Franchise FAQs

Domestic

What is franchising?
Franchising is the legal right to carry out a business in accordance with a particular operational method and under a specific brand. This includes the right to use trademarks, logos, a business system, operating procedures, IT and marketing techniques.

It can be seen as you working for yourself and running your own business; however, you go to market with the benefits of a household name and a dedicated team supporting you with advice and guidance on how to operate effectively.

Why are we franchising?

• To maximize shareholders' returns and value.
• To excel in every facet of its operation.
• To provide attractive and well rewarded career and business opportunities for all employees and Franchisees.
• To dynamically grow through pro-active acquisitions, mergers and joint ventures.

What is your product line?
We have products to be offered in three distinct domains Software, Networking & IT- Security. In Software & Networking we offer Career courses (XPERT) and on RIMS called as NETFUSION. In Software, Modular courses like Java & .NET courses as well as Basic programming are offered In Networking, CCNA, CCNP, MCSE etc. are some of the courses we offer. In IT-Security courses like PIX & Ethical hacking also forms part of the training program. In addition to that we also train on Oracle products as well as CEIS of IBM.

What are the eligibility criteria to be a Franchisee?
Educational Qualifications —
Candidate should be a graduate in any discipline.

Financial Qualifications —
The individual should possess the ability to mobilize resources through internal and external means. He/she should have the capability to personally invest around 40 lacs.

Business experience —

• The individual should possess 1-3 years of experience in any functional area, preferably at the middle management level.
• Be a First time Entrepreneur.
• Be Self employed in Business.

Geographical knowledge-
The candidate should have complete knowledge of the regional market. He/She must also be aware of  number of schools, colleges & other local institutes & their business cycles.

How do you support the Franchisees?
Franchise Franchisor Relationship is like a Hare -Tortoise, where the Hare carries the tortoise on its back over the ground & the tortoise carries hare when they cross a river, each capitalizing on its own strength.

Initially when the venture is in the nascent stage, the franchisor bears a role of a gardener & does the entire hand holding at various fronts. Support required is on technical, sales & operations part. KarROX support & operations team would guide the franchise centre in all respects. Gradually with experience control evolves leading to more independence & understanding. Then the role of karROX shapes as that of a mentor, providing motivation & information as well as striving for futuristic goals.

Faculties constantly need to “sharpen their saw” on the latest technologies & delivery techniques for better customer delivery. Thus, karROX would conduct scheduled special training programs for all your faculties.

Sales people are the engines of any organization. A well informed & trained sales staff is indispensable component for the success. Hence, grooming them is an area requiring experience. karROX Support team due to virtue of its experience in man management is extremely well equipped. Regular sales training workshops would be a part of process for attaining the mentioned objectives.

It’s well known “A leader is one who knows the way, goes the way, and shows the way.” For the entrepreneur being new into the business it’s imperative to understand the key processes, systems & roles. As the captain of this ship it’s essential for you to take charge & lead from the front. To enable this karROX  conducts a three day  training cum induction Program known as    “Business Basic Workshop” highlighting all the major parts of this business such as HR practices, Operations, staff selection criteria & marketing etc.This tool enables to avoid lot of experimentation resulting in uncertainty. In words of Peter Drucker “There’s no thing so useless as doing efficiently that which shouldn’t be done at all”.

Business Partner selection – How much time does it take?
2 – 3 weeks from the date the application from a potential prospect
 
The process:
 
Step I – Online Application form

Step II – Local area survey & data collection

Step III– Meeting with karROX officials
 
Step IV– Business Proposition drawn in complete

Step V– Agreement and Launch plan

Where can I open a franchise centre?
A good commercial & preferably an educational hub in your city/location.

What is the amount of financial investment needed to establish a karROX centre?
The initial investment for the project is approximately 40 lacs. The investment varies with various factors such as the Centre Location, Student Capacity, Duration and the Types of courses to be offered by the centre.

