What is a Franchise?

A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a
business's (franchisor) proprietary knowledge, processes, and trademarks in order to allow the party to
sell a product or provide a service under the business's name. In exchange for gaining the franchise, the
franchisee usually pays the franchisor an initial start-up and annual licensing fees. When a business wants
to increase its market share or increase its geographical reach at a low cost, it may create a franchise for
its product and brand name. A franchise is a joint venture between a franchisor and a franchisee.
Franchise contracts are complex and vary for each franchisor. A franchise contract includes three
categories of payment that must be made to the franchisor by the franchisee:

First, the franchisee must purchase the controlled rights, or trademark, from the franchisor business in the
form of an upfront fee.
Second, the franchisor often receives payment for training, equipment, or business advisory services from
the franchisee.
Lastly, the franchisor receives on going royalties or a percentage of the business’s sales.

Examples of pre-school franchise in India are Eurokids, Kidzee, Tree House and many more.

Requisites to own a franchise pre-school

1) Investment: A pre-school franchise requires an approximate investment of Rs 2–6 lacs. In most of the
cases the franchisee has to invest in property renovation, furniture, toys and general equipments,
transportation, staff recruitment, training and salary. In addition to the above, a franchisee has to spend on
local marketing to create brand awareness in the neighbourhood.

2) Efficient staff: A good team of qualified teachers is the prime requisite to assure the proper working of
a pre-school. Franchisee needs to organize training sessions for teachers from time-to-time.

3) Location: The minimum land requirement to open a pre-school is 1,000 sq. ft to 1500 sq. ft. It should
not be located in a very crowded area with a high traffic frequency.

Advantages of Franchising to Franchisee:

a) Tried and Tested pre-school business - The idea of buying a franchise of a pre-school comes from a
tried and tested model of pre-school business wherein everything has been already planned, executed, and
operated in a methodical manner.

b) Competitive advantage - Franchisor will definitely have their goodwill / reputation in the
market. This makes it easy for franchisee to survive in the competitive market and avail the
benefits of using the goodwill.

c) Savings in the Initial Costs of setting up - The franchise of an already established business does not
require any additional initial cost other than the set-up. The promotional costs, administration and
miscellaneous costs in the initial stage of setup are eliminated to a greater extent.

d) Low Financial Risks - A pre-school franchising involves less financial risk for instance not getting
enough enrolments as the demand for Montessori / pre-school programs is increasing with the increasing
population. Thus, there are very less financial risks
e) Marketing Support from franchisor - advertising through print ads and television commercials
and help with local area support like outdoor signs and events

f) Operational support from franchisor - When you buy a franchise of a pre-school, you have a
perfect layout readily available to follow for a smooth functioning. You can easily keep a track of
operations and also see live examples of how it is followed and what has to be done.

g) Academic support from franchisor - franchisor may provide established curriculum or help in
designing the curriculum. There are regular training and workshops provided to the franchisees
to keep them up to date on educational developments and for working in a specified manner.

h) Regular Monitoring of Different franchisees – Franchisors regularly monitor the working of their
franchisees to ensure proper education and training is provided to students as per the guidelines and
procedures of the franchisor pre-school model. All details and records of pre-school franchisees are
maintained by the franchisor.

Disadvantages of Franchising to Franchisee

a) No flexibility in set up and operations - Franchisee needs to accept the complete set of terms
and conditions in a franchise agreement. These include teaching schedule, administration,
recruitment, marketing and advertisement strategies, infrastructure and other set ups and so on.
There may be few opportunities that provide the flexibility of exercising your authority while
most of them are very stringent.

b) Lack of self-innovation - When you buy a play school franchise, you are bound to follow the rules,
systems and procedures of the franchisor model of pre-school. Thus, there is actually no scope of
modifications in the basic as well as a complex operation of running a play school franchise.

c) Regulated costs - In franchising, the franchisee is liable to pay a fixed amount of royalty to the
franchisor, which makes it a monthly, quarterly, or annually regulating cost. Along with this, there are
minor operating costs in the long run such as licensing fee, advertising fee, training fee, etc. to be paid to
the franchisor from time to time.

d) Limited support after set up - Even when the preschool is set up, some franchisors provide extended
support in the business as and when required. In some cases, the franchisors provide help only in the
initial stages when you are setting up the school.

e) Risk - Buying a new and inexpensive franchise can come with risks. Just because a business is offering
franchises is no guarantee that the franchise will be successful.

Conclusion

Buying a franchise is like buying any business in that you have to do your due diligence and examine the
franchise fully. However, if you are well-suited for a franchise operation and select the right franchise
being a franchisee can make you successful.