move up on the success path.‖

Page | 36

FRANCHISING
Conclusion

As the service economy grows in India, opportunities for franchising will increase. Given the current boom in the retailing and entertainment sectors in India, an increasing number of players are seeing franchising as a growth option. According to industry experts, the Indian franchise economy currently accounts for 5 percent of the country.GDP. According to a study conducted by the Federation of Indian Chambers of Commerce and Investments (FICCI), there are approximately 600 active franchisers and more than 40,000 franchisees in India currently across various sectors.

The last three years Baskin & Robbins have really seen our economy go into an overdrive. What they were witnessing now is only a preview of larger things to come in the next couple of decades. While their stunning strides in the IT business have been largely responsible for driving our growth, they could see more and more industries and services joining the curve. Typically, one will always see between one and three growth engines on any growth curve, but what really excites them is their potential for so many different growth leaders in this phase.

Page | 37

FRANCHISING
BIBLIOGRAPHY

I. Websites  www.franchiseindia.com  www.wikipedia.com  www.franchisebusiness.com.au  www.franchiseek.com  www.franchise-update.com  www.economictimes.indiatimes.com  www.franchisebusiness.in  www.exchange4media.com

II. Books, Journals, Magazines  Pramod Khera, Franchising- The Route Map to Rapid Business Excellence  Economic Times

Page | 38