How many partners can I have for my centre?
It is recommended by karROX that you do not have more than three partners for the venture

Does karROX offer any financing arrangements?
No, karROX doesn't offer any financing arrangements to the partner.

Can we obtain the funds to purchase a franchise from a relative, friend or associate?
You can decide on your internal sources for arranging funds for the venture but please, make sure that the obligations are well defined and that, the continuity of funds is ensured.

I have an existing Training institute; can I get a Karrox franchise?
Yes!! But it has to be customized in look & form as per karROX Centre standards & guidelines.

What is the manpower required to start karROX centre?
Market potential, varied courses determine the need of staff.
Initially, you will need the following:
1 - Centre Head /Centre Manager–Optional.
4 - Faculty
2 - Academic Advisor/Counselor
1 - Office Boy 
1 - Security officer.

What type of fee is the franchisee required to pay?
The franchisee pays the franchisor two types of fee:

Entry fee (Franchise License Fee) -This grants the franchisee the right to join the network and includes the following:

• The right to use a known brand, granted to the franchisee.
  
• Training process and assistance from karROX to the franchisee prior to and during the opening of the center to the public.
  
• The complete business manuals, business launch kit and advertising and promotions layout / designs.
  The entry fee may also depend on the potential of the exclusive territory to which the franchisee is given access.

Royalties or operating fees. Sums paid by the franchisee to the franchisor periodically for ongoing assistance and support provided. Unlike the entry fee, these payments constitute karROX’s principle source of income.

What would be the rate of return, which I/We can expect?
Profitability will depend on the centre capacity &  level of customer service. Today’s customer satisfaction criteria has to be met. There are phenomenal number of people who are keen to learn, due to the virtue of educated middle class who exhibit training & education for their children as their top priorities of spending.

With our experience of operating at several varied locations we expect the break even with 150 students in 6 to 8 months with 25 students being registered monthly for different courses. Also, we expect the returns to be within a period of 12 to 15 months.

Is their an agreement or Contract signed & what is it’s validity?
Yes, there is an agreement the contract of which is signed by both the parties. The initial validity for the license is for three years. The license will be renewed after the end of third year depending on the performance & terms and conditions per karROX policies prevailing from earlier times.

Does karROX facilitate placement of students?
 There is 100% placement assistance.

What is the Recruitment process for my karROX centre?
It’s a coordinated effort between the Business Partner & the operations team to get the initial manpower though the final approval will have to come from karROX.

What makes karROX a good franchisor?
We have experience and expertise in IT Training & Certification sectors for 16 years and our business model is developed to suit to this sector. We are an ISO 9001 2000 certified education organization with over 60 training centers in India and abroad. We are a strong financial organization and with excellent management skills to provide support to our franchise network.

With the franchise success rate of more than 80% we have with us partners who have experienced stupendous growth financially as well as socially.

What do I do next?
Fill up the Franchise Application form with your personal & territorial details & send it to us. Parallely, Analyze the Market Considering the  affluent & middle class population, number of schools & colleges, competitor’s business, local trends etc. Also, Analyze your Resources: In terms of investment, space, business partners, contacts etc.

Then, we would contact you for a tele conference call having primary discussion over the venture.

Then, Have a meeting with karROX‘s team exchanging inputs over the entire scenario understanding the nitty gritties of this venture.

Starting at an appropriate time gives you the leverage in terms of enthusiasm & Revenues. “Hit the iron when it’s hot” well said. Hence decide a time framework & “Make your Decision”.

Signing the Memorandum of Understanding delivers you the partnership status where our expertise would save your important time & money, by utilizing both in an organized & productive manner.

What are the challenges faced?
“Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.”-- Mark Twain

• Marketing Response: Understanding the market comes with experience & experimentation as well. Thus, executing marketing activities that would generate desired response requires patience & persistence.

