Opportunity Oct, 15 2010

Big Brands Make Beeline For Franchising

Big corporate houses these days are increasingly opting for franchise route to mark their presence felt significantly across the nation. Franchising is quite a big help in establishing and expanding a brand. But why already established brands are opting f

By Ramanjit Kaur
Feature Writer
Big Brands Make Beeline For Franchising

Franchising is emerging as a most preferred model for business expansion as almost every business irrespective of their nature and sphere is opting for it. The most recent example to support this is Dabur India taking-up the franchise route to expand its retail venture for its H&B Stores across northern India. In spite of Dabur being operating through a chain of successful company owned ‘newu’ stores, the company has considered adopting the franchise idea. As per Parikshit Sharma, Chief Operating Officer, H&B Stores says, “Taking the franchisee route would help us rapidly expand newu's presence in north India, the market where we intend to take the franchising route.”

Besides this there are other corporate houses as well that are successfully operating through company owned for years. Still they have opted for franchise business route for expansion.

Big corporate houses into franchising

The big corporate houses that have opted for franchise route believes in franchising as an easy mode of expansion and commitment level of the franchisor and the franchisees. Franchising for them is an ideal way to expand a business, in case the company does not have the capital, man-power and time to build the network of company owned outlets and also in case the company wish to grow its business presence sensibly yet rapidly.

However, Dabur is not the first big established brand that has taken-up franchising for expansion. There are various other corporate houses that have been into franchising for quite a time now and have marked their presence not just pan-India but across the globe also.

Raymond Ltd, a company started in 1925 as a woolen and readymade garment industry and has achieved phenomenal success with over 500 stores. As Anirudh Deshmukh, President, Raymond Ltd says, “Raymond can be called the ‘Absolute Leaders’ in the fabric industry as consumers have faith on us since the last 50 years and still we are growing stronger. We basically opted for franchise model for expanding in smaller towns as these are not affected by recession and the franchised stores can be driven by local entrepreneurs who are aware of the preferences of the local customers.”

NIIT, a well known name in the IT education industry has franchising network of over 12,500 centers spread over in more than 40 countries worldwide, apart from India. As per G Raghavan, President, Global Learning Solutions, NIIT, “A large part of this success has been possible due to our Business Partners, who have been a crucial element of our fabric. The Business Partner network not only helped NIIT expand its presence across India and reach the unreached; it also fueled the fire of entrepreneurship in the country.”

JSW Steel Ltd, the third largest steel manufacturer of India is operating through 174 JSW Shoppe outlets, which work on the franchise model. Now, the company is planning to take the count of its JSW Shoppe outlets to 340 by 2011.

Mahindra and Mahindra Ltd, a part of the Indian Industrial Conglomerate Mahindra Group has taken the franchise route to expand its 100 per cent subsidiary, Mahindra First Choice, a multi-brand car servicing company. The company is planning to take the count of its outlets to 450 in the next four years. The new outlets will be a mix of both company owned and franchised outlets.

Reliance ADA Group, a conglomerate company franchises its Zapak Digital Entertainment Ltd. (ZDEL), a largest gaming company of India. According to Rohit Sharma, CEO, Zapak Digital Entertainment Ltd, “Initially, we invested in our own flagship stores across the country. Having created a successful and profitable template through our 35 COCO stores, we realised that the best way to scale up quickly is to opt the franchise route. Franchising creates a win-win model for both Zapak and our franchisees. We have seen a huge traction from franchisees for the gaming café business. It has helped us scale and expand our reach in more than 40 cities.”

Franchised outlets over company owned stores

Franchising is a modern way to raise capital for expansion as a company needs to invest comparatively less on a franchise program than on launching a company owned outlets. As Kaushik Roy, CEO, Daily Bread Gourmet Foods (I) Pvt. Ltd says, "Scope of expansion through franchising opportunity is rapid than through company-run outlets. Franchisees contribute towards the capital, and the motivational contributions are higher since the franchisee earns from the business." Besides this, it is a high impact and low risk revenue source because the companies are selling their franchise rights to entrepreneurs who will pay you franchise fee, royalties and will bear the overhead expenses of the franchise business too.

Nowadays, even well established companies prefer to go via franchise route as it allows cost-effective means of rapid expansion and easy penetration into the various markets across the nation and worldwide. On the other hand, expansion through company owned outlets require huge investment, liability, skilled personnel and risk of failure.

Franchising gives you an easy access to success that is multiplied by self motivated operators (franchisees). Franchisees are not like your other employees who works for you just for their salaries and may switch the job if get good opportunity somewhere else. Franchisees have the enthusiasm and business acumen to run a franchise business profitably and are more dedicated than the average corporate employee. They have the direct liability for the performance and success of the franchise business as they have invested money in the venture.

Word of caution

Every established company should carefully research and refine the franchise business model before franchising their respective businesses because the model needs to be simple enough to be easily replicated. Besides this, the business system should be clearly written within the franchise manuals in order to help the franchisees to know how to operate the franchise business so as to achieve maximum sales and profitability from day one.

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