Food and Beverage Feb, 09 2010

Food franchise soaring high

Franchising as a mode of expansion requires undaunted will power for the entrepreneurs to venture into this arena. Food franchise in India offers the aspirants with huge business potential as well as some major challenges. Read on to know more...

By Abha Garyali
Sub Editor
Food franchise soaring high

During the last few years India has witnessed a vast positive change in the food franchise industry. According to the Food Franchising Report 2009 brought out jointly by FICCI-CIFTI and Franchise India Holdings Ltd, revealed that 51 per cent of the consumer wallet share is dedicated to food. This trend shows there has been an increase in the eating out concept among Indians. The strength of such a concept lies in its capability to replicate and besides the power to sustain profitably for an indefinite life span. The growth of the food industry is also fuelled by the emergence of franchised restaurants across India. Although a lot of national and international food players have established themselves in the franchising arena but still there exist a vast untapped market for more players to enter. As said by Professor Mahmood A Khan, Department of Hospitality and Tourism Management, Virginia Tech, “Indian food franchise industry is in its infancy at this point. With the growing population and changing lifestyles, the potential for the success of any food franchise is tremendous. There are several concepts that are waiting to be developed. In this regard, Indian food franchise industry is a ‘sleeping giant.’ With a rich heritage and variety of foods and beverages, India has a wealth of recipes which can be converted into a wide variety of franchises serving different market segments.”

Food franchise industry has grown in India because of its multiple beneficial factors. Some of these factors are as follows:

Changing trends: With increase in disposable income, eating out in the present scenario is no longer a novelty as it was in the past. As more and more people are becoming time starved; they have started patronising eating outlets. Moreover, the craze of eating out has also evolved as people have started finding joy in celebrating their everyday moments as special.

Youth population: Occupying one third of the population, the youth are the key drivers of this trend. More than a necessity, young generations eat out because it is ‘fashionably in’. Besides, the youth are more open to adapt innovative delicacies offered by the food franchised outlets.

Technological up gradation: Technological advancement is an important propelling factor. With the use of Internet, mobile phones, electronic menu boards etc have made ordering food simpler. Moreover, gloabalisation has helped the international brands to venture into India as well as Indian brands to venture abroad. As examples we can quote Yo!China, Mc Donalds, KFC etc which cater to worldwide delicacies for the Indian consumers.

Branded benefits: People prefer visiting popular restaurants as compared to the not-so-known ones, as they offer world class services in a clean and healthy ambience. Franchised restaurants guarantee same delicacies, same infrastructure and same set-up to attract customers. The quality is consistent to an extent that a food item bought from a franchise in Delhi is a mirror image of the one bought in Mumbai or Hyderabad.

In spite of the above given factors, a food franchisee may have to face lot of hurdles to succeed. Some of the major challenges are as follows:

High investment: It is true that there are a few low cost food franchise options, like taking up a kiosk etc. Buying the franchise of a known fast food or fine diner demands a high initial investment. Food preparation stations, sinks, stoves and ovens, grease disposal systems, venting requirements, customer seating and bathroom areas require lot of money which sometimes may not be possible for aspiring franchisees.

Restrictions by the Government: The Government goes to great lengths to ensure that any food business meets numerous legal and health guidelines to ensure safety of food products. Complying with these regulations, both on an initial and an ongoing basis, is time consuming and expensive. A franchisor should always provide extensive assistance to his new franchisee in terms of dealing with the Government policies as the franchisee can be a novice. The lack of laws in franchising and Government policies is the biggest impediment to the growth of food franchising.

Sluggish profit making: Franchisees have to incur both the expenses of labour as well as the vendors. Keeping prices low is also important to attract consumers. Therefore, low margins or no profits are expected in the initial stages. Moreover, spoilage, theft, and other issues can take place in a food franchise that are not there in other types of franchise businesses.

Qualified labour needed: The success or failure of any franchised restaurant depends largely on the quality of the food and services offered. Customers would patronise the outlet only if the food items are similar to the original franchise and the services given are also the same. Franchisors do train the franchisees’ employees but staffing is mostly the latter’s responsibility. Recruiting and retaining a sufficient number of acceptable quality employees is typically listed as the prime challenge in any food franchise.

Lack of personal life: Most of the aspiring food franchisees enter the business associating it as a high status symbol but later discover the harsh realities of it. The hours can be very long. The labour challenges can be very frustrating and can leave the franchisee devoid of any strength by the day’s end.

The secret to success in evaluating any food franchise is to determine your skills and ability to succeed in this field. Food business can be very rewarding to a person who has the requirements of running a franchised restaurant but can be equally disappointing for those who do not have the essential abilities.

Related: Creamy taste of success

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