• HR Practices: Attrition to a certain extent does exist but if HR policies are followed well & back up plans are ready not such a big issue. It can be completely taken care by following certain practices & processes from the word go. Through our experience we have evolved a set of policies which would mitigate the trouble occurred due to contingencies. We understand the importance of this matter & due emphasis would be laid in the Business Basic Workshop conducted at our place.
• Cash inflows & payments: Due to prevalent culture in the training business installments facility is provided. But it’s important to track down the dues & get them cleared as per the terms. A vigilant centre manager would secure maximum timely payments & prevent any cash flow crunch at the centre.

• Operating costs overshooting: Control of operating costs & overheads is an essential part of centre management. Any negligence on the part of the centre management may result into overshooting of this cost.

Also, its advisable to have your prior  plans prepared & expenses budgeted to prevent any crunch.

• Market acceptance of brand: As visibility & customer base increases ,gradually a brand providing good service will ease on acceptance criteria laying platform for future business. New courses go through a cycle of events from being resisted to becoming popular although good relevant courses exert a quicker transition to being popular.

• Student dropouts: A typical behaviour exerted by teenage students, our target market, can be minimized by consistently engaging them into the learning programs & renewing their enthusiasm. Timely interactions with the guardians also keep it in check.

Understanding the current market scenario, is it the right time to venture in IT training industry?

Few Facts:
1. Domestic IT adoption: It has grown by a whopping 43% from fy 08 to fy 09.
                   
2. New emerging Segments: RIMS, Remote Infrastructure Management Services is the next buzzing thing that would employ more than 3,50,000 professionals by 2011.
                  
3. IT as an Umbrella: Due to its various evolving applications IT today encompasses, converges & overlaps various sectors creating new verticals & horizontals.
                    
4 IT talent: Huge amount of talent pool existing with India allowing the various software corporates to take up challenging tasks & projects. As a virtuous cycle in turn lot of job avenues are generated.

Environment is very conducive & right time to enter the business.
 
I have no prior experience in IT or training business, will I be able to manage and grow in this industry?
80% entrepreneurs who enquire to have a franchisee are from non IT background. It’s a people oriented business & man management happens to be the essential business skill required to be prosperous in this venture. For all technical areas principal company is in charge & responsible. Hence you should have no inhibitions in stepping into this business.

Where do you see this industry after 5 years?
Computer Penetration as of 2008 stands at 2% of the population. According to the information & Broadcasting Ministry India has 15 million computer users & 5 million internet users. This means a huge potential for the computer usage here on. These would lead to numerous application & service generation opportunities. Also, PC cost is reducing which would further add to deeper penetration.

• IT Converging with other sectors: With everyday new applications evolving IT from its applications into the core sector has transformed to being backbone of service industry.

Today IT has & is converging with pharmaceuticals, Telecom, aviation, Health & insurance etc. These would generate good amount of jobs requiring interdisciplinary knowledge.

International

What is franchising?
The European Code of Ethics defines franchising as a system of marketing goods and/or services and/or technology, based upon a close and ongoing collaboration between legally and financially separate undertakings, the franchisor and its individual franchisees, whereby the franchisor grants its individual franchisees the right, and imposes the obligation, to conduct a business in accordance with the franchisor’s concept. This right entitles and compels the individual franchisee, in exchange for a direct or indirect financial consideration, to use the franchisor’s trade name and/or trademark and/or service mark, know-how, business and technical methods, procedural system and other industrial and/or intellectual property rights. The franchisee is supported in this ongoing service by commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between the parties for this purpose.

What makes karROX a good franchisor?
We have experience and expertise in IT Training & Certification sector and our business model is developed to suit to this sector. We are an ISO certified education organization with over 60 training centers in india and abroad. We are a strong financial organization and with excellent management skills to provide  support our franchise network.

What makes you a good franchisee?
Franchisees must have a good level of personal initiative, sufficient enough to take on the responsibilities inherent to managing a business; however, they must also be willing to stick to the operational model transferred by karROX.

