PORTFOLIO INVESTMENT AND FRANCHISING AS BUSINESS OPTION

JUVI F.BOQUECOSA

PORTFOLIO INVESTMENT

WHAT?????

A portfolio investment is a passive investment in securities, none which entails in active management or control of the securities' issued by the investor. Portfolio investment is investment made by an investor are not particularly interested in involvement in the management of a company. It is also the investment in securities that is intended for financial gain only and does not create a lasting interest in or effective management control over an enterprise. It includes investment in an assortment or range of securities, or other types of investment vehicles, to spread the risk of possible loss due to below expectations performance of one or a few of them.

ADVANTAGES OF PORTFOLIO INVESTMENT?

Unlike the investment approach of classic security analysis that focuses on individual security selection, portfolio investment is a modern investment method that involves asset allocation and diversification to construct a collection of investments. The biggest challenge in investing is the uncertainty of an investment's future performance and thus the risk of potential investment losses. Not counting on investment results of single investments, portfolio investment can hedge investment risks by canceling out different investment returns among component investments.

Some people say that the number one rule of investing is Dont put all of your eggs into one basket. Some other people say that You can never have too much of a good thing. Both of these rules are good pieces of investment advice, especially when they are combined together. This is a strategy that is better known as investment portfolio diversification. Investors should not have all of their money invested in exactly the same place but they should have just enough money in one place to fully benefit from the investment option.

HOW????????

Picking stocks may be more fun than divining "asset allocation," the percentage of stocks, bonds and other types of investments that you own, but studies show that a balanced portfolio can have a bigger impact on long-term performance than individual stock picking. The good news: if you follow a few basic rules, asset allocation can be smoother and less time consuming than scouring for the next Apple or Google.

..Consider your goals. Knowing when you will need the money how much and how soon should help you get started.
..Be honest about your risk tolerance. ..Go beyond stocks and bonds.

Be honest about your risk tolerance. Investing involves risk. All investments involve some risk, even seemingly "safe" investments like blue chip stocks or Treasury bonds. If you need some money for a short-term goal and you cannot afford to lose a penny of it, put it into an FDICinsured product such as a savings account or a certificate of deposit. No pain, no gain. Riskier assets such as small-cap or emerging markets stocks tend to have greater returns over time, but can also have violent swings. For example in 2008, emerging market stocks fell 53% percent and clocked in at 79% gain in 2009.

>>Go beyond stocks and bonds. Invest in more asset types. One way to reduce the volatility of a portfolio is to add some alternative assets like commodities or real estate, which don't generally track the markets for stocks and bonds. Commodities can also counteract inflation, because their prices typically rise when inflation picks up. If you're risk averse then consider putting a small portion of your portfolio in a market-neutral fund, which aims to make a profit in both bull and bear markets. Know what you own. Just because their values aren't updated quarterly in your brokerage statement doesn't mean that collectibles, houses, art and other valuables aren't actually part of your investment portfolio. While such items aren't often quickly sold, they do have value and risk to consider before you expand your holdings in other directions.

>>What not to do when putting together an investment portfolio. Many investors make one or more of these common asset allocation mistakes: Don't follow fads. Focusing on fads can get you in trouble. Chances are an investment fad has already produced high returns before you heard about.(A desirable trend characterized with lots of enthusiasm and energy over a short period of time. Don't be satisfied. Taking the "set-it-and-forget-it" mentality too far can be costly. If you don't review your portfolio regularly (annually, quarterly or monthly, just decide) then you could wind up with an asset allocation that is vastly different from what you set out with. Don't lose money. It can take years to make up for a huge setback in your portfolio, so don't ignore assets that hold up in all markets such as dividend-paying stocks, short-term bonds or cash.

Consider your goals. Time cures. When you're saving for a long-term goal, time can smooth the returns of volatile investments. Volatility, which refers to the swings of an asset, is great when your holdings are going up and scary on the way down. A longterm perspective helps when you own more volatile assets, such as small-cap stocks or commodities. Except when it doesn't. If you're saving for a short-term goal, like a teenager's college education, risky, volatile investments may work against you, plummeting right before you need the money. Watch out for inflation. Retirees or anyone living on a fixed income needs to worry about the damage that inflation can inflict on both buying power and regular payments, from bonds, for example, or annuities. Owning commodities, Treasury Inflation Protected Securities (TIPS), as well as a healthy dose ofstocks, can help moderate inflation.

FRANCHISING
JUVI F. BOQUECOSA

 The concept of Franchising as we know today 1st started in Evolution of Franchising Germany in 1840.
In 1851, Singer Sewing Machine Co. began granting distribution franchises for its sewing machines. Thus began the modern concept of franchising. The root word Franchise comes from old French meaning privilege/ freedom. In middle ages a franchise was a privilege/ a right. Essentially a marketing concept, Franchising is an innovative method of distributing goods and services.

