Food and Beverage Jul, 07 2010

Relish sumptuous profits

India has over 1,200 franchise concepts with almost 200 catering to the F&B sector alone. With franchising being the core of the industry, different concepts are coming to the forefront. As the industry is escalating to greater stature, let us take a whim

By Neha Malhotra
Sub Editor, Franchise India Holdings Limited, Web Division
Relish sumptuous profits

India is known for its strong middle class, and if we assume them to have three meals a day; approximately 1000 million meals are consumed everyday in our country. With numbers so high, undoubtedly, the demand for food is sky rocketing. In the current scenario, franchising is helping to fulfill the hunger for more and more branded food.

Unorganised sector rules

India known for its rich culture and heritage is also famous for its mouth-watering delicacies. Though it comes as a surprise, but of the $ 11 billion food service industry, organised players own a share of a mere eight per cent. The unorganised sector is ruled by the roadside shops that can be seen all across towns and cities. Of the food concept options, Indian brands capture 75 per cent of the share while the international names cater to the remaining 25 per cent. Franchising has offered the much needed support and played a noteworthy role in expansion of these brands.

Reasons for growth

Busy lifestyles, increased consumption of ready-to-eat food, shift from single-income to dual income families are all growth indicators. The eating out capacity of people is also on the rise with about six times a month (approx) making it the second most made expenditure by people capturing an 11 per cent share  of their wallets. The foray of international brands especially in the quick service restaurants has also added to the growth of the F&B industry. The growing need and identification of branded food by people has brought franchising into the picture. Tarun Chaudhary, CEO, Slice of Italy shares, “Franchising made it easy to reach and satisfy more customers, and expand into new markets, thus achieving the goal of continued growth.” As a fact, of all the industries, maximum franchising is done in the F&B sector.

Franchise: recipe for success

Franchising has had a great multiplier effect in the growth of this industry. 17 per cent of the organised industry sector is working swiftly on the franchise scheme. There are over 18,000 franchised restaurants around the country with the west claiming a share of 49 per cent of all locations, followed closely by the north with 47 per cent of the share. However, north Indian cuisine has the greatest share in the list of cuisines in the food franchise and has 42 per cent share to its name. Western American food franchised outlets are second in the list with 22 per cent of the share and half of its share i.e. 11 per cent with the Chinese speciality franchise brands. South Indian food outlets are the third most preferred food franchise concept with 13 per cent share, while Pizza and Italian follow close at 12 per cent split.

Palette of business opportunities

Ice creams, fried chicken, frozen yogurts, bakery, chocolate and sweets and sports bars are franchise concepts that have made a significant place for themselves in the industry. A growing number of Indian as well as international brands has made advances in these food concepts offering aspiring entrepreneurs an array of options to choose from. While selecting your favourite coffee franchise, you can opt for Barista, Coffee Day Xpress, Coffee n U, Quicky’s, Brewers, and Cafe Desire, which are a few brand names into franchising. The coffee culture has been welcomed by the Indian populace and is looking to add more to their coffee experience. Shashank Jha, Founder, Coffee n U says, “We are starting a programme called “Connect with Coffee, know your brew”. Every Sunday two hours will be dedicated to the general people at all our cafes to bring them closer to coffee, explain about the art and science of coffee and general coffee knowledge.”

Ice creams also offer an array of options like Amul, Mini Melts, Gelato Vinto, Vadilal and Kwality Walls, some of the known names in the industry. Tom Mosey, CEO, Mini Melts Ice cream tells, “We are driven to administer assistance in issues such as advertising, technical support, research and development, and quality control management. Our objective is to assure that our franchisees achieve high volume sales with excellent profits. We achieve this by constantly striving for perfection and ensuring that our operations are at the forefront of technology.”

Sweets and chocolate stores is also an option now. International brands of chocolates are also foraying into India. Leonidas, Candico, Sweet World, Chocolate Room, and Chocolate Graphics Intl. are some of the known franchise names. Bakery is another related realm and Monginis and Cookieman are offering franchises for their brands. Pattabhi Rama Rao, president, Cookie Man, India shares tells, “Cookie Man has always operated on a franchisee model, and is of the belief that the franchisee model has worked very well to help grow the business across India. The franchisees are usually local people who are able to connect with the customer and encourage their cookie habit.”

Pizza’s are being relished by people of all ages, leading to a rise in the number of brands that offer pizzas as a speciality. Pizza Corner, Debonair’s Pizza, Slice Pizza, Slice of Italy, and Smokin’ Joes are prevalent franchise players. The culture of fried chicken has also been adapted from the West and is becoming popular among Indians as well. The craze was brought to India by Kentucky Fried Chicken (KFC) and now Chawla’s, Dixy Chicken, Bangs and Chick India are taking the fad ahead by offering franchise opportunities. Asvin Simon, CEO, Bangs India tells, “We are planning to open 100 franchised outlets by the end of this fiscal (Of which 50 Outlets will be franchised). By next year, we will start expanding in north India also.” As the brands are relatively new, opportunities are humungous.

