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. In Pakistan, registration and protection of trademarks is regulated under the Trademarks Ordinance, 2001 and it extends to whole of Pakistan.

Franchise Arrangement The franchise arrangement is an arrangement whereby the franchisor permits licenses the franchisee, in exchange for a fee, to exploit the system developed by the franchisor. The franchised system is generally a package including the intellectual property rights such as the rights to use the Trade Mark, trade names, logos, and get-up associated with the business; any inventions such as patents or designs, trade-secrets, and know-how of the business and any relevant brochures, advertising or copyrighted works relating to the manufacture, sale of goods or the provision of services to customers. The Intellectual Property is unique to the business and provides the business with its competitive advantage and market niche. Definition of Franchising: Franchising may be defined as a business arrangement which allows for the reputation, (goodwill) innovation, technical know-how and expertise of the innovator (franchisor) to be combined with the energy, industry and investment of another party (franchisee) to conduct the business of providing and selling of goods and services

A franchise is a license issued to someone to operate a business using a common brand name, a common operating support system and involving the payment of initial and/or ongoing fees.
Require that the business is operated under your trade name (using your name and marks); Collect a fee (such as a one-time fee or ongoing royalty fee); Provide marketing and operational support; Require that each business operate a certain way, following your systems and procedures; and Collect monthly reports indicating financial performance
Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. Franchising is a faster, cheaper form of expansion than adding company-owned stores, because it costs the parent company much less when new stores are owned and operated by a third party. On the flip side, potential for revenue growth is more limited because the parent company will only earn a percentage of the earnings from each new store. 70 different industries use the franchising business model, and according to the International Franchising Association [1] the sector earns more than $1.5 trillion in revenues each year. While researching the websites on the list, I noticed that several of the links were bad. This was disappointing.Unfortunately, I cannot use most of the good websites for my students (who are college students), because the content is geared toward kids. However, I now have several resources that I can point my own kids toward when they are working on school projects!

How Franchising Works

The franchising business model consists of two operating partners: the franchisor, or parent company, and the franchisee, the proprietor that operates one or multiple store locations. Franchising agreements usually require the franchisee to pay an initial fee plus royalties equal to a certain percentage of the store's monthly or yearly sales. Initial fees vary significantly across each industry, ranging from $35,000 for an Applebee's restaurant to over $85,000 to [2] open a Hilton hotel. Royalty fees are also variable - for example, Intercontinental Hotels Group (IHG) franchisees are required to pay the company 5% of their yearly sales , while Applebee's franchisees pay 4% of monthly sales [3] and IHOP franchisees pay a 4.5% royalty fee of weekly sales. The franchisee also covers the costs of actually starting and operating the store, including legal fees, occupancy or construction costs, inventory costs, and labor. Franchise agreements usually have a term of between 10 and 20 years, depending on the company. The parent company authorizes the franchisee's use of the company's trademarks (for example, selling Big Mac's at McDonald's) as part of the franchising agreement. Additionally, the franchisor provides training and support as well as regional and/or national advertising.
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Advantages of the Franchising Model



Franchisees require less initial capital than independently starting a company and can use proven successful strategies and trademarks. Franchisees are provided with significant amounts of training, not common to most entrepreneurs. The franchisor benefits because it can expand rapidly without having to increase its labor force and operating costs, using much less capital. Franchised stores have a higher margin for the parent company than company-owned stores because of minimal operating expenses in maintaining franchised stores. For example, Dine Equity, Inc.(DIN) earned a 52.7% profit margin from franchisee-owned restaurants in 2007 while company-owned restaurants operated at a mere 6.7% [4] profit margin.

Market Forces Affecting Franchising Companies


Weakened Economy Hurts Sales and Slows Franchise Expansion
Franchising becomes a much less desirable business model during rough economic times. First, franchisees must pay royalty fees based upon their revenue, regardless of whether or not they are earning profits, which adds to the franchisee's financial struggles in an economic downturn. Furthermore, slower sales cause parent companies to reduce expansion plans. For example, the 2007 Technomic Restaurant Industry Study blamed the poor U.S. economy as the reason why restaurants reduced funding for expansion by an average 1.4% during 2007.
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Economic issues related to the 2007 Credit Crunch andsubprime lending crisis drastically weakened the U.S. economy, which has led to lower levels of consumer spending, particularly in the restaurant dining industry. For example, many restaurants suffered from a decline in traffic and comparable store sales during 2007, like Applebee's, which attributes a 4% decrease in guest traffic and 2.1% decline in comparable store sales to weakened consumer [6] spending. Additionally, a 2007 RBC Capital Markets Survey indicated that 39% of respondents reduced their frequency of restaurant dining because of lower levels of dispensable income in 2007.
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High Potential for Growth Through International Franchising in Emerging Markets

Unlike the United States and many other Western countries, emerging markets are commercially underdeveloped and have significant growth opportunities. For example, the U.S. Department of Commerce estimated that over 75% of the expected growth in world trade over the next 20 years will come from developing countries, primarily large [9] emerging markets like China. Furthermore, the rise of China's middle class, as well as India's booming per capita income provide significant new markets for franchises to operate. China's middle class is expected to almost double in the next two years, reaching 25% of the Chinese population in 2010, which is spurred by China's 700% growth in per capita income since the late 1980s. [11] than 300% by 2025.
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Furthermore, the Indian per capita income is expected to increase more

As the wealth of consumers in emerging markets grows, so too will their appetites for consumer goods, as evidenced [12] by India's 1,440% growth in its retail industry between 1991 and 2007. Also, as of 2007, India's franchising industry is expected to grow 30% annually as mega-franchising chains like Yum! Brands (YUM) have already established a [13] presence in India. High levels of consumer demand, coupled with relatively low levels of competition, offer a lucrative opportunity for many franchisors to expand into emerging markets. Expansion via franchising is an attractive option for companies looking to expand abroad without incurring high costs. Additionally, international franchisees already possess many inherent qualities needed to succeed abroad, like the ability to speak the native language. (http://www.wikinvest.com/concept/Franchising) 1. 2.
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Entrepreneur.com Franchise 500 List

3. DIN 2007 10-K, Item 1, pg. 5 & 9 4. DIN, Inc. 2007 10-K, Item 6, pg. 35 5. Technomic, Inc. 2007 Restaurant Industry Study 6. DIN 2007 10-K, Item 7, pg.56 7. Nation's Restaurant News 10/1/2007 8. Franchising 9. "Economic Potential of International Franchising in Emerging Markets" 10. China Daily- "Dissecting China's Middle Class" 11. Penny Sleuth- "Investing in India" 12. IBEF.org, Retail 13. www.franchisedirect.com- "India and Franchising"

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