COKE ISSUE: FRANCHISING VS LICENSING SYSTEM: WHOLE OF THIS HAVE TO BE READ: NO EXCUSES , MUST READ AND UNDERSTAND

 
 

1. A license may be granted by a party ("licensor") to another party ("licensee") as an element of an agreement between those parties. A shorthand definition of a license is "an authorization (by the licensor) to use the licensed material (by the licensee)."

In particular a license may be issued by authorities, to allow an activity that would otherwise be forbidden. It may require paying a fee and/or proving a capability. The requirement may also serve to keep the authorities informed on a type of activity, and to give them the opportunity to set conditions and limitations.

2. Franchising is the practice of using another firm's successful business model. 

Two important payments are made to a franchisor: (a) a royalty for the trade-mark and (b) reimbursement for the training and advisory services given to the franchisee. These two fees may be combined in a single 'management' fee. A fee for "Disclosure" is separate and is always a "front-end fee".
A franchise usually lasts for a fixed time period (broken down into shorter periods, which each require renewal), and serves a specific "territory" or area surrounding its location. One franchisee may manage several such locations. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees. A franchise is merely a temporary business investment, involving renting or leasing an opportunity, not buying a business for the purpose of ownership. It is classified as a wasting asset due to the finite term of the license.
A franchise can be exclusive, non-exclusive or 'sole and exclusive'.

3. India

Franchising of goods and services, foreign to India, is in its infancy. The first International Exhibition was only held in 2009.^[23] India is, however, one of the biggest franchising markets because of its large middle-class of 300 million who are not reticent on spending and because the population is entrepreneurial in character. In a highly diversified society, (see Demographics of India) McDonalds is a success story despite its fare differing from the rest of the world.^[24]

4. As practiced in retailing, franchising offers franchisees the advantage of starting up quickly based on a proven trademark, and the tooling and infrastructure as opposed to developing them.
The following US-listing tabulates^[2] the early 2010 ranking of major franchises along with the number of sub-franchisees (or partners) from data available for 2004.^[3]een from the names of the franchise that the US is a leader in franchising innovations, a position it has held since the 1930s when it took the major form of fast-food restaurants, food inns and, slightly later, the motels during the first depression. Franchising is a business model used in more than 70 industries that generates more than $1 trillion in U.S. sales annually (2001 study).^{[citation needed]} Franchised businesses operated 767,483 establishments in the United States in 2001, counting both establishments owned by franchisees and those owned by franchisors:^[4]

1. Subway (Sandwiches and Salads) | Startup costs $84,300 – $258,300 (22000 partners worldwide in 2004).

2. McDonald's | Startup costs in 2010, $995,900 – $1,842,700 (37,300 partners in 2010)

3. 7-Eleven Inc. (Convenience Stores) |Startup Costs $40,500- 775,300 in 2010,(28,200 partners in 2004)

4. Hampton Inns & Suites (Midprice Hotels) |Startup costs $3,716,000 – $15,148,800 in 2010

5. Great Clips (Hair Salons) | Startup Costs $109,000 - $203,000 in 2010

6. H&R Block (Tax Preparation and e-Filing)| Startup Costs $26,427 - $84,094 (11,200 partners in 2004)

7. Dunkin Donuts | Startup Costs $537,750 - $1,765,300 in 2010

8. Jani-King (Commercial Cleaning) | Startup Costs $11,400 - $35,050, (11,000 partners worldwide in 2004)

9. Servpro (Insurance and Disaster Restoration and Cleaning) | Startup Costs $102,250 - $161,150 in 2010

10. MiniMarkets (Convenience Store and Gas Station) | Startup Costs $1,835,823 - $7,615,065 in 2010

5. McDonald's Corporation (NYSE: MCD) is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily in 119 countries.^[3][4] Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth.^[5]

6. McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants. Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly. The remainder are operated by others through a variety of franchise agreements and joint ventures. The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonald's may also collect rent, which may also be calculated on the basis of sales. As a condition of many franchise agreements, which vary by contract, age, country, and location, the Corporation may own or lease the properties on which McDonald's franchises are located. In most, if not all cases, the franchisee does not own the location of its restaurants.

7. 

http://www.slideshare.net/Anamika_Tarafdar/coke-internship-chandigarh

Read 7th slide on this ppt.

FRANCHISE MODEL AND NOT THE LICENSING SYSTEM.

CM inaugurates Coca-Cola plant
Tribune News Service

Nabipur (Fatehgarh Sahib), June 26
A new era of industrialisation in Punjab has begun with the starting of a modern bottling plant here today. The plant has been set up at a cost of Rs 45 crore by Kandhari Beverages Ltd, a franchisee of Coca-Cola.

The Punjab Government, instead of wasting money in dead corporations, will facilitate the setting up of modern industrial units by investing in infrastructure and other facilities. This was stated by Capt. Amarinder Singh, Chief Minister, Punjab, after inaugurating the plant.

He said during the past five years, a number of units had been closed resulting in slower economic growth and unemployment in the rural areas. Now the government would attract MNCs and other big groups by creating congenial atmosphere and infrastructure.

Congratulating Mr Jaspal Singh Kandhari, Managing Director, Kandhari Beverages, and Mr Patrick Siewert, President, Coca-Cola Asia, he said, ''the government will welcome the decision of the Coca-Cola to invest in agri-processing industries. The Punjab Agro Industries Corporation would soon sign an agreement with the company to set up new ventures.''

Mr Patrick Siewert, on his maiden visit to Punjab, said India and China were the two of Coca-Cola's key markets. In the past five years, the company had made an investment of more than $ 800 million in India. The company has set up 27 bottling plants, including five in the North. The company employed over 10,000 people and had a network of 8,50,000 outlets in the country.

Regarding the Punjab operations, Mr Jaspal Singh claimed that per capita consumption of soft drinks was among the highest in the country at over 15 bottles per year. The new plant was capable of producing 600 bottles per minute of 300 ml and 140 bottles of PET per minute. It would also provide employment to over 400 persons.

Earlier, talking to the mediapersons, Capt. Amarinder Singh said the preparation of new industrial policy was in final stages and would be announced shortly. The government had already received an interim report of the Chattha committee and is waiting for the final report on the recommendations on the industrial policy. It is likely to be submitted in the next few days.

Asked about the state government's views on the Public Sector Disinvestment Commission's recommendations to wind up PSUs, he said,'' I am of the firm opinion that the government should have no role in running industries and it should concentrate on providing infrastructure and good governance. We would like to wind up most of the PSUs and provide adequate compensation to the retrenched workers after disinvesting our shares from six PSUs in initial stages. There are only about 600 employees with these corporations. The workers should also understand that the government is not in a position to run these corporations.''

Regarding the pending capital subsidy worth Rs 470 crore towards SSI units for the past many years, he assured that the government had been committed to pay the amount. It would be released in phases due to financial constraints. 

 

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