Franchise relationship is based on an
agreement which lays down terms and conditions of this relationship.
The term of franchise may be for 5 years
or more. The franchise agreement may be renewed with the mutual consent of the
The franchisee gives an undertaking not
to carry any other competing business during the term of the franchise; and the
franchiser gives an undertaking not to terminate the franchise agreement before
its expiry except under situations which may justify the termination of the
The franchisee agrees to pay specified
royalty to the franchiser, as per terms of the franchise agreement.
Franchise means selling the same product
and maintaining a similar type of shop
decor (i.e. style of interior decoration) for which franchiser provides assistance
to franchisee in organising,
merchandising and management. The franchiser virtually sets up the business for
Franchisee is supposed to follow parent
company’s policies regarding mode of business operations, as per clauses in the
Franchiser may give training to
personnel working in the franchisee’s organization.
There are primarily two types of
Product/ trade name franchising: In this type, the
franchisee exclusively deals with a manufacture’s product. Examples include
Kidzee, French Loaf outlets, Bharat Petroleum bunks,Patanjali products, etc.
Relationships like Maruti Suzuki with ABT Maruti or Hero Honda bike dealerships
may be considered as franchises. However, they but should be considered more as
exclusive dealerships with more operational freedom for the dealers.
Business format franchising: When a franchisor
awards rights covering all business aspects as a complete business package to
the franchisee it is called as business format franchising. This package
includes training , support and the corporate name. This enables uniformity of
products, services, environment across geographical boundaries with a high
degree of standardisation. Examples are McDonald’s, Pizza Hut. KFC, Hot breads,
Titan, Color plus, Zodiac, Lakmé beauty parlour.