CHAPTER Introduction:

Transcription

1 CHAPTER Introduction: Franchising is the practice of using another firm's successful business model. The word 'franchise' is of Anglo-French derivation - from franc- meaning free, the franchise is an alternative to building 'chain stores' to distribute goods and avoid investment and liability over a chain. The franchisor's success is the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. Although in a nascent stage, franchising is gaining popularity in the retail segment in India, more particularly in the areas of food products and drinks, restaurant chains, consumer goods, and computer training center. Franchising is one way in which a company can take advantage of India s vast market with a degree of control that other traditional forms of distribution cannot match. It is a uniquely American idea which has been developed for more than a century. Franchising became popular after world war II, when individuals with a little capital and a lot of initiative started to fulfill their dreams of owning a business. First generation franchises are the pubs, voluntary groups of grocers and petrol stations linked to major oil companies. Second generation franchises are fast food outlets and cleaning services. These are also known as business format franchises. However, except in the US, and now in China (2007) where there are explicit Federal (and in the US, State) laws covering franchise, most of the world recognizes 'franchise' but rarely makes legal provisions for it. Only Australia, various provinces within Canada, France and Brazil have significant Disclosure laws but Brazil regulates franchises more closely. Where there is no specific law, franchise is considered a distribution system, whose laws apply, with the trademark (of the franchise system) covered by specific covenants Different type of franchise business : With this the manufacturer uses the franchise agreement to determine how the product is distributed by the person buying the franchise. A retail company can be provided 1

2 with a franchise to distribute, for example, a range of tyres. The franchisee can utilize the brand name and the trademark owned by the manufacturer to distribute or sell the car tyres. The owner of the store will pay the manufacturer a franchising fee or agree to purchase a minimum inventory to sell on to their customers. The manufacturer gets the income from the purchase of the retailer, and/or the franchise fee, and the retailer gets the benefit of the brand and experience of the franchisor. The Manufacturing Franchise. The franchisee is permitted to manufacture the products under license and sell them using the originator's trademark and name. They also get the benefit of the national advertising of the product they manufacture. The company owning the product gets the franchise fee and sometimes a fee for every unit sold. Examples include the food and beverage industry. The Business Franchise Venture. The franchisee purchases and distributes the products for the franchise owner. A client base is provided by the product owner for the franchisee to maintain. Vending machines are a classic example of this, where the franchisee purchases the vending machines and distributes and services them, taking their share of the takings of the machines. A Business Format Franchise This opportunity is very popular, and involves providing the franchisee a proven business model using a recognized product and brand. Training is provided by the franchise owner and assistance in setting up the business. Supplies are purchased from the franchisor and the franchisee pays a royalty fee. Frequently the franchisor will sell the franchisee the products or raw materials to provide the same quality of product. Most well-known fast food franchises are of this type, and also many jewelers and other ubiquitous High Street names Social franchises : Franchising is a very popular way that many use to grow their already successful businesses, and a few end up going global. 2

3 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, whole food retailing, aquarium maintenance, and hotel operation, have been identified as suitable for adoption by social firms employing disabled and disadvantaged people. The most successful example is probably the CAP Markets, a steadily growing chain of some 50 neighborhood supermarkets in Germany. Other examples are the St. Mary's Place Hotel in Edinburgh and the Hotel Tritone in Trieste. Social franchising also refers to a technique used by governments and aid donors to provide essential clinical health services in the developing world. 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. Good example of event franchising is the World Economic Forum, or just Davos forum which has regional event franchisees in China, Latin America etc. Likewise, the alter-globalist World Social Forum has launched many national events. When The Music Stops is an example of an events franchise in the UK, in this case, running speed dating and singles events In short strong of time all these three companies have expanded their base and covered every corner of India. The biggest highlight of these companies is that despite being big players in the market they still provide small business franchise opportunities to the people. Apart from these three other entrepreneurs too offer attractive and alluring small business franchise opportunities. Some of the other entrepreneurs are Reliance, Bharati and Tata. Being leaders in their respective fields all these have opened doors for those people who are looking for small business franchise opportunities in India Franchisee business in food and hotel sector: Apart from these domestic companies many foreign players are too setting up their business in India. And the most striking feature is that majority of them are global food giants. This is evidential from that fact that one can find various food outlets of the global food giants such as McDonald's Pizza Hut, Sub way, Domino's, Kentucky 3