What is Franchising?
Legal definition of Franchise:
Blacks Law Dictionary 7th edition 1999 defines Franchise as, the sole right granted by the owner of a trademark or trade name to engage in business or to sell a good or service in certain area.

Definition by International Franchise Association

A franchise operation is a contractual relationship between the

franchisor and franchisee in which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as know-how and training; wherein the franchisee operates under a common trade name, format and/or procedure owned or controlled by the franchisor, and in which the franchisee has or will make a substantial capital investment in his business from his own resources.
- Definition by International Franchise Association

TYPES OF FRANCHISE

Three main types of franchise:

Product distribution franchise; Business format franchise; and Management franchise.

PRODUCT DISTRIBUTION FRANCHISES

A product distribution franchise model is very much like a supplier-dealer relationship.

Typically, the franchisee merely sells the franchisors products. However, this type of franchise will also include some form of integration of the business activities.

PRODUCT DISTRIBUTION FRANCHISES

Examples of famous product distribution franchise:

BUSINESS FORMAT FRANCHISING

In a business format franchise, the integration of the business is more complete. The franchisee not only distributes the franchisors products and services under the franchisors trade mark, but also implements the franchisors format and procedure of conducting the business.

Famous Examples

MANAGEMENT FRANCHISE

A form of service agreement. The franchisee provides the management expertise, format and/or procedure for conducting the business.

Famous Examples

FranchisorFranchisee relationship

Regulated by contract which usually covers: Initial fee Royalty fee/Management fee Capital required from franchisee Territory/Area of operation Duration of license and renewal IPRs Termination

CAREFUL THINGS IN FRANCHISING

The franchisee is not completely independent. In addition to the initial franchise fee, franchisee must pay ongoing royalties and advertising fees.

Franchisee must be able to balance restrictions and support provided by the franchisor with their own ability to manage the business

CONT.

A damaged image or franchise system can result if other franchisees perform poorly or the franchisor has financial problems. The duration of a franchise is usually limited and the franchisee may have little or no say concerning termination

Advantages OF FRANCHISING
Your business is based on a proven idea. You can check how successful other franchises are before committing yourself. You can use a recognized brand name and trade marks. You benefit from any advertising or promotion by the owner of the franchise - the 'franchisor'.

The franchisor gives you support - usually including training, help setting up the business, a manual telling you how to run the business and ongoing advice.
You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.

Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.
[

You benefit from communicating and sharing ideas with and receiving support from other franchisees in the network
[[[

Relationships with suppliers have already been established.

Disadvantages OF FRANCHISING

Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor. The franchise agreement usually includes restrictions on how you run the business. You might not be able to make changes to suit your local market.

The franchisor might go out of business.

Other franchisees could give the brand a bad reputation. You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor. All profits are shared with the franchisor

Indian Judgments Impacting Franchising

Reasonableness of Non-Compete Clause Gujarat Bottling Co. (GBC) & Ors. Vs. Coca Cola Co. & Ors. Agreement signed for grant of franchise by Coca Cola to GBC to manufacture, bottle, sell & distribute various beverages for which TMs were acquired by Coca Cola. Agreements negative stipulation required GBC to work vigorously & diligently to promote & solicit sale of beverages produced under the TMs owned of Coca Cola Co. Shares of GCB were transferred to Pepsi, a rival of Coca Cola. Coca Cola obtained an order of injunction from High Court restraining the transfer of shares from GBC to Pepsi.

Protection of Confidential Information

V.V. Sivaram & Ors. Vs. Foseco India Ltd. (FIL)

Defendants 1 & 2, were ex-employees of FIL & had access to confidential & detailed info. about Turbostop (T), a patented product of FIL; FIL bound them with contractual obligation of non-use of confidential info. acquired in course of employment & by a non-compete obligation; Defendant 3, a contractor of FIL had access to confidential info. about T & was bound by a confidentiality & noncompete contract. All 3 violated contractual obligations. Court granted order of temporary injunction against them.

Breach of Consumer Rights by Franchisor:

MacDonalds (Mac) French Fries Case in USA:

A class action lawsuit brought against Mac by group of hindus, vegetarians & kosher observers from USA. During 1990, Mac advised its vegetarian customers that its French Fries contained no meat but in 1997, shortly after Wendys was sued for allegedly misrepresenting its food as veg., Mac reversed its stance & began advising public that its fries actually contained a beef product: beef tallow. The court ordered Mac to pay damages of 10 Million US$ and was also asked to issue an apology.

THANK YOU