INTRODUCTION: FRANCHISING

Franchising is the practice of using another firm's successful

business model.

The

word 'franchise' is of anglo-French derivation - from franc - meaning free, and

is used both as a noun and as a (transitive) verb.[1] For the franchisor, the
franchise is an alternative to building 'chain stores' to distribute goods that avoids
the investments and liability of a chain. The franchisor's success depends on the
success of the franchisees. The franchisee is said to have a greater incentive
than a direct employee because he or she has a direct stake in the business.
What is a franchise? A franchise is a right granted to an individual or group to
market a company's goods or services within a certain territory or location.
Some examples of today's popular franchises are McDonald's, Subway,
Domino's Pizza, and the UPS Store.
There are many different types of franchises. Many people associate only fast
food businesses with franchising. In fact, there are over 120 different types of
franchise businesses available today, including automotive, cleaning &
maintenance, health & fitness, financial services, and pet-related franchises, just
to name a few.
How Franchising Works
If you are thinking about buying into a franchise system, it is important that you
understand exactly how franchising works, what fees are involved, and what is
expected of you from the franchise company.
An individual who purchases and runs a franchise is called a " franchisee." The
franchisee purchases a franchise from the "franchisor." The franchisee must
follow certain rules and guidelines already established by the franchisor, and in
most cases the franchisee must pay an ongoing franchise royalty fee, as well as
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an up-front, one-time franchise fee to the franchisor. Franchising has become

one of the most popular ways of doing business in today's marketplace. In most
states you cannot drive three blocks without seeing a nationally recognized
franchise company.
The History of Franchising
Franchising began back in the 1850's when Isaac Singer invented the sewing
machine. In order to distribute his machines outside of his geographical area,
and also provide training to customers, Singer began selling licenses to
entrepreneurs in different parts of the country. In 1955 Ray Kroc took over a
small chain of food franchises and built it into today's most successful fast food
franchise in the world, now known as McDonald's. McDonald's currently has
the most franchise units worldwide of any franchise system.
Today, franchising is helping thousands of individuals be their own boss and
own and operate their own business. Franchising allows entrepreneurs to be in
business for themselves, but not by themselves. There is usually a much higher
likelihood of success when an individual opens a franchise as opposed to a mom
and pop business, since a proven business formula is in place. The products,
services, and business operations have already been established.

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TYPES OF FRANCHISES
There a four types of franchising opportunities available with varying levels of
qualification requirements.

Single Franchise - This is the beginning level and common form of

franchise participation. The Franchisee is awarded the exclusive rights to
operate a single unit franchise in a specified geographic area. It could be
a home-based business or have a physical location. The franchisee is
typically a hands on operator of the business.

Multi Unit Franchise - The franchisee owns and operates more than one
franchise unit. Units may be in random areas of your choosing. The
franchisee is typically less involved with each individual unit, but
manages the multiple unit operations.

Area Development Franchising - The franchisee will own an exclusive

territory and will agree to a development schedule for the number of units
they must open and operate. There is typically a significant reduction in
franchise fees and possibly ongoing royalties.

Area Developer

franchisees usually have managers for each unit.

Master Franchising - Sometimes called a master or regional developer, a

master franchisee has the exclusive franchise rights in his or her area
(usually a metropolitan area or even an entire state). He acts as the
business development partner for the franchise company in his specific
territory or region, i.e., a state, counties or metropolitan area. The master,
in addition to opening franchises, sub-franchises (selling a single unit and
multi unit franchises), keeping a significant portion of the franchise fee as
well as ongoing royalties from the franchisees within his or her
area. There may also be additional income available from distribution of
products through the franchisees in the area. The master essentially

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becomes a franchisor in his or her own area without having the costs of
the trial and error the original franchisor went through.

Absentee Investor - For the right kind of business, with the right
employees running that business, it is possible to own a franchise
business and not be directly involved in its day to day management. With
this approach, you can keep your job and build equity and wealth toward
your retirement years through business ownership.

