franchising aspects Dec, 16 2011

Target small cities for big benefits

A decade back to come across a branded apparel outlet in Tier II and III cities and towns was quite a novelty, but now established beauty salons, restaurants etc have also become a common sight. Explore more

By Abha Garyali
Sub Editor
Target small cities for big benefits

Franchising has brought about a revolution in the Indian market scenario. Till the recent past organised brands used to have their presence only in the metros and big cities. However, as result of changing scenario, mostly all established, retail as well as service brands are now foraying into smaller cities and towns. This is a calculated step taken by retailers and franchisors after seeing the tremendous potential in such markets.

Small towns attracting big service brands

Till a few years back the thought of opening an outlet in any tier III city would have led to the nightmares to the big organised retailers. Today with the changing lifestyle of people living in smaller cities and towns as a result of television and internet, it is quite common to see people wearing branded apparel, footwear and including branded products in their daily routine. Following the success of product franchising brands, service brands have also ventured into such locations. As informed by Shahnaz Husain, Founder and Chairperson, Shahnaz Husain Group: “Thanks to television and commercial advertising, the awareness of global trends, consumer products and brands has extended to smaller towns. In certain categories like beauty even people in smaller towns are quite brand conscious. Therefore, big brands want to venture into smaller towns.”

Factors for this growing trend

Some of the factors attributing to this development are:

Rising living standards: The increased disposable income, brand consciousness, and love for better living standards has led to large number of people preferring to visit branded beauty salons or restaurants.

Recognising brand value: People living in small towns have now acknowledged the value for brand and can easily distinguish it from local brand. Earlier it was considered wastage of money to visit an expensive salon but now they are ready to experience best services at best price.

Increased awareness: Youth from smaller towns these days go to metros for higher education. They visit big eating places and salons but the unavailability of such brands in their home towns creates little disappointment for them. Recognising this discomfort, franchisors ventured into small towns.

Successful service categories

All retail as well as service brands may not achieve equal success. Small towns and cities have people who generally prefer buying reasonably priced articles. Therefore outlets of luxury brands do not generally work. Mostly it is the f&b and beauty industry which has made a mark in small areas.

Food and beverages: F&B brands have found success in the smaller towns. Increasing number of middle class patrons in smaller towns also prefer to spend a few extra pennies on hygienic and standard restaurants, rather than going to the local eating places. Domino’s Pizza has stated spreading out to smaller cities with the aim to tap the local potential. Keeping this in mind Domino’s has made a strategic shift in the way outlets in smaller towns are modeled. There is ample dine-in space made available to customers to sit and enjoy the meals. Similarly Graviss Foods, the master franchisee for Baskin Robbins ice creams had also gained a lot of success via opening its joints in smaller towns with new product line.

Beauty salons: Another category that is doing well in smaller cities and towns are the beauty salons. With men and women, even of Tier II and III cities getting more conscious of their looks, the beauty brands have made inroads in such locations. As informed by Husain: “We have franchise salons in smaller towns and cities, like Faizabad, Fairdabad, Saharanpur, Durgapur, Dehradun, Jammu, Nasik, Asansol and many many more.”

Pre-school chains: Having successfully, expanded in metros and big cities pre-school chains are exploring prospects in small cities and towns. Recognising the necessity of good education for all irrespective of earning power of the parents’ lot of education franchisors are looking for franchisees in small cities and towns.

Pathology labs: As it is very difficult for people living in small towns and cities to visit big cities and metros to get their diseases diagnosed accurately franchisors dealing in Pathology services are offering franchisees in Pathology lab services. Dr Lal Pathlabs have ventured into smaller towns to deal with this growing need.

Hospitality sector: With increased industrialisation and rising salaries of the middle class a large number of hospitality brands are eyeing tier II and III cities for expansion. Ken Greene, President and Managing Director, Asia Pacific, Wyndham Hotel Group said: “Expansion in tier II and III cities is very important and franchising works extremely well in such market places. The most important thing to consider while expanding in these cities is to find the right property, or a location to put the right brand depending upon the consumer demographics that are driving the franchise business in that particular market place.” Starwood Hotels and Resorts are also targeting a portfolio of 100 properties in the country by 2015 and the main focus will be on smaller cities.

Franchising paving way to smaller towns

It can be rightly said that franchising is the main factor attributing to the success of big brands in smaller towns. A local franchisee who understands the need of the residents can operate his outlet better than an outlet manager who gets a fixed monthly salary. Franchisees being the owners of their outlets know and try their best to make their outlets become successful in small locations.

Hampers on the way

The first challenge for any franchise brand can be ensuring brand recognition and identity. Few small cities are still unaware of brands and their significance. It can be especially said about home makers and other women from such areas who are still unaware of organised brands. Another challenge as informed by Husain is of recruiting franchisees carefully. She said: “It has to be ensured that the franchisees completes the beauty diploma course and the advanced course at our beauty academy in Delhi and also fulfils other requirements, in terms of location, area, density of population in the area, investment etc.”

Future prospects

The future holds bright for small areas. Both national and international brands are paving way towards these potential market places. As said by Husain: “Our future plans do include expansion in smaller cities. Moreover, we are always open to the extension of our franchise salons and franchise beauty training academies. Girls from smaller towns and cities come to study at our beauty academy, with the aim of opening franchise salons.”

To conclude it can be said that service franchising is on the rise not only in metros but also in small cities. Youth from smaller cities with an entrepreneurial zeal can surely reap long time benefits by taking a franchise of any established brand.

Related: Franchise agreement checklist

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