SHEMBLOG

Both preschool and senior secondary school franchising has become one of the most sought after forms of educational franchises. Every prospective school franchisee should have a proper business plan for school franchising that should elaborate upon some fundamental issues. A prospective school franchisee can seek the help of a franchise consultant when creating a business plan for school franchising.

Business plan for school and Franchise Agreement

A franchise agreement is a legally binding document that describes the relationship between franchisor and franchisee. For any prospective school franchisee, it is imperative to have a proper business plan. A business plan for school franchisee needs a well-defined franchise agreement that explains the franchisor’s expectations from the franchisee with regards to the acceptance of a certain business format and future growth prospects.

The franchise agreement is designed in such a way that it lists all the privileges a prospective franchisee would enjoy. When the franchisee makes a business plan for school franchise, he can check out the franchise agreement to measure the extent of help that would be provided in terms of infrastructure, advertising, marketing and management for the proposed preschool/school and effectively calculate his level of involvement and probable costs that would be incurred.

Business plan for school and FDD

Some people might confuse a franchise agreement with a FDD — Franchise Disclosure Document. FDD is different, as it is a legal document that has to be provided by a franchisor to the prospective franchisee before any document of sale is signed or finalized. The business plan for school franchises would depend upon the FDD for providing the relevant information that helps the franchisee in making an informed decision about the school/preschool brand’s market worth. The FDD is provided before signing the final documents.

FDD and Franchise Agreement

A business plan for school franchising would include a FDD that would also provide comprehensive information about the franchisor’s financial background. The franchisor has to disclose lawsuits or bankruptcies in this FDD. Whereas, a franchise agreement is important to the business plan for school franchising because it outlines the franchisor’s expectations and responsibilities.  It consists of—

• Explanation of Contract
• Operations Manual
• Proprietary-related statements —they directly affect a franchisee’s method of operation. A prospective school franchise would need to know the marketing/advertising procedures advocated by the franchisor when creating a business plan for school franchising. 
• Ongoing support from franchisor

The business for school and education in general has seen a monumental increase in India. The present scenario is witnessing a never-seen-before proportion of investments from private corporates and foreign investment firms. The business for school in India has gone beyond the realm for just boarding schools or international schools. Now, many city-based (10+2) schools are being financed by a number of corporates and have become an integral part of the Indian higher education. This change has come about with the government lifting many hurdles that used to hinder foreign investments. However, currently, there are still some legal issues that inhibit the business for schools from expanding across the nation..

For example, it is still not possible for the non-profit companies that are covered under Article 25 of CRA — Companies Registration Act, i.e. including industry associations from setting up institutions or get a recognised university prominence/recognition from the UGC — University Grants Commission. By adhering to such policies, business for schools is being hampered which eventually limits the spread of quality educational institutions in the country..

Limitations to Business for Schools in India

There are still many reservations towards the expansion of business for schools in India regionally, i.e. some of these limitations are state-based and some of the restrictions have been levied by the central government itself. For example, educational institutions can be set-up in India only by recognised trusts/societies/charitable companies. However, the profits earned from such business from schools can’t be diverted outside the organization and have to be reinvested to a certain extent..

Now, these sorts of laws only hamper business for schools from further developing. This has a two-pronged negative affect on the education business scenario in India..

This sort of restriction hinders the educational institutes from spreading out and instead encourages the investors to delve into falsified accounting methods to spread out their profits from the established institution. Further, such policies discourage foreign investments. There are some states that are working towards answering this issue. For example, the state of Maharashtra is making sure that it encourages the business for school in their urban and semi-urban centres as it plans to limit the application of the above-mentioned clause. This would mean that the non-profit, Section 25 companies would be allowed to set-up educational institutions in India. This clause alteration still doesn’t affect the primary education sphere.

Many preschool chains in India try and put forth the image that theirs is the best preschool network in India, but the reality is quite contrasting. Most of these preschools aren’t professionally-managed or administered in a manner that can promise the quality of preschooling to be maintained across their branches/franchises. In order to become the best preschool network in India, it is important that the preschool’s franchise relationship and expansion set-up is exemplary.

Businesses & Franchise Model
There are three basic types of business that qualify for expansion through the Franchise model. These three are the distributorship, brand name licensing and business format franchise. Out of these three, preschool networks have been established on the business format type of franchises.

 Business-format franchise — this is the most common of all franchise formats where the Franchisee acquires the right to own a business system that has been set up by the franchisor. The franchisee pays because the franchisor already has an established brand name and an enviable track record. The payment is done in the name of a pre-determined royalty fee which is mentioned in the franchise agreement. This format is special because the franchisor-franchisee relationship doesn’t end with the financial aspect of the dealing. Rather, the franchisor is supposed to provide continued training, sales support, cost-cutting through bulk purchasing and marketing, advertisement support.

A reputed preschool network is more likely to have a master franchise or the presence of a regional director who are supposed to exude the attitude of the actual franchisor. In order to establish a good network in the country, a franchisor needs to maintain smooth-running relations with the franchisees. This isn’t an obligation that is being considered by the franchisor, because a better-performing franchisee essentially translates into better-earning franchisor, i.e. the franchisor earns through the royalties collected.

Franchisee Initiative — some people may mistake that all the professional obligations rest with the franchisor. In fact, the initiative taken by the franchisee plays a pivotal role in making a chain of preschools the best preschool network in India. This could be done through a number of means,
• Extending the public relations of the franchisor through business/formal or social networking.
• Giving ideas for improvement of curriculum of that brand of preschool.
• Helping the franchisor gain a realistic picture of what the client is expecting.