Advisory May, 24 2010

Malls: an ideal location for franchising

Mall culture is not very old in India and is still in its evolutionary stage. The debate is still on, if malls are a preferred location for setting up a franchised outlet or not. If you are aspiring to take up a franchised outlet in a mall then the articl

By Abha Garyali
Sub Editor
Malls: an ideal location for franchising

The mall developers and real estate professionals started educating people about the mall culture realsing the significance of location, footfalls, vicinity, design, retail mix, brand mix, mall management, rentals and lease model. Majority of the franchisors believe that rentals in malls are on the higher side as compared to high streets and that malls can be a viable option for setting up a franchised outlet only if property rates are reasonable. However there is another group of brand owners who believe that though rentals are higher in malls, but the adequate amount of footfalls in malls justifies the high cost of real estate.

There are others who hold the opinion that it largely depends up on the kind of retail formats adopted by the franchisees. Kiosks are best suited for malls as it requires less space and gets maximum footfalls.

Supporting the above Samit Lakhotia, Director Business Development, Refeel Cartridge Engineering Pvt. Ltd informed, “We have plans to set up kiosks in malls at the weekend due to high footfalls during this time. Approximately 70000-80000 people visit the malls on weekend. Even if we attract 10 to 15 per cent of the footfall to our kiosks, then also we shall be making our profits.”

Here the article highlights the benefits of having a franchised outlet in a mall.

Factors supporting malls in India

Let us elaborate some benefits of having an outlet in a mall:

Youth’s bent towards malls: India is a young nation with three-fourth of its population consisting of the youngsters. It is well-known that mall culture is very well adopted by the youth who prefer shopping in malls rather than in the local markets.

Presence of multiplexes: The presence of multiplex theatres in the malls also adds to its profitability. With over 70 per cent of people preferring to watch movies in multiplexes, they also visit other outlets in the malls. These movie goers also shop a lot, thereby increasing the footfall in the outlets.

Complete package: Malls offer a complete package of entertainment with excellent ambiance and all necessary comforts. It offers entertainment, shopping, food and thus a source of complete entertainment.

Impulse buying: People visiting malls for movies would definitely love to visit shops and tend to buy one thing or the other which account for impulse buying. The stores that fall under the category of impulse buying product stores are gift and card shops, health and beauty stores, music stores and to some extent footwear and apparel brands.

No maintenance issues: Malls have an added advantage for franchisees and retailers with no issues related to maintenance of surroundings, parking lots, electricity, security etc.

Developers adopting lease model: As for the franchisees are concerned lease model is best situated for them. Franchisees often opt for popular successful brand which is preferred by our brand-conscious young generation who frequently visits the mall. Thus conversions are for sure. The lease model is not for entrepreneurs who want to start a business of their own as it involves big risks and incurs high cost. Moreover the popularity and the footfall of a mall is unpredictable and so lease model is a safer option.

Word of caution

Though above mentioned factors will for sure attract lot of franchisees and franchisors to take up an outlet in a mall still there is a word of caution before zeroing down on the location. The franchisees and franchisors must check the credibility of the developer, location of the mall, retail and brand mix, anchor tenants, safety and security, footfalls, catchment areas and the lease documents before investing.

Related: Trade Show: Opportunistic Platform

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