What are karROX's undertakings?
Although franchise packages cannot guarantee profitability for the franchisee, the factors necessary for success should be taken into account in order to reduce the franchisee’s risk of failure. karROX does not simply transfer a product or service to the franchisee but also transfers the rights to use the brand name and any other distinguishing signs recognized by the clientele as well as access to knowledge gained from experience, knowhow, technical and commercial methods and procedures. We are thus transferring a comprehensive and confidential business concept, with a proven track record and assist the franchisee in operating the business format.

How does the transfer process work?
The karROX transfer of the system to the franchisee is straightforward, thus allowing the franchisee to acquire the knowledge necessary in a relatively short time frame. The franchisee training period is generally composed of two quite distinct elements:
a) A theoretical and practical training phase, provided at the franchisor’s premises and in existing centers.
b) A second on-site support phase during the opening and launch of the franchised centers.

What type of fee is the franchisee required to pay?
The franchisee pays the franchisor two types of fee:
• Entry fee ( Franchise License Fee) This grants the franchisee the right to join the network and includes the following:
o The right to use a known brand, granted to the franchisee.
o Training process and assistance from karROX to the franchisee prior to and during the opening of the center to the public.
o The complete business manuals , business launch kit and advertising and promotions layout / designs.
o The entry fee may also depend on the potential of the exclusive territory to which the franchisee is given access.
• Royalties or operating fees. Sums paid by the franchisee to the franchisor periodically for ongoing assistance and support provided. Unlike the entry fee, these payments constitute karROX’s principle source of income.

What are the advantages of franchising for the franchisee?
Experience gained from pilot units and other franchised outlets considerably reduces the risk of failure in comparison to running a sole proprietorship. When opening their outlet, franchisees are not starting from scratch but buying into a potentially established business, due to a brand that is more or less known on the market. The business system is supplied by the karROX, thus simplifying management and guaranteeing tried-and-tested methodology which has already proven successful. Franchisees benefit from economies of scale obtained by the franchisor, thanks to distribution throughout the network.
Communication and marketing potential is far superior to resources available to an individual acting independently and cost less.

What are the main disadvantages of franchising for the franchisee?
Like the entire franchise network, the franchisee will be required to comply with a series of standards, established by the karROX. He will also be required to pay karROX a percentage of annual turnovers in exchange for services and benefits received.

Why karROX wants to franchise its business?
karROX business model is suitable for franchising, the profitability of the project for both franchisee and karROX are estimated and the conditions which will define the franchise project; has been established by karROX.
The operations documentation for the project is based directly on karROX’s practical experience and elements which define the franchise project. It is paramount that this knowledge and experience are transferred in order to ensure that the franchise package is homogenous and free of personal variations which could affect the tried-and tested business scheme. It is also important to establish procedural and management standards for the franchise network, determine responsibilities, rights and obligations for each party, outline the joint corporate image as well as fit-out requirements for premises.
The following elements has been included in the operations documentation for franchise projects:
- Operation manuals
- Franchise agreement
- Visual identity and corporate identity manual
- Business plan
- Specification manual for fit-out of premises.
- Marketing Manual
- Academic Manual.
If I don’t have personal funds, how can I become a franchisee? Do certain franchises offer a solution?
This is not really suitable for a franchise. Generally, how are you going to work for yourself without personal funds? However you can always......try to borrow from your friends or your family. That can be considered as personal funds if you don’t have to pay it back (an advance on an inheritance or a gift) or if you can reimburse them once you have paid back the bank.
You can also sell some property or cash in a savings plan.
Lastly, you can take on a partner or look for one of the rare good managers or even save up so that you can start up later.
Ah, an important "detail": karROX can’t lend money under rules of its incorporation and country laws; otherwise we would be better to open up a branch instead of franchising. Our aim is to share success with franchisees who provide a financing capability in return.

