The franchising model is no longer limited to leading global QSR chains, but is also becoming popular amongst brands in numerous categories planning a pan India expansion
The franchising industry is playing a key role in the growth of the retail industry with 3,700 franchisors and 1.5 lakh franchisees, generating annual sales of $ 22 billion, or nearly four per cent, of the total turnover of the broader sector.
The key factor that has contributed to the growth of the above business model is the entrepreneurship of the highly educated below the age of 35 years, with nearly three-fourth of the new businesses created from this segment. In addition, a recent report by Franchise India Research highlighted that 350 brands entered this segment in ’13, and appointed partners on a pan India basis.
The emerging opportunities in this segment has also encouraged Lacoste to look for partners, and Rajesh Jain, Director and CEO, Lacoste India, emphasised that it is a suitable model to expand in tier-II and smaller towns on a pan India basis.
A pro-growth model
The spotlight on the franchising industry has grown over the past decade with the entry of several leading MNC QSR chains, but senior professionals highlighted that this model has been present in the country for many decades, but in an unorganised manner. And, that’s because a partnership with a well established brand enables an entrepreneur to quickly grow his business as well as suitably leverage a successful business model.
“Brands need to select their franchisees with due care, and we have an appropriate model to achieve the above objective,” said Tanmay Kumar, Director - Business Development, Yum! Brands.
The popularity of this model has also resulted in master franchisees and multi-unit franchisees, which operate several outlets, and enable brands to streamline their expansion plans.
Vasanth Kumar, Executive Director, Max Retail, said, “We are paying greater attention to multi-unit franchisees and cluster franchise network, while expanding.”
Striking a similar view, CK Kumaravel, MD and Co-founder, Naturals Beauty Salon, said, “Multi-unit franchise model provides considerable simplicity while expanding.”
The growing sales online has not gone unnoticed by the franchising industry, and in several segments including lifestyle-related products, consumers are increasingly purchasing via the web.
Mahesh Gupta, Chairman, Kent RO Systems, said, “We generate nearly four per cent of sales online, and it has also helped us to expand our target audience.” Retailers also stressed that a viable business model in this segment includes giving the entrepreneur the entire margin for a product, while the franchisor could earn royalty. Clearly, franchising is on the cusp of strong growth.