According the International Franchise Association there are over 75 industry

categories of franchises. The categories listed are an indication of the variety of
the types of franchises available.
Accounting/Tax Services, Advertising/Direct Mail, Automotive Products &
Services

Beverages

Specialty,

Business

Brokers,

Business

Services,

Business/Management Consulting

Check

Cashing/Financials

Services,

Childrens

Educational Services,

Computer/Electronics/Internet Services, Construction Materials, Services and

Remodeling

Educational Products & Services, Employment Services, Environmental &

Restoration Services, Equipment Commercial Cleaning
Factoring - Accounts Receivables, Financial Services, Fitness & Nutrition,
Food - Baked Goods/Donuts/Pastries, Food Candy/Popcorn/Snacks, Food
Coffee, Food Deli/Sandwiches/Subs/Wraps, Food Ethnic, Food Ice
Cream/Yogurt/Smoothies/Juice, Food Pizza, Food Restaurants, Food
Specialty Franchise Consulting
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Hair Salons, Beauty Care & Services, Health Aids & Personal Care Services,
Home Furnishings- Retail, Sale & Rental, Home Inspection/Radon Detection,
Hotels/Motels

Interior Decorating

Janitorial & Commercial Cleaning Services

Laundry & Dry Cleaning, Lawn, Garden, Agriculture, Logistics, Shipping,

Warehousing

Maid & Residential Cleaning Services, Maintenance, Cleaning & Sanitation,

Management Development & Training

Online Auction & Consignment

Packaging/Shipping/Mail Services, Painting Services, Pest Control Services,

Pet Sales, Supplies & Services, Photography & Supplies, Pressure Washing &
Restoration, Printing/Copying Services, Publications
Real Estate & Services, Retail - Home Interior, Retail Stores Specialty

Senior Care/Adult Care (Non-Medical), Signs & Graphics Services

Tanning Centers, Telecommunication Services, Training

Weight Control

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ADVANTAGES & BENEFITS OF BEING A FRANCHISOR

The advantages and benefits of being a franchisor company outweigh many
other business growth strategies. The list of advantages and benefits are
phenomenal.

The ability to thoroughly leverage others assets. You can use the money,
time, talents, contacts, ideas, and resources of others to expand.

You can sell the business and still own it. And you can sell it over and
over again.

Immediate cash flow.

No contingent liability.

No additional real property or equipment leases.

No manager or personnel procurement problems.

Eliminates the day-to-day responsibility for direct management.

Franchisors income is based on the franchisees gross sales not

profitability.

Gross sales are easier to monitor than profits.

Profit and loss responsibility belongs to the franchisee.

There is a long-term residual income.

Expansion is not limited to your capital because the franchisees provide

the capital for expansion.

Collective buying power.

More capital can be generated for advertising.

Franchise fees can be used for research and development of new products
and services for the franchise network.

Cash flow from franchise fees can be used to open company owned
franchises.

The capital generated through franchising does not have to be repaid and
can be used to sustain growth.
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A franchisor helps other ambitious individuals to succeed in their own

businesses.

A franchisor company can be operated with a minimal number of

employees since each franchise operation is staffed by employees of the
franchise.

So you think you want to buy a franchise but youre not so sure it would be the
right choice. After all, why should you spend a premium on a big name when
you can just duplicate their efforts? Think again. There are a few good reasons
why copycatting doesnt work, and in hard economic times, these reasons make
even more sense. We cant say enough about the security factor of choosing to
invest in a franchise as opposed to a new start up. Below are 5 advantages of
franchising.
1. Branding
The first thing Franchises offer franchisees is a strategic identity that is not only
effective, it has cumulative market impact. Corporate Brand Identities are
proven. Mega-brands like McDonalds and Dunkin Donuts have literally spent
millions on their brandings and logos and the franchisee gets to take full
advantage. Most Franchisors have already survived decades in their respective
industries and are easily identifiable to the public. A successful brand is one that
is remembered, and Franchises have some of the most successful brand
identities in the world.
2. Advertising
Advertising can be one of the biggest expenses for any new business and for
good reason. You cant survive without effective advertising and effective
advertising is expensive. These days, even if you have a prime location, if
customers are unfamiliar with what you have to offer they wont come in.
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Franchises offer national advertising campaigns that are included in your

