The Hindu : Franchisee model: need for legislation

Online edition of India's National Newspaper
Saturday, Feb 14, 2004

Business

Business

Franchisee model: need for legislation

By K. T. Jagannathan

CHENNAI, FEB. 13. Franchisees are a dime a dozen in India. Be it Internet cafes or IT education and food outlets, the franchisee model has become the order of the day. This business model, in some cases, has encountered a host of problems. Compromise in quality, betrayal of trust and abuse of brand image are among the myriad irritants faced in this specific model. How to get over these?

Peter Elligett, the owner of the famous Cookie Man, which lays much store by the franchisee-based growth model in Australia, feels that a legislation is a sine qua non not only to discipline franchisors but also ensure that "shady operators (read franchisees) are kept out".

In a free wheeling interview with this correspondent, Mr. Elligett felt that a legislation would make `compliance cost' high for a franchisor. Yet, he reckoned that it would protect a good franchisee. Australia had legislation on franchisee. The disclosure norms under this rule were stringent for a franchisor, he said. These restricted a franchisor from making any representation, forced him to follow set practices and made it obligatory to reveal the ownership.

Typically in a full format franchisee model, a franchisee was given the brand, concept and the system by a franchisor, Mr. Elligett said. Legislation would ensure that the brand image of a franchisor was not `besmirched' by a shady operator, he added. In this context, he said Australia had legislation on franchisee model.

There were norms governing franchisees in the U.K. and the U.S., he said.

Cookie Man is present in 12 countries other than India. It has chosen a joint venture route in India whereas in other nations it has adopted the licensee route. Mr. Elligett said the licensee concept had its own constraints vis-a-vis growth. Hence, Cookie Man was looking at the joint venture possibilities in Lebenon, Malaysia, the UAE and Kuwait, he said. As of now, it has 116 Cookie Man stores across the globe. In the Indian venture, Cooke Man has 50 per cent stake. John Lynch, CEO of the Indian joint venture, was convinced that "there are opportunities for high-end cookies in India and hence replicating the Australian model here". It has four stores in Chennai and three in Bangalore. It plans to appoint franchisees in Delhi and Mumbai by the middle of this year.

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