Franchising Agreements in Business

Tutor’s Feedback TMA ANSWERS A1) Franchising which is an agreement between the franchisee and franchiser which gives the franchisee the right to sell or promote franchiser’s product and services using the franchiser’s trademark. Franchising has growing rapidly lately, you can see franchises everywhere. KFC, McDonalds, Nike and much more are very good example of successful franchise that encourages franchising. Franchising has been luring many business men, it can be called as buying success since you’re buying an already established and successful business. Franchising can be beneficial for both the franchiser and the franchisee. The franchiser get more motivated, the expansion becomes faster, lowers operation cost The franchisee on the other hand get management and assistance training, financial assistance from the franchiser according to their agreement. Brand recognition is another benefit for the franchisee. The franchiser has already identified customer need and fulfilled this need by creating a certain product. Since many small business’ fail in their first five years, buying a franchise risk is fewer compared to starting your own business. However acquiring a franchise alone won’t always mean success. Checking the financial status of the franchiser is important .The franchise fee can sometimes be so high or the royalty fees paid. A franchisee must investigate the business they are going to buy before signing any agreement, and choose a suitable business that can be successful in the franchisee business environment and culture. For example in Saudi Arabia buying the fast food franchises are successful because people there like fast food and are more likely to buy fast food rather than preparing it at home. A2) CDX or Coffee Day Express is a unique business that has achieved great success in catering service. There are main market segment are youth. There expansion was noticeable and was due to a number of factors. The shift in people’s food habits in past few years was a major factor in the growth of the business. Due to the busy life people is having they consider instant food as favorable. Factors like rising dual incomes, standard of living, convenience, and influence of western culture has further fuelled this trend. As result CDX became a leader in this field of business. The business made huge success in the field of takeaway just few years from its beginning. CDX had a number of strengths that helped them be in their expansion and growth. These strengths include their unique trends and their extraordinary products that tastes great. Their products are considered as their USP. Their standards were exceptional, their wide rang menu products attracted different customers and they were consistent on providing new flavors and products. The elegant and hygienic packaging of the products ensure that healthy standards were maintained. With the quality and freshness of services offered in relatively fast time, the hygiene standards, and at affordable prices Coffee Day Express were superior to their competitors. The great success of CDX made it a hot opportunity for franchisees, they were also offering profitable partnerships to those who want to franchise their brand which made interest even increase. Investment in their franchise involved a low level of risk taking and had many advantages. Their brand dominate the Indian market with 900 kiosks 226 of the kiosks are franchised. In conclusion, CDX which was started by the Indian Bean Coffee Trading Company in 2003 became one of the fastest growing businesses in India because of its high quality products and services, and the increased demand by people to buy instant food. Offering their brand to franchisee added more success to the business helping in its expansion and growth across India. A3) The business model of CDX can be considered as a successful model, actually a very successful model based on what they were able to achieve. Their rapid expansion and growth and their ability to maintain it to this point show how successful they are. K. Ramakrishnan, company’s founder, says, “In today’s fast paced lives, CDX is a place where the stressed metropolitan consumer can pause for refreshment before getting on with life. With its speed of service, CDX kiosk system is a hugely successful takeaway concept”. Having 900 kiosks across India they are dominating the market. All of these facts make us consider the Coffee Day Express business model as a successful one. Being so successful in India will the Coffee Day Express business model achieve same success in other countries, is this business model applicable for all countries? No it won’t be successful in all countries, the business model might be successful in other countries but it would succeed on certain basis. One factor that helped CDX to succeed is the change in people food habits that and their busy life styles made them prefer instant food , if CDX went to country where people are not likely to buy instant food it won’t achieve same success, it may even fail to continue operating. Another factor that lead to the CDX is how dense India metros are putting in consideration the large population this means an increase of the number of people buying your goods, even if ten percent of population buy your product the business will make profit, but in a country with lower population you will be lower sales not enough to be considered successful. In conclusion, Coffee Day Express or CDX business model has achieved without any doubt a recognizable success in the Indian market, however for the business model to successful in other countries, the country must have similar business environment characteristics like those in India or else the chances of the business to succeed will be lower. A4) To decide on having a small business or entrepreneurial venture when starting a business, one should understand the difference between them. Understanding the differences will enable us to decide which business would be suitable to us, based on the resources and what are we expecting to gain from running this business. An entrepreneurial venture is a business that is started with limited resources. The owner main objective is high profit and rapid growth. It usually introduces a new innovative product. This type of business needs good marketing, efficient distribution of products. Different aspects of the business is arranged by the enterprising individual. Small business on the other hand is an independently owned and operated business. The owner may not be interested in growing large because like to feel more relaxed and to run the business in an ordinary ways. So for me I would be more interested in an entrepreneurial venture. Franchise or run an independent small business? I would go for running an independent small business rather than buying a franchise. My reasons are the expense of buying a franchise, the success of the business will return to the original owner of the business, and lastly it won’t be challenging. In conclusion, deciding whether to run a small business or an entrepreneurial venture, to franchise or run the business independently differs from one individual to another based on one’s resources and how much one is ready to sacrifice for the business to be successful. References

1. Jim Hopkins, ‘Venture Capital 101: Entrepreneur Courses Increase, ‘USA Today, March 17, 2004,p.1b.
2. Lucyna, L (2014) Franchisingas a Way of Creating Entrepreneurship and Innovation. Comparative Economic Research. Vol. 17 Issue 3, p163-181. 19p. [online] Available from: https://web.a.ebscohost.com/ehost/detail/detail?vid=3&sid=470c561d-3b95-4cd3-974d-91895fd2f05b%40sessionmgr4004&hid=4204&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=bth&AN=99346623 E-library source
3. Diana , M (2014) Small Business, Big Impact. Journal of Property Management. Vol. 79 Issue 5, p48-52. 5p. [online] Available from : https://web.a.ebscohost.com/ehost/detail/detail?vid=5&sid=470c561d-3b95-4cd3-974d-91895fd2f05b%40sessionmgr4004&hid=4204&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=bth&AN=98203299 E-library source

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