franchise fee. This is a huge benefit when considering a franchise.
3. Name Recognition
People today want guarantees like never before and name/menu/brand
recognition gives them that assurance. Everyone knows what to expect when
they stop at your franchise because the majority of them are repeat customers
even if its the first time in your store. You get to take advantage of the fact that
a family from out-of-state, for instance, who has previously enjoyed your
franchises products and services, will think nothing of visiting your facility
because of their past positive experiences. In fact, like an old friend, they are
counting on you to be there.
4. Reputation
Next to Advertising and Branding, a Franchisee enjoys the protected reputation
of the Franchisor. I say protected because there are designated legal departments
that take care of the inevitable issues like lawsuits, accidents, and difficulties
with employees. The reputation of the franchise is important enough, it is what
breeds positive expectations that keep patrons loyal, but this benefit coupled
with a built-in umbrella of legal protection is an incredible bonus and one you
cannot get as an independent.
5. Support
Unless you were raised in the specific business you are trying to start, you will
need special training. Franchise Head Quarters will train you in everything from
the technology involved, to the accounting, to standing behind the counter and
taking money. Ongoing and online support is always available as well as special
alerts and continuing education.
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DISADVANTAGES OF FRANCHISING
HIGHER LEGAL EXPENSE
The necessity of preparing agreements, Uniform Franchise Offering Circulars
(UFOCs) and related documents, and filing them in various states (with attached
audited financials) represents a significant expense, although the year-to-year
expenses are generally less than those initially incurred in setting up the
structure and related documents. Basic documents, once prepared, can be filed
in many states with generally minor changes. Additional legal (and possibly
accounting) costs will be incurred if a separate legal entity is used for the
franchising program.
TECHNICAL

LEGAL

CONSTRANTS - F RANCHISE

AWARD

PROCESS
Franchise laws are particularly technical in their application (for example, if a
Franchisor provides only 9 days of pre-sale disclosure rather than the required
10, the Franchisee has an automatic rescission right, even though the missing
day was not the cause of any loss.) For these reasons, an education program for
franchising personnel (which we provide) and the assistance of an in-house
legal compliance person is highly useful.
TECHNICAL LEGAL CONSTRAINTS - REGULATI ON OF THE
RELATIONSHIP
Franchise laws in a number of states regulate the circumstances in which a
Franchisor may terminate or refuse to renew a franchise. While generally not
preventing Franchisors from achieving termination or non-renewal, these laws
do present a number of technical requirements that must be complied with.
These requirements make inclusion of provisions for objective standards (for

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both system compliance and financial performance) for termination (and/or

recovery of exclusive territories) particularly important.
FRANCHISE MARKETING CONSTRAINTS
Advertisements, brochures, flip charts, video tapes, etc. offering the franchise
(but not retail advertisements) must be pre-cleared with state agencies and
cannot contain earnings claims. Information regarding possible financial results
for operating units can only be presented in a formal document attached to the
UFOC.
CONTROL ISSUES
As with dealerships, there may be quality control and related issues, at least as
compared to company-owned operations.
BUSINESS RELATIONSHIP ISSUES
Perhaps more than with dealers, Franchisees typically view themselves as, to
some degree, partners with the Franchisor in the development and possible
success of the system. While most will agree that committee management
doesnt work and that there needs to be one captain for the ship, a wise
Franchisor will work with his Franchisees, probably with the help of a franchise
advisory council, in charting strategic directions, implementing marketing
plans, etc. A Franchisor must be psychologically comfortable working with
Franchisees who will understandably take the view that if were going to be in
on the landing, wed like to be in on the takeoff too.
NEED

TO

DELIVER

PERCEPTION

( AND R EALI TY )

