Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees). A continuing relationship in which a franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing and managing in return for a monetary consideration. Essentially, a franchisee pays an initial fee and ongoing royalties to a franchisor; in return, the franchisee gains the use of a trademark, ongoing support from the franchisor, and the right to use the franchisor’s system of doing business and sell its products or services.
Major types of Franchise Business in India
The four major types of franchises that are available in India are the product franchises, the business franchise ventures, the manufacturing franchises, and the business format franchises
The product franchises are ones where the manufacturer uses the franchise contract to decide the ways in which the franchisee will be distributing the products e.g. Petrol pumps
In these cases the franchises are allowed to make the products with license and also market them by using the name and trademark of the original company. They can also use national advertising to market the manufactured product. Franchises of this nature are common, for instance, in the soft-drink industry.
Business franchise ventures
The business franchise ventures are instances where the franchisee buys and sells the products from the franchisor. In these cases the franchisors normally provide franchisees a client base, which they need to maintain. An example of a business franchise venture is the vending machines that can be found in many public areas and workplaces.
Business format franchise
This is the most preferred form of franchise in India. Here the franchisee gets a successful business model that is backed by a popular brand and product. The brand owner provides the required training and help for establishing the business. The franchisor also provides the supplies and receives a royalty fee from the franchisee.
The franchisor also provides the franchisee raw materials and products and this is done on a frequent basis to make sure that the latter’s quality of service stays the same. Major examples of such a franchise type are the fast food chains. Prominent examples include McDonalds , Burger King, and Pizza Hut.