Retail Nov, 02 2011

Malls: destination next for franchises

With changing times, malls too have evolved over the years. With brands preferring franchise route for expansion, there comes the need for space. And understanding this need for space, malls are going an extra mile to do their bit. Read on to know more

By Abha Garyali
Sub Editor
Malls: destination next for franchises

Franchising is basically the replication of a successful business model format across locations through like-minded partners. Therefore any brand which is self-sustainable and workable can be franchised. Moreover it can be said that franchising is the most convenient and easiest way to expand any brand in India as well as internationally. Similarly malls have emerged as the perfect destination to make any outlet profitable.

Location: essential criteria in franchising

Any brand can be franchised but the success of the franchisee depends a lot on the location. Mostly all retail and service brands can be opened in high traffic locations, which are highly accessible to customers. Opening a coffee outlet in an area where there is less of traffic will surely be a failure, however good the brand is. Therefore the first criterion for both the franchisor and franchisee is to select a profitable and suitable location for the franchise outlet.
Furthermore it is well known that malls are the best location for shopping, roaming around and even relaxing with a cup of coffee. Therefore, malls attract a large number of people, either shoppers or visitors, giving rise to an increased traffic. Shubhranshu Pani, Managing Director, Retail Services, Jones Lang LaSalle India said: “Malls, as relatively novel retail formats, are the perfect venues in India.”

Parameters for opening outlet in malls

Malls are a perfect location for all brands but a business intending to franchise at a mall or anywhere else must qualify on the following parameters:

Established and profitable brand: It is seen that mostly all malls have outlets of world renowned brands. Malls prefer to give rental space to brands which are well established. It is seldom to come across new and local brand in a mall. As shared by Pani: “A franchise brand should be successful and profitable since at least the last 3-4 years before setting up oulets in malls.”

Manageable by franchise partners: Mall owners look out for brands which have a good track record with franchisees. A business which cannot be handled successfully by franchisees cannot get a good location. The business should be on a format that can be shared with like-minded entrepreneurs for implementation easily.

Malls: perfect franchise venues

A business can only become successful when it generates high sales and profits and develop into a popular brand name. Once it reaches this stature, any number of franchise outlets can be opened in malls and other favourable locations. Malls are the most viable locations for attracting heavy traffic. It is the perfect way for franchisees to merchandise their products/ services. This allows for reaching the break-even in a faster time as compared to other locations. Moreover malls have the advantage of making customers more aware of the brand’s presence in viable location like malls. An important factor responsible for this is the change in the mindset of Indian shoppers. Indians have overcome their attitude for malls and hypermarkets and are now aware that visiting a mall does not necessarily mean higher costs. On the other hand they offer more comfort and variety.

Franchising has played an important role for getting India in the middle of the retail franchise revolution. Pani assures: “As long as the real estate market is hot and new malls are being built to feed the hunger of the expanding retail market, franchising in India will thrive. Malls will continue to be the leading franchise vehicles in India, thanks to their popularity and ability to draw large numbers of shoppers.”

Conflicting views about malls

There are conflicting opinions on the profitability of franchised brands in malls in India. People in favour have the view that that malls are the best places for a franchise set-up because they assure a lot of customer traffic. While many also conclude that mall space demands very high rentals as compared to the profits earned.

Nevertheless it is true that the cost of putting up a store inside a mall is proportional to the established franchise brand. Experienced brands do not adopt franchising unless they do not have a reputation for saleability and profit earning. Therefore it can be concluded that malls are the most viable location.

Malls in Tier II cities and towns

Mall culture is on a continuous rise in the smaller cities and towns. In metro cities, malls have already been famous. However the Tier II cities are presently benefitted more by malls. In the large cities, major brands have no problems with attracting customers, and therefore they can also operate from their own premises. However, in Tier II/III cities, major brands prefer to first test out the market via franchisees, since local operators are better at capitalising on local market dynamics.

Word of Caution

Being a prospective mall franchisor or franchisee, it should be noted that a majority of people in malls visit only to enjoy their ambience. It is a mistake to assume that a high footfall rate in a mall automatically translates into increased sales for franchises. Hardworking and innovative franchisees can increase their profitability by offering bargains and imaginative display.

In metros, people visit malls not only for shopping but for leisure and entertainment due to the ambience that malls offer. Moreover malls provide a large variety of brands under one roof. Customers visiting these places update themselves regarding the latest fashion, styles etc in retail products. This makes malls boost retailers’ sales because customers who had no plans of buying their products may still do on impulse there. Lifestyle brands, in particular, benefit from this factor.

To conclude it can be said that malls are undoubtedly the best venues for any franchise brand. They are sure to boost sales and success of a franchisee.

Related: Lucrative profits in Luxury franchise

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