OF

CONTINUED VALUE
Franchisees (perhaps more than dealers and particularly if they are being asked
to pay royalties and/or marketing fund contributions throughout a long-term
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contract) can be expected, after some period, to feel that they know as much
about running the business (at least on the retail level) as the Franchisor and will
ask what their continued payments are buying them (What have you done for
me lately?) Wise Franchisors anticipate the question by building value in the
brand, updating systems and providing continued operational and marketing
benefits that give the Franchisee a superior position vis a vis the competition,
making his or her leaving the system obviously a poor business decision.
POTENTIAL FOR LOSS OF FREEDOM
Unless carefully designed, awards of exclusive territories may generate legal
and other problems when a Franchisor seeks to expand through alternative
channels of distribution (Internet, mail order, etc.), special venues (units in WalMart, K-Mart, etc.), access different markets (non-automotive), co-branding
opportunities, mergers with existing competitive chains, etc. Appropriate
franchise agreement provisions, and proper education of Franchisees, and
management of their expectations, can largely avoid these issues.
FINDING QUALIFIED FRANCHISEES
As may be true with dealerships, but more importantly where the franchise
relationship is long term, finding and educating (not just training) good
Franchisees is vital. The ideal Franchisee combines entrepreneurial energy with
the willingness to follow systems and act as a team player. Psychological
testing and a detailed interview and training process are tools which many
Franchisors use to select the right individuals. The question to be asked should
be Is this the best candidate in Rochester? rather than Can this man fog a
mirror held under his nose and produce a warm checkbook?

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 UNMANGED GROWTH
Given franchisings demonstrated potential for rapid expansion (financed
primarily by Franchisees), the potential downside is too rapid expansion, with
the needs of the Franchisees outstripping the support capabilities of the
Franchisor.

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10 STEPS TO BUYING THE RIGHT FRANCHISE

Franchising is a safe way to start your own business. Just make sure you pick
one the makes sense for you.
Recession, unemployment, tight credit, crashing stock market--we're in hard
times and it's going to continue for a while. In spite of this, or maybe because of
it, franchising is booming, with hundreds of thousands of people looking into
franchise opportunities every day.
Business ownership is the American Dream. Franchising remains one of the
safest ways of becoming a business owner due to the time-tested training and
support available from top franchises in more than 80 industry categories--a
number than continues to grow.
If you want to be your own boss, make sure you're finding the best franchise for
you, which may be different than what you thought given the market conditions.
Following are 10 steps to selecting a great franchise in the down market
conditions expected for 2009.
Step1-Self-Evaluation
Ask yourself what you really want to achieve by owning a business. Things
like, what hours you want to work, what kinds of things are you good at and like
to do, how much money can you afford to invest and what returns will you need
to produce from the business? Also, give some thought to where you want to
live and operate your business, as well as what your exit plans are in the future.
Once you understand what's important to you, you'll be able to evaluate any
franchise opportunity and know if it's a good match.
Step2-Financing
These are not normal times. Given what's happened to our capital markets,
you'll need to have a clear idea of how much money will be available to you.
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Unless you're sitting on a mountain of cash, start this process early on because
the answers can be quite different from what they were just a few months ago.
For more on funding, review my previous article, " 3 Sources of Franchise
Financing."

Step 3--Evaluate industry categories

Take a master list of franchise opportunities (the Entrepreneur Franchise 500

published each January is the most comprehensive) and review it. Don't bother
with individual companies at this time, just focus on industry groups or
categories. Based on your impression of each of these segments, ask yourself if
it appears to meet the desired criteria you identified in Step 1. If it doesn't, cross
it off. You'll end up with a list of possible industry segments.
Step 4-Look for recession-resistant segments

Take your list of possible industry segments and ask yourself a simple question:
"Do I believe this is a business that will continue to do well regardless of the
state of the economy?" This will be true of businesses like damage restoration,
fast food, senior care or hair cutting, but it may not be true of others like
optional expensive services businesses or upscale retail. Cross off industry
segments if you believe that they're not recession resistant so you give yourself
the best possible chance for a successful decision.
Step 5-Start identifying individual franchise companies

Once you've narrowed down the list, look at individual companies and pick one
that you think is representative of the category. Try to select companies that will
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have territories available in your desired area. From this list of companies, pick
a few that seem most interesting or attractive to you based on your criteria
identified in Step 1. It's time to look at them in a little more detail.
Step 6--Request preliminary information from franchisors

After selecting a few companies that match with you, contact the companies and
request basic franchise information. This might be on a website or in brochures,
videos or other materials they may send you after you visit with one of their
development staff. Review the preliminary information from each company to
determine if, based on this further information, the company still appears to
meet your criteria and is worth spending more time on. From this point forward,
your time commitment on each active investigation is going to increase
dramatically, so be selective.
Step7--Study the FDD

After your initial contacts and the submission of a qualification questionnaire,

the franchisor will typically provide you with its Franchisor Disclosure
Document (FDD), an FTC-mandated disclosure document. The FDD contains
extensive information about the franchise, including the history of the
executives, any litigation the company has experienced, the names and contact
information for the current franchisees, and a copy of the franchise contract.
Review this information carefully and get any questions you have answered
before you proceed to the next step.