In cuisines, Chinese, south Indian, and north Indian are the most prevalent. Yo China!, Mainland China, Shanghai Post, Yum Yum Dimsums are  the known franchise names for Chinese cuisine while Billion Smiles and Sagar Ratna are the south Indian franchise stalwarts. For north Indian food options, aspiring franchisees can opt for Pind Balluchi, Moti Mahal and Khyber. Sudhir Behl, Director, Khyber Restaurant tells, “I do not think that our franchisees will face any challenges while running the business as we will be providing them with every kind of support they require during the initial period of the business establishment.”

Locations drive sales

Location for opening a food store/outlet plays a pivotal role in its success. Besides malls and high streets, franchisors are seeking more avenues for fulfilling their expansion plans. Airport or railway station retailing is another trend that is gaining enormous significance. It is an exciting avenue and franchisors are trying to reach out to the time strapped customers at these locations as well.

Besides location, another imperative concern for a franchisee is localisation. It is an important aspect that needs to be given due attention. Most of the franchisors seek these suggestions from the franchisees who know their regions well. Franchisors are open to suggestions and incorporate them in their menus. Regional inputs help drive more sales and cater to the clientele in an improved way.

International labels on the table

International labels are still eyeing to own a share of the Indian food industry pie and we on and off hear of new brands venturing on to the Indian shores. Recently, Lite Bite Foods bought the Guatemalan Pollo Campero to India. Amit Burman, Chairman, Lite Bite Foods tells, “We have stepped into the Indian market with one outlet in Gurgaon and will soon be ramping up presence in the market. We are planning to open about 50 stories in the next three years across the country. Half of them will be company owned and the other half will be sub-franchisees. Delhi-NCR and Tier-I cities would be first on the menu.”

Costa Coffee, Gloria Seans, Swensens, Subway, Baskin & Robbins, Pizza Hut, KFC, GFA, and Booster Juice are just some of the international labels that are franchising successfully in India.

Not only are international food chains coming to India, but also Indian franchisors have moved on to international locations. However, a lot of home work goes into materialising this opportunity. Tony White, Director, The White Connection & Regional manager, Gloria Jeans Coffees, Australia says, “Indian companies need to have a strong local brand presence first. The biggest challenge here is that there is so much new opportunities in India that a franchisor needs to maximise the brand presence at the local level first before planning to take it in another country.” Though the thought is enticing, groundwork and a thorough search for franchise partners will be the key to success.

Monetary concern

The F&B industry offers a wide range of culinary system options that can suit every pocket and the lowest investment which even begins at a mere Rs 1 lakh. A minimum of four to six per cent of the gross sales go into the promotion and advertising of the business. The working capital for a QSR can range anywhere between Rs 2-5 lakh and goes up from Rs 5 -2 lakh when opting for a restaurant, while for a kiosk it falls within Rs 25,000-75,000. The anticipated ROI for a QSR and a restaurant varies between 10-30 per cent whereas for a kiosk the ROI begins at 15 per cent and goes up to as much as 100 per cent. The typical franchise term of a minimum of five years is applicable to all. Territorial rights and franchise agreements differ as all franchisor’s have a different set up for their companies. Samir Kuckreja, CEO, Nirula’s tells, “Typically, we enter into territorial franchisee arrangements with companies that have a sound financial background and preferably, domain expertise in hospitality.”

Orientation towards healthy food

People’s food preferences have changed as they are becoming more and more cautious of what they eat and how they look. A direct impact can be seen in their orientation towards healthy food. Looking at this facet, a lot of healthy food systems have come to the fore.

R Inder Bhalla, MD, Cocoberry India tells, “We have been giving healthy yet delectable eating options to the people. We would like people to indulge in healthy eating, thus have a healthy life ahead. With franchising at the core, we plan to open 300 stores by the end of 2013.” Manpreet Gulri, Development Agent, Subway Systems India says, “The USP of the brand is fresh and low calorie exotic dishes. It provides the customers with a delicious and healthy alternative to greasy fast food.” Being relatively new, the platter of opportunities has just begun filling up as franchisors are gearing up to cater to this growing demand.

Promising future

The F&B industry is growing at a rate of 40 per cent per annum. With 30 per cent of new franchise outlets coming up, the avenues for opportunity are spelled clearly. As the numbers show opportunity on the horizon, aspiring franchisees have started looking for options which suits them the most from a list of never ending options in this business. Venturing into this sector will surely cook up great profits ensuring it as the apt business proposal.

Related: An appetite for success

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