4 Fried Chicken and more to follow soon. Thus, India s scenario has opened up various small business franchise opportunities in India for new entrepreneurs and equally to the multinational companies for expanding their business in India in food and hotel sector. 1.2 STATEMENT OF THE PROBLEM: The study would contribute significantly in understanding how to build successful and efficient franchisee business models through a sample study of the executives at Franchisor Company and franchisee networks branches. So the study has significance as it could lead to conclusions which would be simulated and advantages could be realized not only the franchisee companies and its franchisee units in food and hotel industries but also in other similar companies in other states and for other franchisee MNC organizations. The Study also helps to investigate and find whether is and how the outcomes of these research parameters that could be used to build successful franchisee relations for food and hotel franchising MNC s in India to expand their business operations effectively and efficiently. This research work has developed a precise and effective technique and method for the analysis to identify if any problems and impediments in the franchisee business relationships for corrective action plans to solve the overall intermediary problem, through effective franchisee management systems for multinational companies having a vision to expand and increase their turnover, profits, brand equity and share value in international stock exchange 1.3 NEED FOR THE STUDY: To Understand the nature and concept of franchising in Food and Hotel Industry Defining the dynamics of franchising a business To Understand Legal aspects of franchising To Understand the criticalities of Franchisee-franchisor relationship 4

5 Analyzing Costs involved in franchising operations Derive the Advantages and disadvantages of franchising for Franchisee and Franchisor To State that, the franchising creates successful entrepreneurs 1.4 OBJECTIVES OF THE STUDY: Following are the broad objectives of the research: To analyze how MNC s(food and hotel industry) lay down Franchising operations in India To assess operational efficiency in franchising a business (Both with respect to a Franchisor and a Franchisee) To identify the critical success factors in Franchising To examine the relationship between Franchising and Entrepreneurship To appraise the cost involved in Franchising To appraise the legal aspects of Franchising 1.5 HYPOTHESIS: H 0 : There are NO impediments in the franchisee business relationships in food and hotel industry in India for MNC s. H 1 : There are impediments in the franchisee business relationships in food and hotel industry in India for MNC s. H 0 : The franchisee business is NOT a successful business intermediary model in food and hotel industry in India for MNC s. H 2 : The franchisee business is a successful business intermediary model in food and hotel industry in India for MNC s. H 0 : The commercial operations and relationships are not healthy and are creating tensions between the stakeholders of this intermediary business 5

6 H 3 : The commercial operations and relationships are healthy and are creating tensions between the stakeholders of this intermediary business H 0 : The marketing and promotional operations are not healthy and are one sided are directed to build company image of the franchisor and reduce the franchisee business entity. H 4 : The marketing and promotional operations are healthy and are one sided are directed to build company image of the franchisor and reduce the franchisee business entity. H 0 : The provision of the franchisee agreements are one-sided and NOT following the equity and justice to both parties to pave way for healthy and longstanding business relationships. H 5 : The provision of the franchisee agreements are one-sided and are following the equity and justice to both parties to pave way for healthy and longstanding business relationships H 0 : The Marketing control and meeting ( weekly / monthly / quarterly / annually ) are not considering the marketing conditions and competition in the specific location are interested only in targets and returns than long standing mutual benefit based relationships. H 6 : The Marketing control and meeting ( weekly / monthly / quarterly / annually ) are considering the marketing conditions and competition in the specific location are interested only in targets and returns than long standing mutual benefit based relationships. H 0 : The financial control and auditing systems are not in place and are one-sided. H 7 : The financial control and auditing systems are in place and are one-sided 1.6 SCOPE OF THE STUDY: The current research is a case study to derive that Franchising creates realistic option for every business and creates successful entrepreneurs. The study will help us to: 6