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Step 8--Call existing franchisees

The best source of information for any franchise system is the existing
franchisees. Contact franchisees and ask them all about the business, their lives
as franchisees, and what they think of the company. This is a good tool for
evaluating how well a franchisor supports its franchisees, whether the startup
cost projections are realistic and how effective the provided marketing materials
are.
Step 9--Visit the franchisor

Assuming everything else checks out, your second-to-last step is usually a visit
to franchisor headquarters. This is a great time to get any final questions
answered and to meet the people who will be helping you get your business up
and running. Though this may seem like a formality, it's a vital check-andbalance to make sure you are completely comfortable and confident in the
company you are about to enter into business with. Also, keep in mind that they
will be carefully evaluating you as a potential franchisee at the same
time, so this final judgment is a two-way street.

Step 10--Make your decision

Once you've completed the preceding nine steps, it's time to make your final
decision. If you've carefully followed this process, you can be sure that you've

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made your choice for all of the right reasons, that this franchise opportunity
does all of the following:

Matches your financial resources

Provides you with the lifestyle you imagined

Uses your particular skills and experience

Provides a recession-resistant product or service

Has a majority of happy and successful franchisees

Employs an experienced and enthusiastic staff of personnel who will help

you achieve your dreams of business ownership success

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CASE STUDY: FRANCHISING OF CCD

HISTORY ABOUT CAF COFFEE DAY
Caf Coffee Day is a division of India's largest coffee conglomerate,
Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL), popularly
known as Coffee Day. This is a Rs. 300 crore ISO 9002 certified company. Its
chief customers are in USA, Europe & Japan. Based in Chickmaglur, the home
of some of the best Indian Coffees, Coffee Day has its business spanning the
entire gamut of coffee consumption in India. Its different divisions include:
Coffee Day Fresh n Ground (354 Coffee bean and powder retail outlets)
Coffee Day Xpress (341 Coffee Day Kiosk)
Coffee Day Take away (7000 Vending Machines)
Coffee Day Exports
Caf Coffee Day
Coffee Day Perfect (FMCG Packaged Coffee) division

Caf Coffee Day (CCD) pioneered the caf concept in India in 1996 by opening
its first caf at Brigade Road in Bangalore. Till about the late 1990s coffee
drinking in India was restricted to the intellectual, the South Indian traditionalist
and the five star coffee shop visitor. As the pure (as opposed to instant coffee)
coffee caf culture in neighbouring international markets grew, the need for a
relaxed and fun hangout for the emerging urban youth in the country was
clearly seen. Recognizing the potential that lay ahead on the horizon, Caf
Coffee Day embarked on a dynamic journey to become a large organized retail
caf chain with a distinct brand identity of its own.

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CAF COFFEE DAY IN THE PAST 12 YEARS:

1996
1st caf in Bangalore

2001
14 cafs in 6 cities

2008
607 cafs across 98
cities, and in Pakistan

Near Future
Expanding to Middle
East, Eurasia, East
Europe, Egypt, S.E Asia

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POSITIONING
Caf Coffee Day, at its inception in 1996 was the vanguard of a caf culture in
India. At a time when the country was growing well economically and young
India enjoyed higher spending power, CCD as it is popularly known, started to
set up the first retail chain of coffee bars. It broke new ground in 1999 when the
entire market grew phenomenally with the entry of new players.
From the beginning, it positioned itself as being a coffee bar and has maintained
that positioning for a long time now. For a consumer, CCD represents a fun
place where one can go with a whole bunch of friends at any time of the day
and have a good time, over coffee.
In 2002, Caf Coffee Day underwent a rebranding exercise through a change in
its logo. The earlier logo was a simple red square with a white streak running
across, and Coffee Day written at the bottom. At this stage, CCD was still
perceived as a South Indian coffee joint similar to the Coffee House in Kolkata,
a place where intellectuals meet and spend their time discussing issues. CCD
saw a latent market in youngsters, who were increasingly looking for a place to
spend time with friends and have fun. It then created an umbrella mother brand,
Coffee Day and four sub-brands to represent the various activities. The logo
then incorporated red, white and green colours, a larger font and emphasis on
the word Caf. According to the company, red signifies leadership and passion
and the white swirl stands for purity of purpose and the feel of coffee. The new
colour green endorsed the long heritage of CCD in growing coffee.