I am in contact with two franchisors. One requires me to buy from him but has no royalties. The other lets me buy from anywhere I wish but has royalties.
Nothing comes free. If there are no royalties, there may be two reasons for this:
• Either the network is not a franchise and offers no services or help to its members,
• Or the price for these services is added to the price of your purchases.
As regards someone who lets you buy from wherever you wish, we are surprised.
You are perhaps talking about a free choice from among referenced suppliers or suppliers with referenced articles.
If not, what would happen if every member purchased from anywhere he wished?
The name would no longer mean anything to the customer and your business would drop off

I am looking for a good franchise but I do not want to work 10 hours a day.
Most franchisees are successful because they have a good franchise but also because they work a lot. There are some rare franchises that do not require much work but most are franchises that require a lot of your own capital.

I would be interested in a franchise that required no royalties or fees or contribution to advertising, just an entry fee – is this possible?
This type of network does exist but is it interesting to join a network that does not pay for advertising and does not finance the service to the franchisee...but has advertising and service to the network paid for in the price of the products? Unless this network does nothing at all? Believe us when we tell you that your criteria are not good ones on which to base your choice. It is not by hiding the costs or by doing nothing that karROX helps the franchisees to succeed. However there still are some franchisors, who do not invoice for the fees and have the service paid for in the price of the product.

Before signing a long-term contract with a franchisor, I should like to have a training course to see if this sector is a growth market and also to get to know the area in question better. Is this possible?
This is possible in certain cases and in certain networks but it is neither compulsory nor an obvious thing to do.
Why? Certainly it is interesting for the franchisee to see how things are in the field, which enables him to make a better decision but he must then undertake to maintain secrecy and even non-competition to avoid him taking all or part of the little secrets and the know-how and using them outside the network. A contract or a partial undertaking would therefore normally be signed before the applicant was “situated”.
However some franchisors use these “discovery” courses to help the applicant to make his decision with full knowledge of the facts and also to observe him before deciding to recruit him. It’s a good method for both
parties.

FAQ: Legal questions

Can the contracts be different within the same franchise, especially regarding fees?
It is usually desirable, in a franchise network, for the contracts to be the same.
It is important for the franchisor, who can handle them more easily. It is important for the franchisees, who will thereby have a sense of fairness.
It is not always the case because franchise networks are built up slowly and often concerns that existed at the start are no longer there some years later.
You can therefore find different contracts in some franchise networks and, in itself, this is not a source of legal problems.
Regarding the more specific question of fees, and payments in general, We would say that differences in entry fees are often seen in franchises because these entry fees can correspond to different situations, region and exclusivity clauses.
The entry fee when the network has 10 centers is not the same as when it has 20 or 50 because, at that time, the network is much stronger and the very fact of entering it represents a more important advantage. You could therefore consider that the entry fee may be higher.
As regards the fees, attention must be paid to the amount of the fee and the method of calculation. Everything will depend on the way in which the fees are calculated.
• The fees can be different if, for example, they are calculated on the number of computers or location of the training center.
• They can also be different if they are calculated on the turnover.
• The fees can also be on a sliding scale. Above so many locations, the rate is different (less); beyond a certain regional limitations, the fee rate can also reduce.
What can be surprising is that the fee rate can be different for the same service and the same type of business.
This can result in a demand for an explanation.

What network are you made for?
Determine your skills profile:
1. Draw up a table in which you arrange in columns:
• An initial list of your skills and your experience.
• Pencil in an initial estimate of your level. You can always correct it later
• Indicate the points where you can progress alone.
• Indicate those where you will have need of assistance or training.
2. Fill in your table indicating the skills you think are required for such and such a network or sector.
3. Your skills profile is ready but you realize that you wish to develop it as you search for the franchise that suits
you.
Identify the other criteria in your profile:
However, with franchises, the profile also includes other criteria (draw up a table):
1. What are your tastes and motivations?
• Regarding products, activity, the importance of the personnel, etc.?
• You cannot succeed in a job you don’t like: all the more so because a franchisee works very hard.

2. What is the amount of your personal financial contribution?
• What are the financial securities that you can possibly bring to the bank to get your loan?
3. What is the maximum amount of loan you would not wish to exceed?
• (Your opinion will certainly change as your research continues).
4. What level of support do you have from your family for this project?
5. What level of risk would you accept?

