Infrastructure and real estate form the backbone of any country’s economy and in case of India, the backbone is strong and everlasting.
The Indian real estate market is expected to touch US$180 billion by 2020. The housing sector is expected to contribute around 11 percent to India’s GDP by 2020. In the period FY2008-2020, the market size of this sector is expected to increase at a Compound Annual Growth Rate (CAGR) of 11.2 percent. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.
For those who want to know more about franchising role in shaping the real estate business, here Anuj Kejriwal, MD & CO – ANAROCK Retail explains in the following points how franchising works in real estate business:
- The system of franchising has been at play since the '90’s and has proved to be a very successful way of conducting retail business - especially in terms of retailers' expansion plans. Interested franchisees identify categories and brands that they are interested in and short-list those that meet their budgets. In the case of high-value brands, only experienced and well-heeled players can afford to make an outreach to such a brand.
- In most cases, prospective franchisees will get in touch with consulting firms which specialize in franchise opportunities, and after initial communications will meet up with the firm to understand the terms and conditions. Such a consultancy will be quite experienced in not only helping a potential franchisee to identify the most suitable brands based but also in terms of the city, the prevalent demographics there, and competition analysis.
- If matters move forward from there, the intending franchisee incorporates a company and signs a letter of intent (LOI) or memorandum of understanding (MOU) with the franchisor. This contract creates a formal bond between the two parties, and the franchisee then proceeds to meet the agreed-upon financial requirements. The financial arrangement will usually involve an initial fee and ongoing monthly royalty pay-outs to the franchisor.
- After the contract is signed, the franchisee must identify a property from which the franchise business can be undertaken. Depending on the category and brand, the property requirements may be quite specific in terms of location, size, fit-outs and tech enablement. The final location will be approved by the franchisor, often after a prolonged search by the franchisee has resulted in a short-list of suitable properties.
- Then follows the actual building and/or interior fit-out of the premises, after which recruitment of suitably trained personnel takes place. At every initial step, the franchisor will provide the necessary support until the actual launch date as per the agreement.
Real estate business in the country has vast scope for those who want to explore and grow via the franchising model. Not only startups and entrepreneurs but experienced player too have enough space to cultivate their ideas and bear the profitable fruits of it.