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Caf Coffee Day is known to experiment with different caf formats. They have
been:
Music cafs
Books cafs
Highway cafs
Lounge cafs
Garden cafs
Cyber cafs

The most recent addition has been lounge cafes. These cater to a more niche
segment than the general consumer segment of CCD. The age group of 20-29
would be more able to afford a lounge setting than the group of 15-19.

ADVERTISING,

SALES

PROMOTION

AND

SEGMENTATION

STRATEGY
Caf Coffee Day does not look at mass media as a viable area of advertising or
marketing spend. CCD is advertised through barter deals with other brands for
ground events
BELOW-THE-LINE ACTIVITIES:
2003- Levis launched a new range of Low Rise jeans through a
campaign called 6 below. CCD displayed POPs of Levis in all its
outlets during the campaign.
2004- The launch of Liril Orange soap by HLL was conducted in Caf
Coffee Day.
2004- TVS Scooty tied up with CCD for events in the coffee bars and at
malls on Valentines Day in February.

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 2004- CCD was the official ground partner for the Channel V Get
Gorgeous contest

IN-FILM ADVERTISEMENTS:
Some Telegu and Tamil films with prominent brand placement
Hindi films- It started with Bas Yun Hi and then conscious advertisement
decisions were made for Khakee, Main Hoon Na, Kyun Ho Gaya Na and
Mujhse Shaadi Karoge.
All these movies were targeted at young movie-goers, teenagers and people
looking for light-hearted entertainment. These are much the same kind of people
who are likely to visit Caf Coffee Day.
Serials like Kahani Ghar Ghar Kii, but there are no important tie-ups with
such entities.
SALES PROMOTIONS:
Merchandising- Every CCD stocks merchandise ranging from coffee
mugs, T-shirts, caps, bags, coffee filters, mints, different flavours of
coffee powders, tea and cream, wafers and biscottis. It also
merchandises promotional materials for other brands it associates
with. When some brands are conducting events for which passes are
distributed or movie premiere tickets are given out, CCD is an
important hub for these activities as most of the target market.
CCDs Guide to Active Holidays- It is a travel guide focusing on
adventure sports and is available in the CCD outlets, for people
seeking escapade from monotonous life.
Caf Beat- An in-house magazine which gives the entire low-down on
whats happening in CCD outlets across the world. It describes
experiences of customers, celebrations in CCDs, and covers youth22 | P a g e

centric topics like movies, music, travel, lifestyle, e-dating, books and
careers. Around 38% of CCD goers read Caf Beat and some carry it
back with them.
CCD has now tied up with WorldSpace and Microsense to provide
satellite connectivity in its outlets.

SEGMENTATION STRATEGY:
Caf Coffee Day has its main consumer base in the age group of 15-29 years. Its
customers are mainly middle class and upper middle class youth who are
upwardly mobile. From the market, CCD seeks to target not just the youth but
anyone who is young at heart. More than 10% of their customers are above 35
years of age. The evidence of the connect CCD has been able to make,
particularly among the youth, comes from the findings of Brand Equity's Most
Trusted Brands 2008 survey. In the food services category, CCD ranks No 2,
while McDonalds stands at No. 3 and Barista lags at No 5.
The graph below indicates official figures for the type of consumers of CCD.
We can clearly see that its most profitable segment is the 20-24 age brackets.
These customers can afford to visit CCD on a regular basis and have a habitforming attitude towards CCD.

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How to start CCD business in India

As we have already told you that the company do not offer any franchise at all. But if you
have a commercial or commercially converted/convertible retail space on a
rental/revenue share basis which are having following specifications in addition, then you
can enjoy the benefit to be their partner. These are:

1. You must have a retail space area at ground floor of at least 1000- 1500 square feet.

2. Good parking space is also required.

3. There must be minimum frontage area of 25 feet in running.

If you found yourself eligible and are fulfilling all the demands of the company, then you
can contact the authority and they will then contact you at the earliest. Write all the
following mandatory details on a clean paper. These details are:

1. Name of the person/s that is/ are the owner of the property.

2. Complete contact details of owner/s including postal Residential Address, Contact

Numbers and email id.

