 Hello friends, I am Satish Pariani working as an assistant professor in Department of Mechanical, Vulture Institute of Technology, Sholapur. Today we are discussing the concept of franchising, learning outcome. At the end of these sessions you will able to explain and use the business expansion tool which is called franchising. The contents what will be covered will be first of all basic knowledge of franchising. What are the types of franchising? What are the benefits of franchising? And the problem associated with franchising and finally the references. First of all we understand what does franchising mean? The definition given by International Franchisee Association is a franchisee operation is a contractual relationship between the franchiser and franchisee in which the franchiser offers or is oblique to maintain a continuing interest in the business of franchisee in such areas as know-how and training where wherein the franchisee operates under the common trade name format and or procedure owned or controlled by a franchiser and which franchisee has or will make substantial capital investment in his business from his own resources. Franchising actually is more than a distributorship. It extends to an entire operation or method of the business. It has greater assistance, control and it is generally of longer durations. Franchiser merely resells products to retailers or customers. Franchisee as we all know the biggest example is given in the world is called McDonald's. You see they extend support to the entire operation or method of the business and generally the person who goes in deal with this franchisee has longer durations whereas in distributorship the as we know the company many times has a channel physical product they sell through distributor which only resells the products at their profit in it and which further is sold by retailers and customers. Now as I given one example of Franchisee McDonald's now you think which Varapao company we all eat Varapao's right so which Varapao company a firm is done franchising. Now generally there are three main types of franchising which are being done. First one is called product distribution franchise. Second one is business format franchisee, third one is management franchisee. These are done on the basis of three different types whether it is product where is a business format or it is management. Let us see certain examples in this regard. Now you tell me Coca-Cola, Exxon, OSIM are examples of which they are the examples of product distribution franchisee. As we all know Coca-Cola, Exxon, OSIM are the example of product distribution franchisee. Now we will go with this the American food McDonald's Hilton KFC Subway Starbucks Coffee Long John Silver are the example of these are the famous example of business format franchisee. Then generally we see this type of franchisee is much much powerful because the entire business is being franchisee. We all know the success stories of McDonald's the success stories of KFCs like success stories of Starbucks coffee not only in India but each and every corner they are doing a very good business. Now the last franchisee example is American Idol where it is a famous management franchisee. The franchisee provides the management expertise format and procedures for conducting the business. Let us say tomorrow it can happen that our Korn Baneega Karotpati KBC can become a big example in this regard a management franchisee. Now what are the benefits of franchisee? The first and foremost benefit of franchisee is franchisees offer the independence of small businesses ownership supported by the benefits of big business network. As we can see in the example of McDonald's a big name is associated with them and independence a small organization is working. You do not necessarily need business experience to run a franchisee. Franchises usually provide the training you need to operate their business model. This has a higher rate of success than startup. It has been observed over a period because see this sentence is truly valid we can say because it is having support from big organizations support from their experiences. So whenever they support this kind of with their experience with their knowledge with their processes the failure rates are way too much less we can say because they have already taken care of certain unwanted sudden issues which can creep up in the business. You may find it easier to secure finance for franchisee it may cost less to buy a franchisee than start your own business of the same time. Franchisee just you have to pay some franchisee fee and they support you with their processes they support their business model but when you are starting a new startup you are starting with them from the scratch. So what happens the cause associated or the risk associated with the franchising business is far far less comparatively with your new startup. Again these are having certain advantages also and certain disadvantages also. Now what are the problems associated with franchising? The first and foremost problem associated with franchising is having sufficient capital. Many businesses fail due to undercapitalization and the same is true for the new franchisee. Suppose I want there is a new business which want to do his franchising there may he can raise the issue he can fail purely due to undercapitalization and because of insufficient capital is available with them. The second foremost important is building a solid infrastructure. Solid infrastructure means a franchising business if it is not built on the solid infrastructure basis it can fail it can truly fail it then bringing the right franchisee on board. Building a solid relationships many times when the franchising business is being done there are certain conditions there is certain agreements done between franchiser and franchiser. The conditions such as you should not sell you should not sell another product in the jar store. Let us say the example of McDonald's in McDonald's you cannot sell other like we can say Vada Pao's or certain wafers of other brand even though they are famous. That many times a franchisee to we cannot say cheat but it can to enhance his or to support his what he can say margins if the business is not running good or something many times to improve his profitability he starts selling so there can be issues between franchiser and franchisee. So there should be a solid relationship between between the franchiser and franchisee again we have to bring the right staff on the board if the staff is not correct the problems again are faced at a different level. Now the another role is understanding the role of franchiser means many times it has been seen that we need to change certain furniture levels or certain infra or certain positions in our franchisee business so it also needs that training timely training or if the product change by franchiser or some taste change by franchiser. Let us say McDonald's today is operating with some burgers and pizzas so suddenly if it starts want to sell certain chips or wafers they put in new product so need they need to give some training to the at lower level and parallely they need to understand whether that product really is will be running on the stores all over the places or at some places they need to be very clear so what is the role of franchisee being very clear in that case also the finding the right time is the basic problem of franchising where right time right place again it is said generally McDonald's see when they give their franchisee they see at what different what is the location what is the area available and generally they see whether that area is your name or it is on rented they have certain conditions certain clauses we need need to meet that clauses and then come up with that kind of businesses so certain references used we are used from NPTEL and franchisee direct.com and the business is your viewer.