Franchise trends Jan, 08 2014

2014, the year of opportunities!!

Like every year, 2014 will also have different factors effecting and shaping up the franchising industry. Last year every sector witnessed a dramatic evolution. Some grew by leaps and bounds while some had to see fluctuations.

By TFW Bureau
2014, the year of opportunities!!

Besides all the ups and downs, as per Francorp, franchise business model has gained momentum and has proved to be the most suited business model for brands across the world including India. Every brand wanting to expand nationally or even internationally seeks for a franchise model for his brand. Let’s browse through the trends that year 2014 has brought with itself and how different industries are offering ample business avenues to the budding investors.

Presently, Indian franchise industry has more than 3,700 franchisors from different sectors and more than two lakh franchisees running business successfully. Every sector has their out-performers and laggards, and despite the market conditions, these out-performers are consistently performing on strength of innovations and offering potential opportunities for entrants. Industry leaders have planned much for the world of franchising in 2014. Beauty and health industry will grow as always because of the people becoming more conscious about their health and appearance as well as about global trends. As per francorp, 15 per cent of the present organised beauty and wellness market is franchisee-run. In the coming decade, the market is expected to touch 20-25 per cent. Also, around 1200 franchisors and more than 125,000 franchise units are presently there in India. Shahnaz Husain, CEO, Shahnaz Husain Group of Companies, said, “The beauty business is said to be a “happy industry,” because it is among those that is not even affected during the recent recession trends. Indians are spending much more on beauty and wellness than they did before. The business, mostly being run by women entrepreneurs, is slated for growth during the coming years.”

Pushkaraj Shenai, CEO, Lakme Lever says, “We are witnessing a change in the profile of our existing franchisees as most of them want to set up additional salons. However the industry is witnessing growth through both organic and inorganic routes.” He further added, “The growth of existing stores has been healthy but economic sentiments have had an impact on the store growth levels. The category is still at a nascent stage and the capacity to grow is immense. Business is shifting from the unorganised to the organised sector and customers want to migrate to trusted brands that offer quality services.”

If we talk of retail, Reliance Footprint has made a debut in franchising in last quarter of 2013 and is very hopeful for this year and years to come. The services and education industry is also set for rapid expansion this year. CEAT tyres intends to double the current shop base by 2015. The growth will come from new franchise-owned stores that will be coming up in tier II and III cities in key territories. Well known tank cleaning services brand, Fast Clean entered franchising industry in 2006 and is ready to face challenges in 2014. Most of the brands are now looking at strengthening their partner network in all major cities and towns of India and inviting professionals and entrepreneurs to join hands with.

In this financial year, Preschool chain Little Elly is planning to open 50 more centers mainly in Southern metros and Pune. Indian Pre-school market is poised to grow at a tremendous pace as the market is under penetrated, especially in tier II and tier III cities. Higher disposable income with growing middle class population and the importance they attach to education are a few driving factors for growth. The total market size could be close $ 1 billion by the end of 2015. Five years down the line, this could become a multi-billion industry.

Health and fitness, F&B on a boom

Increased health consciousness amongst people encouraged Snap Fitness to follow the franchise path to expand further. As investment is recovered quickly by franchisees, they have opened multiple gyms. The support provided by the brand is being well appreciated. Another brand VLCC looks forward for the challenges this year. Sandeep Ahuja, Managing Director, VLCC Health Care, said, “Franchising makes it much more viable for companies to reach out to potential customers in a much wider geographic scale, especially tier-II and III towns and cities where there is already a latent demand for Wellness services and products. Around 12-14% growth per annum is reported by franchisees after the break even.”

As per Manpreet Gulri, Country Head, Subway, the market is apt for the growth of F&B sector. And since the franchise path is nowhere near touching a plateau in the years to come, the same is a best driving force for the QSR (Quick Service Restaurant) sector. The brand Subway has realised a productive 2013, be it regarding exploration of new opportunities or sales. Manpreet Gulri affirmed, “We have crossed the milestone of opening 400 restaurants in India, expanding the network to tier-II and smaller cities. The signs from the market are positive so far. The franchising industry is projected to provide more than 11 million employment opportunities in India by 2017.” In India, the brand has already created its niche, with simple operation, flexible floor plan and low start-up cost being the inherent strengths of its franchise model.

Travel companies offer franchise

Indian tour and travel industry is also showcasing a healthy growth, especially for domestic and international holidays. Many market leaders have started to utilise the franchise business model for the expansion of their presence across the world. Rajesh Magow, Co-Founder and CEO-India, MakeMyTrip says, “Opting for franchise has given us more opportunities to partner with entrepreneurs who not only can manage businesses but also give us access to key markets in the Indian geography. They also help us reach out to customers who may not be confident or comfortable transacting online. In this way, we can offer our services to many new customers from smaller cities and towns and meet their travel needs and aspirations.” So as a lot of scope is available for new entrants in this segment. Thomas Cook India is also increasingly focused on expanding its network in the tier II and III markets. The brand is also looking to increase its focus on the Middle-East market, since it will continue to grow massively over the next few years. The brand is looking to penetrate in newer segments, incorporating the latest technological innovations, to smoothen the travel experience.

Shinier opportunities

Year 2014 will bring much shinier prospects for the investors. Compared with others, gems and jewellery sector has seen tough time in the past one year. As a result, many industry patterns are uncertain about the growth of this sector in 2014. Santosh Srivastav, Managing Director, Gitanjali Jewels says, “The year ahead seems to be a difficult one so far as investors are concerned. However there is an ever increasing demand in jewellery segment and there are times when there is a downfall but that is temporary in nature.” Whereas the AT Kearney study forecasts double digit growth in the Indian jewellery industry in the next five years. The study analyses the industry trends and predicts to reach Rs 500,000–530,000 crore by 2018 from Rs 251,000 crore in 2013. Lets see what is in store for this sector.

Moving to the Indian clothing and textile industry, 2013 was a high growth year and market leaders are hoping that it is standing on threshold for next few years. Anant Daga, CEO, W', TCNS Clothing says, “There are signs of market improvements with an increase in footfalls and bill values. There are very few players in the organised sector and the demand curve is quite steep. Overall, the markets have improved and the trend seems to continue.” “Trends which are encouraging the industry include new lines of fashion and fabrics coordinated with jewellery are doing very well,” according to Daga.

Francorp analysed top five business sectors which had reported high growth in 2013 and have proved to be the most lucrative sectors for investment for 2014. These sectors are:

1. Food & Beverage
2. Retail Lifestyle
3. Health & Wellness
4. Education
5. Consumer Services

As per the analysis, more than 150 brands joined the franchise league in 2013 and had expanded via franchise model. No matter which market or sector you fall in, if you have chosen franchise business model for expansion, you will prosper despite of any global turmoil in 2014.

Related: Customisation is the key to happier franchisees

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