3. Postal address of the place available for potential Caf Coffee Day

4. Retail Space Area available in square feet

5. Frontage area of Retail Space available for this purpose

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6. Actual pictures or photos of the location

7. Demographic specifications of the catchment area for opening Caf Coffee Day.

WHY FRANCHISING WITH CCD ?

CCD

today has become the largest youth aggregator, and from a marketing

stand point, the success has come by focusing on the 3As: Accessibility,
Affordability and Acceptability.- Bidisha Nag raj, the Marketing president of
Cafe Coffee Day
Although demographically, a typical consumer would be male or female
between 15-29 years of age, belonging to middle or upper middle class, we call
our consumers young or young at heart. We are about juke boxes, good and
affordable coffee and food. The brand fit is with youth or the young at heart. So
we often look out for brands that are aspirational in nature. Sudipta Sen
Gupta, Marketing head, Caf Coffee Day.
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CCD AN ESTABLISHED BRAND IMAGE IN INDIA

Cafe Coffee Day (CCD) has an established brand image in India and ranks No 2
in the Brand Equitys Most Trusted Brands 2008 survey in the food services
category. Rival Barista is at No 5. CCD has been able to make a connection
with the Indian consumers, predominantly among the youth. CCD is the market
leader in India and was awarded the Exclusive Brand Retailer of the Year by
ICICI Bank in its Retail Excellence Awards 2005 for the organized retail sector.
CCDS WIDE NETWORK THE ANYTIME, ANYWHERE CAFE
CCD has been able to make its brand presence felt through the sheer number of
stores. CCD has 620 cafes at present and it has ambitious plans to launch more
than 900 cafes by the end of the current financial year. This means launching
one store every other day which is not surprising from a company which
launched a cafe (in 2005) in Vienna, the coffee capital of the world. CCD also
has three cafes in Vienna, and two in Karachi, Pakistan. Lagging behind CCD in
the Indian market, Barista has about 200 cafs, Java Green (around 75 cafs)
and Mocha (around 25 cafs). The Indian organized sector has potential for
around 5,000 cafs but fewer than 1,000 cafs exist currently.

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Franchisee benefits from CCD:

CCD has a lot to offer to potential franchisees. The company provides
franchisees with help both before and after they open a restaurant. CCD offers
the franchisees the following services before opening:
Training: Before opening the Subway restaurant the franchisee has to take part
in an intensive two-week training. Site selection. CCD will help the franchisee
to secure a location for the new CCD restaurant.
Restaurant design: CCD provides the franchisee floor plans for the specific
location. Equipment ordering. CCD provides the equipment that the franchisee
will need running the business.
Access to product formulas & operational systems: CCD offers training
courses and information resources.
As mentioned before CCD also provides a service to the franchisees after
launching the restaurant, namely:
Operations manual: The in-depth manual that CCD offers franchisees covers
a full range of topics important to running ones business. Field support. The
franchisee will be assisted by a representative, who will help to get started and
provides ongoing operational evaluations.
Franchisee services: The franchisee will be assigned a coordinator who will
serve as the main contact person, who is just a phone call or e-mail away.
Research and development. An executive chef, baking specialists, staff
nutritionist and product development team continually strive to make our
excellent food even better.

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GENERIC COMPETITION FACED BY FRANCHISEE

DIRECT COMPETITORS:
Barista- This is the closest competitor to Caf Coffee Day in the Indian
market. They target the same class of upwardly mobile youth and young
professionals. But Barista is often viewed as a place to unwind after a
hard days work or an ideal setting for some business meetings.
Caf Mocha- This aims at providing a level of experience to the
consumer which is hard to imitate. Inspired by Morocco and Turkey,
Mocha offers not just coffee but also sheeshas from Egypt and gourmet
desserts. Mocha calls itself a coffee shop for the soul.
Qwicky- Based mainly in Bangalore, Qwicky has a strong local hold in
South India.

