Franchise challenges Apr, 28 2015

How to overcome key challenges in franchising?

Finding a right franchise partner, lack of skilled staff and rising real estate cost are among the common challenges faced by franchisors across India. We find out gravity of the problem and suggest a way out here…

By Sandeep Rana, TFW Bureau
Senior Copy Editor
How to overcome key challenges in franchising?

According to recent reports, the Indian franchise industry is estimated at $24 billion with a healthy year-on-year growth of 30 per cent. Its size is estimated to touch $35 billion by 2020. The domestic franchise industry has grown manifold over the years with Indian and foreign companies expanding their business ventures via franchise route. The prospective entrepreneurs in India too have shown encouraging response by taking the franchise rights of different brands. With fast expansion of different companies, they are also facing several major challenges in their operations. Most of these roadblocks are common for the companies.

Lack of skilled workforce

Though India has the second largest population in the world but it lacks skilled people, which is the need of the hour. Although the Indian government has taken a note of scarcity of professional youth and has come up with National Skill Development Corporation (NSDC) to create a large pool of skilled workforce but that is a gradual process. Be it beauty, fitness, F&B and or any other industry, people with basic education of the concerned category are less and a high attrition rate adds to the woes of the industry.    

“One of the major challenges encountered by us is the lack of professionals in the fitness industry. Since the number of experts is not enough, it becomes difficult for a franchisor to deliver the same level of service at every centre,” points out Neeraj Mehta, Director, GFFI Fitness Academy (India).

“High attrition rate and lack of professionals in the industry are the reasons that you see almost all leading beauty and salon brands have their own institutes to overcome this grave problem. Gradually, more and more fitness and F&B brands are following this concept by opening their own training centres,” shares a franchise expert.       

Sharing how his company is beating the problem of recruiting staff and high attrition rate, Kailash Shahani, Founder, Morpheus Human Consulting Pvt. Ltd, says, “We understood that hiring a staff for our franchisee was becoming a challenge for them and therefore sometime back we have created internal recruitment team dedicated to support our partners in their growth. We also face high attrition in this industry and therefore we need to be prepared for bench hiring which Morpheus is specialised in.”

Finding a right franchise partner

Many franchisors in India find it difficult to find the right kind of match to lead their brand in their respective areas. Many issues come up during the business partnership process. “Finding the right partner to represent your brand in tier-II and III markets is a big challenge. People want to associate with the brand but do not understand the brand values which they have to adhere to or replicate once they become a partner. To overcome this challenge we have very stringent selection criteria on which the franchisee is evaluated. Also, most of our franchise partners are referred by our existing partners who understand our brand value, “Kiran Joshi – Franchise Head, Dr Batra’s Positive Health Clinic Pvt Ltd, tells Franchise India.

Cautioning on this aspect, Mehta, says, “While considering an individual as a franchise for your business the first thing you need to be sure about is the authenticity of that person. There is always a risk of compromise in the service delivery, customer management or anything which may leave a negative impact in your product’s image.”

Product customisation

Product customisation is also another challenge for the franchisors across sectors. In order to tailor the product according to customer needs is the key to success. Relevance is of utmost importance for the franchisors to thrive in the industry they are in. A slight change in the design or format of the product can make you stand exclusive in the industry. Ex- Subway bakes its own range of fresh breads which no one else does in the same category.

Real estate

At a time when our country is seeing a political slugfest over the issue of land acquisition bill, the franchising industry continues to face real estate challenges. Not just the soaring prices are making it tough for them to expand their operations in India but also the norms and lengthy procedures are proving to be a roadblock in the success of the industry.

 “You need good money, man and space power to run a cycle outlet. Space is one of the main concerns as you need a big space to store these cycles but real estate cost is so high. The government should bring down import duties to drive the business otherwise it is very tough to be present in the market,” worries Hemant Shah, who runs six Firefox Bikes franchise stores in Bangalore.

On this aspect, RS Sodhi, Managing Director of the Gujarat Cooperative Milk Marketing Federation Ltd, which runs Amul shares, “We are witnessing huge developments in real estate across the country. However, the pricing is an issue. Ice-cream retailing or any retailing business has to go through long waiting periods before they stabilise and become a viable proposition. The mantra of the successful retailing till today is offering high value for money to the consumers while fetching high volumes to offset the lower margins. The retailing initiatives would only be able to offer low margins and thus irrational real estate prices can become quite an impediment.”

Rahul Deans, CEO, Cocoberry Restaurants & Distributors Pvt. Ltd, too finds it a big challenge for the industry. “It is particularly a challenge in India (across all formats) where poor urban planning has meant that rent/sales ratios are possibly the highest in the world, particularly in Mumbai and the NCR region. There is also a high failure rate of malls and the fragmented nature of the real estate industry, which increases the challenge. “

So, we can conclude by saying that there are obstacles but measures to counter them too. Evolving your business according to the market and your franchisees can work your way. All you need is patience and should adopt new measures to strike a right balance. What should be heartening for the industry is the government launching NSDC and measures being taken to reform the land acquisition system. In the long run, these steps will work in favour of the industry too.

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