7 Understand the nature and concept of franchising in Food and Hotel Industry Dynamics of franchising a business Understand Legal aspects of franchising Understand the criticalities of Franchisee-franchisor relationship Analyzing Costs involved in franchising operations Understand Advantages and disadvantages of franchising for Franchisee and Franchisor Understand that franchising creates successful entrepreneurs 1.7 METHODOLOGY: The study makes use of both primary and secondary extensive. The study mainly goes into research through a primary sample survey to find the present level of success and efficiency level of franchisor business like, Mc Donald, Pizza Hut, Domino s Pizza, Choice Hotels, Country Inns & Suites, InterContinental Hotels Group, Coca Cola, Subway, KFC and Baskin Robbins. The franchisor and franchisee units.the study is purely descriptive and analytical nature. The study is based on random sample survey of the respondents through a questionnaire study conducted on selected units across India. This primary survey would be the research survey coupled with the discussions and interviews of the franchisees of the franchisee company. The study has been carried out through a well-structured questionnaire that is personnel administered to various districts of India. Sources of Data The Primary data analysis is conducted with the help of a questionnaire. This primary survey would be the research survey coupled with the discussions and interviews of the franchisees of the franchisee company. He is responsible for handling the financial, commercial, marketing, human resource and marketing and promotional aspects (with reference to food and hotel sector survey sector). The study has been carried out through a well-structured questionnaire that is personnel administered to various districts of India. 7

8 The franchisor and franchisee units and branches (commercial, financial and auditing, managerial, operational and customer service aspects) are selected across India.The survey is conducted on the franchisees of selected franchisee companies across India.10 franchisor companies or survey units are selected for study. In each, total of ten franchisees have been selected for the study.the sample size is 100 (franchisees).the survey will be conducted with a sample study on randomly selected franchisees. The secondary data is collected from the published journals, books, newspapers and various websites. Techniques of Analysis The data collected is codified tabulated and processed for the purpose and analysis of the study, various statistical tools were made use.the test was conducted using specialized Statistical package viz., SPSS, ANOVAs, One-Sample T-test, are some of the statistical tools used for analysis of the data. 1.8 LIMITATION OF THE RESEARCH The study is limited to only ten case studies of both food and hotel industry. Selection of only five form hotel industry may not be an exact representative of the entire population in the hotel industry. Franchising in food industry is entirely different from that of hotel industry in choosing franchisor and process of choosing it. In India the MNC food industry is basically the fast food outlets which get limited to KFC, Mc Donald, Pizza Hut, Domino s Pizza etc. 1.9 PRESENTATION OF THE STUDY The entire study is presented in the following form. It has been divided into 6 different chapters. CHAPTER-1. the first chapter introduces the main theme and over all objective of the thesis. the detailed research objectives which are explicitly listed with the associated hypothesis, the research methodology, sample survey, primary and survey methods 8

9 data collection and analysis methods are presented. significance of the study is done and in the final chapter the limitations of the study are enumerated. CHAPTER-II. the second chapter details the literature survey under taken by the researcher about conceptual frame work with introduction introduction to conceptual frame work definition of franchising,evolution of franchising in the world, introduction to franchising business global scenario, introduction to franchising business.- indian scenario,introduction to food and hotel sector- global scenario,introduction to food and hotel sector - indian scenario.,introduction to food and hotel sector- Karnataka scenario with detailed review of literature with reference to research in franchising business in food sector was follows by the research gap and research question and the summary of the chapter. CHAPTER-III. the third chapter introduces in detail the researcher s study of the complete organisation profilesof the survey selected francising companies and franchisees under those companies in food sector. CHAPTER-IV.deals with data analysis and interpretation of the study. CHAPTER-V.deals with the summary of the overall findings of the research. CHAPTER-VI. The last and the most important sixth chapter of the thesis brings out the findings and suggestions and conclusions on the level of successful franchisee food sector business on the basis questionnaires primary survey survey and the final conclusion of the thesis. This chapter is followed by bibliography and questionaire. 9