I am going to take up a franchise. Can it demand that I buy courseware 100% from its logistic centre?
This question presents the problem of exclusive supply within networks.
There can be an obligation for 100% exclusive supply provided that the requirement is legitimate: the franchisor must be able to explain how it is in the network’s interest and the franchisee’s only to be supplied by the franchisor or by referenced suppliers. Priority deliveries, a better implemented guarantee, lower prices or as in our industry timely upgrade with technological advancements and new curriculum on upcoming technologies, are sufficient reasons to legitimize an exclusive supply clause.

Is a franchisee required to account to the franchisor? Is he required to produce results? Can he be struck off?
In principle, yes. The franchisee and the franchisor are bound together by a contract in which each undertakes to perform a certain number of services....
If one of them does not perform his services, he is liable to his partner under the contract.
As regards the results, everything depends on whether the contract provides for this or not. However the above principle applies.
As regards being struck off, i.e. termination of the contract in law, this is possible if one party does not fulfil his obligations.
For 2 years, I always paid my royalty and courseware fee but for a year and a half I have not been paying my royalties in full. To date, no one has given me notice to do this so I don’t have any intention of paying.
What am I incurring?
The major risk is that the franchisor will break the franchise contract because of non-performance of your obligations in his respect....
Another question is perhaps to know why you are not paying your proportional contribution and why the franchisor has not issued you with notice to do so, which would enable you to discuss things with him, if need be.

When are the manuals handed over to the franchisee, before or after signing the contract?
In principle and usually when the contract is signed, because these documents are confidential....
But it can happen that part of them is handed over beforehand ... and another part is only handed over during training.

When you acquire a franchised property or business, do you also get the franchise contract?
Not necessarily automatically and it would be worth your while to ask this essential question. Reasons:
If the franchisor has not made any provisions regarding this in the contract and if the contract is signed with a company, the purchaser evidently obtains the franchise contract automatically.
However, a serious franchisor would not wish just anyone (a competitor, a poor candidate, etc.) to purchase one of the franchised outlets in his network. Consequently, he generally inserts two important clauses regarding resale into the franchise contract
1. A clause giving him preferential rights regarding resale (at the same price, of course)
2. Another clause, termed ‘Intuitu Personae’, which specifies that the contract is signed in the capacity of the person of the franchisee and is therefore not transmissible. This requires the franchisee transferring his business to ask the franchisor to approve the transferee.
These provisions are important for protecting the name from progressive deterioration in value for the franchisees as transfers take place. This protects both the franchisor and the remaining franchisees.

Do the characteristics of the franchise contract require that the franchisee remain an independent trader?
Yes, absolutely. A franchise contract can only be signed between independent businesses The franchisee is always an independent entrepreneur or an independent business. This means that he/it finances his/its own activities, collects the profits and assumes the risks and the responsibilities, etc.
In a franchise contract for a period of 5 years, can a franchisor decide to terminate the contract at the end of 5 years without any particular reason?
Yes, if the contract is for five years, the franchisor, just like the franchisee also...is not obliged to renew or extend the contract … and need not justify his decision.  Of course, this is only possible if the contract does not provide for automatic renewal, etc...

Does a franchisor have the right to require the franchisee to pay him a monthly minimum while he receives a % of the turnover?
The franchisor may require the franchisee to pay him a monthly minimum fee to cover the costs created by his help, his services, etc....
This practice is not particularly wide-spread but you must understand that in certain activities the sector granted can be poorly handled by a franchisee who has other businesses or who lacks energy or works in the “black’ economy...

Is territorial exclusivity an important element?
YES, it is important for the franchisee. Why?
Without territorial exclusivity, another franchisee can set up in the same street as you, in the same shopping centre or in the same town.
It is therefore advisable to protect the franchisee’s profitability by agreeing not to set up another point of sale within a reasonable distance.

The difficulty is in knowing what a reasonable distance is? The franchisor must also be prevented from accompanying his network's increase in strength or setting up in a new centre if the potential is there.