INDIRECT COMPETITORS:
Eateries like McDonalds and Haldirams pose competition to CCD as
they are likely attractions for a consumer to be drawn to. A consumer can
well contemplate why he should spend around Rs. 45 on a coffee when he
can get a burger and a coffee for the same price at McDonalds.
Local tea joints and coffee shops like Caf Nescafe- They are smaller
places but nevertheless target the same set of consumers. Hence, CCD
has to consider the threat a shop like this could pose to it.

GLOBAL COMPETITORS:
Starbucks is planning to enter India shortly and would be stiff
competition for even an established brand like CCD.

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 Coffee bars in the market of the other country that Caf Coffee Day is
entering is also be a factor CCD will have to plan for before entering a
market

DISTRIBUTION STRATEGY
Today CCD has the largest network of cafes in India, with over 607 Company
Owned Company Operated cafes across 98 cities. But they do not follow a
franchising strategy. The channel partner has no involvement in the daily
operational activities of the Caf in the retail space. Neither would he have to
invest in operational capital equipment or branding or marketing and promotion
of Caf Coffee Day.
CCD opted not to follow forward integration and outsourced its distribution
responsibility to other parties in 2003. As its reach spreads across India and it is
now exploring smaller towns, CCD would find it more expensive to maintain on
its own. The private players would procure raw materials like sugar and paper
cups but coffee beans would still come from Bangalore.

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COMPETITIVE STRATEGIES OF CAF COFFEE DAY

Caf Coffee Day which follows a backward integration of the value chain

procures coffee beans from its base in Bangalore. This gives it a high sense of
quality assurance and guaranteed supply across its outlets as the same raw
material is used in all outlets. But Barista is a combination of imported coffee
beans and beans from Tata coffee. This is a relative disadvantage because if
there is a discrepancy in the quality or supply, Barista would have to consider
alternatives and probably look for another supplier.

Similarly, the food items available in Caf Coffee Day are obtained from

local suppliers whereas Baristas food is catered by the Taj caterers. Caf
Coffee Day would hence, have a lower-cost advantage.

The brand strength of Caf Coffee Day in comparison to Qwickys and

Caf Nescafe is far greater and its reach is on a countrywide scale. A consumer
travelling across cities would not find it too difficult to seek a Caf Coffee Day
outlet instead of deciding on trying a Qwickys, which he is not accustomed to.

Caf Coffee Day has an advantage of top-of-mind recall for coffee-shop-

goers in India, especially because it set the caf ball rolling in the country.

It is a place where a lot of young people can meet, chat, have fun and let

their hair down, rather than sit and sip a cup of coffee in prim and proper
serenity. This is one of the main factors for why it is chosen over places like
Barista or Mocha.

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MARKET EXPANSION

Recently, Caf Coffee Day entered a tie-up with the Ginger hotels of the Taj.
This caters to business executives and is on a Smart basics platform. The outlet
would be open to all, and not just the hotel's guests. The aim is to increase
footfalls in Ginger and increase the reach of Caf Coffee Day. This way, CCD
can reach out to another set of consumers, apart from the young crowd it has
mainly catered to.

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CONCLUSION
Caf Coffee Day has different caf formats across different cites. They can be
categorized into Music Cafs, Book Cafs, Highway cafs, Lounge cafs,
Garden cafs, and Cyber cafs. Every format has a different feel to it.

Also, Caf Coffee Day changes or makes fresh additions to its menu from time
to time. This includes having specialty coffees from different countries, exotic
desserts and pina coladas. Since the target consumer is of an age where one
constantly seeks change, this makes sure that the consumer does not get bored
with a repetitive style and seeks new places to go to.

Caf Coffee Day has changed its interiors twice since inception. First, during its
rebranding in 2002, where it brought in big photographic wall mounts of coffee
experiences, and yellow chairs and marble tables. In 2006, it again changed its
dcor to cane chairs to give the outlets a more causal feel. Caf Coffee Day has
hence constantly reinvented its look to keep up with the ever-changing wants of
its consumers.

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BIBLIOGRAPHY
http://www.wikipedia.org
http://www.evancarmichael.com
http://www.businesslink.gov.uk
http://www.franchisebusiness.in
http://www.franchiseindia.com
http://www.cafecoffeeday.com/lease-enquiry
https://www.scribd.com/

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