Advisory Jan, 04 2014

Follow franchise footsteps

As per an ASSOCHAM report, the Indian footwear industry has grown at a CAGR of 15 per cent and is expected to grow by 25 per cent for the next ten years.

By Sakshi Arora
Feature Writer
Follow franchise footsteps

It is likely to touch a USD 60 billion mark by 2015 from the current level of USD 35 billion. Looking at a huge potential in this industry, investors have an opportunities galore to choose from.

India is today the second-largest footwear producer in the world. The domestic footwear sector stands apart from others on grounds of ever-evolving retail ecosystem and low production cost along with enough of raw material. Dominated by men’s footwear sector, which has seen an increased purchasing power over the time, this industry is also witnessing a surging demand for formal footwear. With an increase in demand along with the rising disposable incomes and fad for branded labels, the industry holds a great potential for franchisees to earn higher profits.

Why franchise model?

Prior to put the best foot forward in the organised sector and to have a strong foothold pan-India, brands like Lee Cooper, Red Chief, Liberty, Reliance Footprint chose franchise as the preferred route.

To associate with the brand Red Chief, a franchisee must be an independent business owner. The brand seeks a responsible, customer-centered partner with a structured approach towards store business. Liberty, on the contrary, welcomes anyone with an innovative and young outlook. Anupam Bansal, Executive Director, Liberty Shoes Ltd., says, “The franchisee should show keen interest in global footwear fashion, have an experience/understanding of retailing, however, not necessarily footwear retailing. The focus is on enhancing guest experience through consistency in quality, services and offerings.”

Passion and dedication are mandatory pre-requisites for potential franchisees across all industries. The footwear brands are seeking the same passion in their prospective franchise partners. Reliance Footprint is looking for franchisees that build strong customer-relationship, and can open franchisee-owned stores in lifestyle retail markets or malls.

Vision and Expansion

The Indian footwear industry is today worth almost Rs 22, 000 crore, bagging immense opportunities for franchisees. Where the organised sector contributes for one-third of the market, it is the small unorganised segment that fetches the remaining share.
The franchise path is a novel concept for Reliance Footprint as of now. Through the same, the brand is now looking for an extended footfall. Currently, the company is catering to 20 states and 86 cities, seeking further expansion in cities with a population of 2.25 lakh people or more.

Following the FOFO (Franchise Owned Franchise Operated) model, Red Chief has a strong foothold in MP, UT and UP and aims to tap tier II and III cities pan India.

Manoj Kumar Gyanchandani, Managing Director, Leayan Global Pvt. Ltd. (Red Chief - Retail Division), says, “The industry is growing rapidly with some 40 per cent growth. The potential of footwear industry is huge amongst all other categories in the city.”
Liberty shoes opted for franchise route as a local partner is of more benefit for the brand than opening a company-owned outlet as the franchisee shares his local market knowledge. Having almost 400 stores in large, medium and small cities, mostly in Northern India, the company has plans to cover tier II and III cities, including Karnataka, Tamil Nadu and Andhra Pradesh. Liberty’s success stems from an innovative marketing approach. It’s an approach that goes against the general perception of what works in the market by opening and running franchisee showrooms on cash and carry format without ensuring minimum guarantee.

Since most of the rural market of India is untapped as of now for footwear manufacturers, therefore, many brands have been preparing to reposition themselves. New price ranges would be introduced, which will ensure increased customer base also.

Guidance all through

Whether new or old, a franchisee needs support or training in order to run a business as per franchisor’s perspective. Constant supervision is ensured at the franchisor’s end and consistent support is promised to franchise partners. A similar approach is being followed by Reliance Footprint as the brand helps its franchisees with complete training about SOP’s (Standard Operating Procedure)/ system/ product knowledge. The brand does ATL (Above the Line) activities, brand building initiatives and press advertisements for company-owned stores, and promises the same to its franchise partners.

Reliance’s partners are provided assistance related to merchandise management and marketing as well. Red Chief also knows the key to success in franchising business. Its franchise partners are promised training all through, from store process to product knowledge to running the business with maximum profits in hand.

Liberty ensures the same while keeping in mind that a sloppy business operation by a franchisee can affect the whole brand. Liberty makes sure that its partners regularly bring new products in place of the existing collection.

Challenges on the way

For many years, the biggest obstacle for the footwear industry has been the unorganised shoe market. Liberty believes that amongst all, the key challenge faced by it is the wrong forecast at individual and retailer levels. Thus, a theory of constraints (TOC) initiative was implemented to increase sales and profitability.

Ever since the first store of Reliance Footprint was launched in November 2007, it took six years for the brand to adopt the franchise path to expand further. The franchise model has been thoroughly tested through every possible condition and for fine tuning. At present, the brand operates as many as 154 operational company-owned stores.

Debdeep Sinha, Sr. Vice President, Reliance Footprint, says, “Quality retail space in established lifestyle retail markets is the biggest challenge and we target the same through franchise route for expansion.”

For Red Chief, varied challenges during the journey included high rentals and choosing apt locations. These challenges encouraged them to re-set the process at every stage to ensure that they line up with their franchisees and do not face the problems again.

Facing global competition

In today’s cutthroat competition, a lot of challenges are faced by the shoe brands in the footwear industry. With an aim to stand apart from their rivals, different companies follow different strategies. To cite an instance, Reliance Footprint ensures that it caters to the footwear and accessory needs of each and every member of the family. It has more than 50 brands, all under one roof.

Talk about Liberty Shoes Ltd. and it is focusing at empowering positive change in its franchisees. With different buying patterns and huge availability of raw material setting the footwear business apart, its comfort and fashion ensures uniqueness of Liberty Shoes. Technology and innovation are the brand’s priority and it is this re-invention of products on seasonal basis that helps it face the global competition.

International brands such as Puma, Moda in Pelle and Johnston & Murphy have also gained a strong foothold in the Indian market through the franchise model.

Franchise Facts:

Brand Area Investment Breakeven RoI Current franchise outlets
Reliance Footprint 2500 sq ft Rs 50 lakh - 1 crore 4 years Subject to different markets/cities depending on sales potential --
Liberty Shoes 800-1,000 sq ft Rs 10-15 lakh Within one year 30% 325
Red Chief 700-800 sq ft Rs 20-22 lakh 1.4 years 4.5 years approx. UP-East, West, UT and MP

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