46
/ 8
Min Read
When a brand grows from one store to 500 and then further, what fundamentally changes in the way you think about retail expansion?
The first store is the most important and most deliberate decision you make, because that’s where you write the playbook. It’s your laboratory. You test everything there: the product, service standards and the systems you’ll build. At U.S. Polo Assn., for instance, we tried a store identity that later felt a little cluttered, so we reduced the fixtures and tested the whole model again.
Once the first store is open, watch it closely for at least a year. Build the systems, bring in data analytics and look at it from the consumer’s side: what more can you offer in product, service and after-sales? From zero to 10 stores, you keep a close watch. From 10 to 20, you build systems. From 10 to 100 is a completely different way of working.
What processes does a brand need between 50 and 100 stores?
The first store is where you decide the specs: the model, the store size, the capex model and the investment you’ll need from a franchise partner. At the end of the day, it’s someone else’s money you’re using.
Between 10 and 50 stores, most of your systems go in place, such as mystery audit scores. If you plan to go franchise rather than company-owned, company-operated (COCO), you also build evaluation scorecards that set out how you’ll assess a franchisee and why you’re choosing them.
The structure changes as you grow. The business head can look after the first 10 stores directly. From 10 to 20, you need a national manager. From 20 to 50, you need regional managers. After that, you need a large team of cluster managers, with clear roles for who runs operations and who drives expansion. Early on, store managers report straight to the business head. Beyond that, you need a whole line of cluster managers to take the business forward.
Finding the first 10 locations may be relatively easy. After that, how do you choose locations, even within the same city?
Catchment comes first. We have a huge amount of data. We once had around 18 brands, which we’ve consolidated into five major brands in India: Tommy Hilfiger, Calvin Klein, U.S. Polo Assn., Flying Machine and Arrow. With a network of more than 1,000 stores, we understand the market in detail, including which categories are moving faster and at what pace.
Rent is the first filter. For example, a Flying Machine store is about 1,000 square feet. If rent goes above 15% of revenue, it doesn’t work, because we have to protect our gross margins.
The second filter is whether the location suits the brand. Flying Machine should sit next to like-minded brands. Otherwise we’re trying to fit into a space that’s too big for us. We’ve already built the brand in the big malls, so we’re now moving into satellite towns, such as those around Bangalore.
Third, from a practical point of view, visibility matters, because in India what is seen is what sells. There shouldn’t be a bus stop, a transformer or a tree blocking the store front. We prefer a double-storey building with a clean facade. We also need flexible agreements with landlords. Sometimes you sign an agreement and can’t get out because of lock-in periods and clauses, so we look for lighter terms that let both sides help each other if things get stuck. That said, we have faith in our brands, we know our locations well and we do a lot of groundwork backed by a big database.
For a franchised outlet, do you rely more on the partner’s local knowledge or on your own data analytics?
The main reason to bring a franchise partner on board is their local knowledge and we respect it. They know where half-sleeves sell and full-sleeves don’t, and where checks work versus plain Oxfords. They deal directly with consumers.
We take their suggestions into account during buying, which happens about six months in advance. When we place orders at a trade show, franchise input makes up about 30% of our total buy. We don’t want to dilute the brand’s identity, so we keep a core. But we act on partners’ suggestions. In Punjab, for example, bell-bottoms are a huge trend, but they don’t sell in Andhra Pradesh and Telangana, which is one of our top markets. So,we created a fit that works well in Punjab without disturbing what we offer in AP and Telangana.
We call it “glocalisation”: staying local without losing the essence of a global brand.
As a brand scales from 100 to 500 stores, do franchisees feel insecure, or do they feel stronger?
We treat franchisees as partners: if we grow, they should grow too. We have seen insecurity during the move from 100 to 500 stores. We’ve built a master franchise model so we can scale with one partner. Smaller partners running one or two stores felt they might lose out. So, we’ve linked them with the master franchisees and assured them they won’t be pushed out. Building trust with partners is one of the values we always hold on to.
The other challenge isn’t insecurity but mindset. We want our franchisees to keep learning. AI is taking over everywhere, and we want to understand how Gen Z and Gen Alpha will think, so we’re putting a lot of technology into our stores. Some franchisees ask why they should invest when everything is going well. But we’re making our brands ready for the future. You never know what young people will wear or eat next: suddenly Korean trends arrive, then Japanese ones. People have to learn alongside the machines.
We’ve seen resistance. My strong recommendation to every partner is to be adaptive. If you don’t adapt to how fast the world is changing, you’ll fall out of the system. AI is new learning for all of us and we have to adapt so that it works for us, not against us.
In company-owned stores you can train and govern staff directly. Do conversions drop in franchised outlets, or can audits and quality checks lift them?
There’s a variation of about 5–6% overall. We have an in-house training and development department and we also work with outside partners, who train people for us.
For franchises, we want each master franchisee to have a dedicated trainer for their stores. One partner runs more than 40 stores. We build the cost of a trainer, a buyer and a visual merchandiser into the margin we pass on and they appoint all three. Visual merchandising matters because how a store looks decides whether stock sells. Fashion has to look good on the floor and impress the customer before it goes into the bag.
Company-owned stores convert better in big malls and on major high streets, such as Indiranagar in Bangalore, where shoppers tend to be more serious buyers. But in Tier 3 and Tier 4 markets, franchise stores convert better than ours. Repeat business is very high and franchisees have a strong local connection. They call customers and tell them a new range has arrived.
Some prime locations have very high rents. Why open stores there yourselves instead of giving them to franchisees?
Real estate is expensive, but sales are high in those locations too. The products and sales velocity are very good there and our gross margins have improved a lot. In some markets, if you want to build a brand, you have to be present. So, it’s not as though we’re making a loss there.
If we franchised such a large, expensive store, there’s a high chance the partner wouldn’t make money and would come back saying the costs are too high to cover their basic EBITDA. We avoid that. Some partners might be very profitable over a five-year horizon, but for some big brands, these locations are something we have to run ourselves.
How do you see franchising in India’s retail sector today and where is it headed?
No brand can succeed without local partners. My one-line message to franchise partners: the brand knows itself best, so stay close to it, learn from it and implement it on the floor. A brand needs partners to execute fast and stay profitable. Get close to the market, be its eyes and ears, get the right data and learn faster, because the world is changing.
