Advisory Nov, 06 2009

Experiencing The Franchise Boom In India

With economic recession having made its impact world wide, the retail sector, IT sector and self owned businesses have all faced its dreadful consequences. One sector that grew beneficially is the franchising industry which presents more inviting aspects

By Abha Garyali
Sub Editor
Experiencing The Franchise Boom In India

The franchise industry in India has presented itself as a promising business opportunity as it witnessed 30 per cent growth even during the tough economic climate. In the 23rd edition of Franchise and Retail show held in Bengaluru it was stated that the franchise business industry in India is hopeful of high growth in the coming years despite the global economic downturn. Currently, there are around 1,200 franchisors and two lakh franchisees in the country but it is largely an urban phenomenon. Colonel (Retd) Upendra Sachdev, Executive Director, Indian Franchise Association (IFA) said, “The franchise business in India has a huge potential and we think it will grow to a large extent in the next five years.'' He added, “Looking at the current growth in the franchising industry it can be said that by the next five years there would be at least 50,000 franchises in the Indian market, which would create employment for at least 500,000 people.”

Retail industry put to hind

Till a few years back retail sector was still a rising force. With the dreadful consequences of the slowdown many retailers have taken the franchise route for expansion. This shift towards retail franchising has further relegated the retail sector to hind, and this can be considered as one of the prime reasons for the popularity of franchise industry.

Corporate professionals laid off

Another segment which was affected by recession was the corporate sector. Many bank and corporate professionals were laid-off during the time and the best course left for them was to try their luck as entrepreneurs. Franchising offered them a great platform to start something of their own and achieve heights.

International players see great potential in India

Another reason for the development of the franchise industry can be attributed to coming up of numerous international brands in India. With franchising gaining momentum, the international brands have already made a mark in the Indian market. India promises greater growth potential as compared to developed economies, primarily due to the emergence of an aspirational and brand conscious middle class. Franchisors in international markets are pressing ahead with their plans to further develop their networks. The international brands like Café Jubilee, Church’s Chicken, CKE Restaurants Inc, The Melting Pot and Papa John’s International Inc are a few examples.

Rising sectors

The two sectors which are having maximum growth potential in franchising are food and beverages and education sector. These sectors have already generated maximum franchise agreements. Sachdev informed, “The franchise business has been very good, mainly in food and beverages and education sectors. The food and beverages industry was up by nearly 38 per cent while the education sector registered a growth of 32 per cent last year.” Computer education firm Aptech, for instance, is looking for franchisees for its new venture called English Express. US Pizza has also turned to franchising in a big way and has plans to increase its outlets from the present 76 to around 125 by the end of 2010.

Mushrooming malls

One of the prime reasons for this development can be the growing numbers of shopping malls in the country. Due to the ever increasing number of malls, the national as well as international franchisors feel, it is the best time to expand their brand in the Indian market. Another emerging trend is the buying of a franchise by the mall developers themselves to double their profits as they can install the outlet in the prime site to ensure the success of the outlet.

The aspiring entrepreneurs who want to make it big in the business world can now be hopeful to achieve their dreams. Franchising has come to stay in India, and is not just a short phase as some people had doubted in the beginning. Investing money in buying a franchise is the best way of ensuring success.

Related: Watch out for legal traps

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