Francast Report 2019-11-16

Franchising to Boost Job Creation Amid Economic Downturn

Given the current economic downturn that is leading to an acute situation of rising unemployment, an increasing number of people are likely to turn to low-cost franchising opportunities

Franchising to Boost Job Creation Amid Economic Downturn

The recent National Sample Survey Office (NSSO) report shows that the unemployment rate in the country in FY 2018-19 was at 5.3% in rural India and 7.8% in urban India, resulting in overall unemployment rate of 6.1%. As per market estimates, current unemployment in India is at a 45-decade high. The situation is aggravated with the spurt in instances of job losses from automobile manufacturers to biscuit makers. For instance, the automobile sector which makes up for almost 7.5% of the country’s GDP and almost half the manufacturing GDP, has laid off 3.5 lakh employees.

This is because consumer demand has shrunk dramatically over the last 10 months of sectoral slowdown. Many other sectors, including real estate, banking and FMCG, are feeling the heat as well, but haven’t yet sizzled completely under pressure. While economic conditions are not permanent and are expected to recuperate in sometime, the lay-offs highlight the big employment gap to be covered in the market.

Major Boost for Franchising

Past recessions and economic downturns have clearly shown that people turn to franchising in times when the economy is strained or could likely become strained. Why? People want more control of their future with a business that comes with proven systems and support. It is globally proven that during a slowdown franchising is the established format to fix the economic stress by giving people opportunities to start a small business without much knowhow.

Approximately 1.5 million people are currently employed by franchised businesses in India. With the current economic conditions, low-cost franchises with investment below Rs 25 lakhs will be in high demand. In addition, industry’s big push on micro franchising and fulfilment services is expected to convert the 50 million people employed in the unorganised sector towards higher paying blue-collar jobs in the franchise businesses. An average franchise unit employs between 8-20 people with 70% in blue-collar and 30% in white-collar jobs. Further, a large young population indicates high entrepreneurial energy in the country.

This is where the franchise model helps through shared ownership. In fact, 53% of the brands offer franchise at a start-up cost of less than or equal to Rs 5 lakhs, thereby addressing the high entrepreneurial drive in the country at the bottom of the pyramid. Notably, 84% of the franchisees in India are post-graduates and graduates. Overall, franchise employment is projected to grow by 35% annually, continuing to outpace the rest of the economic sectors. By the end of 2019, the franchising industry is set to have 2.5 lakh outlets through over 5,000 brands.

 

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