AGENDA

Agenda
Introduction
What is it ?
Examples
Top Rated
Franchise
Sucess Rate
Industry overview
Suitability

Revenue Streams
ROI
Types
COMMON
FACTORS
Is it a Good Time?
Summary
Questions &
Answers
THANK YOU!

INTRODUCTION

FRANCHISE SYSTEM
=
FRANCHISE
+
FRANCHISOR
+
FRANCHISEE

INTRODUCTION
o A franchise is a license granted

by a business to another business

to make and sell goods/services.

o A franchisor is the owner of the

business who grants the license.

o A franchisee is the person who

purchases the business name.

WHAT IS IT
Normally referred to as
Business Format Franchising
A contractual long-term relationship
Grant of a licence to franchisee
Franchisee gets:

Tried and tested product/service

Profitable proven business model to follow
Experience and know-how of the franchisor
Entitlement to use the trade name / mark
Entire package

EXAMPLES

EXAMPLES

TOP Rated Franchise (

2009 )

Industry Overview
At the end of 2007 in the UK:
Industry worth 12.4bn
806 franchise systems
Property services
Personal services
Business and commercial services
Hotels and catering
Store retailing
101
Transport and vehicle services

202
159
156
115
73

Industry Overview
Regional Distribution of Franchised Units

(%), 2005 2007

South East
20
South West
London
North West
East Midlands
Scotland
Yorkshire
8
West Midlands
North/North East
Wales
5
East Anglia
3
Northern Ireland

13
12
10
8
8
7
5
1

SUITABLE?
1. Is it a financially viable business?
- Would it still be viable with an additional 15%
costs?

2. Is there long-term and widespread demand for

your product / service?

3. Can you prove that it can work in other parts
of the country and without your skills and
ability?
4. Are the business processes easily replicable?
5. Can an unskilled person easily be trained
to run the business / sell the product
or service?

NOT SUITABLE
YET!

A business that is failing

Low gross margins

Where product range has short life-cycle

(e.g. Tower of London gift shop)

High technical skill levels required

(e.g. toy)

Geographically defined market - no

potential to repeat in other places

(e.g. newspaper delivery)

(e.g. brain surgery)

Not proven

(e.g. only been trading for 3 months old)

TYPES
Investment Franchise
Investment franchises are operated by
the fast-food and restaurant chains,
as well as by some well-known hotels.
The franchisee has overall control of the
business
Employs his or her own senior management
and staff.

Executive Franchise
Involves the provision of professional services,
Financial advice, legal services or recruitment

assistance.

TYPES
Retail Franchise
The franchisee runs the outlet, employs staff

and displays goods approved by the franchisor.

Distribution Franchise
A distribution franchise permits the

franchisee to operate from a depot or

central office that is usually owned by the
franchisor.

Depot Franchise
The franchisee is the operator and sole occupant

of the depot. This type of franchise is generally

available to courier companies and parts
suppliers, for whom a depot is an essential part of
the business.

TYPES
Job Franchise
Usually a one-person business, operated by the

franchisee from home. Home-delivery

operations, such as lawn care, car repairs or
furniture refurbishing, are examples of job
franchises.

Management Franchise
A management franchise is where the

franchisee will be responsible for both running

the franchise and employing and managing a
team of operatives.

REVENUE STREAMS

Initial Franchise Fee

Average cost is 52,500

On-going Fees

Management Services Fee (Royalty)

National Marketing Levy

Average 7.5% of Gross turnover (never profit)

Average 1.9% of Gross turnover

Mark-up on Goods
Service Fees

Training Fee
Others: e.g. re-sales (transfer fees)

The franchisor should not be looking to make a profit from the

initial fee.
Source: (Nat West Survey 2008)

R.O.I

COMMON FACTORS
Successful Franchises

View franchising as a long term partnership

Provide comprehensive training
Undertake ongoing research & development
Franchisors income linked to the success of
the franchisees

COMMON FACTORS
Failed Franchises
View franchising as an income stream to

prop up a failing business

The business is not proven
The business has limited longevity
After initial training, they leave the
franchisee on their own
Have little or no financial incentive in the
success of their franchisees
Do not undertake ongoing research &
development

IS NOW A GOOD TIME?

People being made redundant, have a pay off

and its difficult to find new jobs

Businesses have less money to expand using
company owned expansion
The success rates are higher for both franchisors
and franchisees than for non franchise
businesses
For Franchising to succeed still need to apply
proper / sound business practices

IS NOW A GOOD TIME?

Your Local Business
with National Backing

45% of People would prefer to buy from a franchise

business
Source: bfa Franchise Awareness Survey 2006

SUMMARY
A well established industry
Create a national or

international brand
Cost Effectively
Quickly
A number of elements to
developing a successful
franchise
Sources of Help and Advice

Do you
have any
questions?

!!!!!!!!!!!!!!!!!

For More Help

ContactROHIT VARSHNEY
+91-9911158061