To bring to you the best companies we examined the performance of 268 businesses in 25 categories in India and discovered 20 companies as the best franchise opportunities.
ENTREPRENEURS typically establish a new franchise system because they have created a formula which is superior to that of their competitors. If an entrepreneur has built a brand name and developed better outlet operations, he can earn high profits by establishing a chain of outlets and reproducing the superior profit-generating operations in many locations.
Such entrepreneurs become the top selling businesses, thus, positioning themselves well in their category of the industry.
In our annual exercise to bring to the investor the best companies in various categories for business deals, and the companies which offer minimum risk, we researched and short listed 20 businesses that are considered healthy by way of established systems and good profits.
We studied over 250 companies in 25 categories in India that existed in the last one year, and examined their performance. We obtained information on different dimensions of new franchise systems.
Our research showed that in India, on an average, new franchisors are born out of old established companies. The survival pattern in this regard is pretty high as compared to new franchisors in the US where the attrition rate is quite severe in the early years of franchising; one-third of the new systems stop franchising in their first four years. Our research also showed that franchisees that had an international company as their franchisors had higher success rate because of the support from established franchisors.
There are companies in India that used the franchising route at a very early stage of their establishment and have grown over the years to a matured franchisor. It would seem that India is still nervous about franchising because very few companies actually adapt to the franchising process at an early stage, and wait for their business to show results before franchising.
Understandably, this safety factor is needed for a country like India which has seen some not-so-effective returns on franchising when it was first found attractive in 1999 and 2000 period, and later followed by a crash.
In our research, the franchisors were categorised into three broad groups: Food and Beverages, Retail and Services. New food franchises have a slightly lesser failure rate in the early years than do retail or service franchisors, but the failure rate slows down more quickly than for the other two groups.
Service franchisors have a higher failure rates in their early years as compared to food franchisors, but, it starts to gain after the fifth year. Retail franchisors appear to have a lower failure rate than service early on. However, they display little decline in the pace of that failure rate as they age.
The high death rate of new systems suggests that franchising is not an easy business in which to succeed and demonstrates the importance of creating a model to explain the survival of new franchise systems.
New franchise systems that survive, grow to establish important, thriving chains like McDonald’s, Blazeflash and Apollo. What do the successful franchise systems do differently? One hypothesis is that they are simply lucky, and that there is little that entrepreneurs can do to improve their chances of establishing successful chains.
However, our initial examination of the characteristics of franchise systems quickly ruled out this hypothesis. The successful systems were different from the unsuccessful ones in too many ways for their success to be just a matter of luck. In comparison to unsuccessful franchisors, the more successful ones were larger, offered strong supporting services, had more recognisable brand names, offered longer-term contracts with franchisees, and had fewer headquarters staff per outlet.
Many of these characteristics are related. For example, it is logical to think that the larger a firm, the more recognisable is its brand name. It takes a lot of hard work and dedication to be successful, but it takes some extra efforts to be at the top. The companies that we have selected are the companies that have put in some extra efforts to achieve the top position.
Some of the companies we have listed are new, while others have experience of a good number of years, and the third are franchisees of international franchisors. These companies have also been presented with the Franchise Award2004 for their excellence in performance and business development.
CADD Centre, a CAD/Grafx Training Institution, has designed courses, in consultation with companies, to provide knowledge and skill which has relevance and use in the industrial world.
The company requires its franchisee to be graduates in engineering or management along with experience. This would put in professionalism into their network. A prominent locality with all facilities and infrastructure also suggests a working environment that follows quality norms.
CADD provides comprehensive assistance to the partner in establishing and managing the business. The company has a detailed list of all the support system it will provide. To help the engineers get a good perspective of the organisation, training is conducted at CADD Centre, Chennai. CADD Centre will support the network partner, both in terms of technical expertise and sales expertise. However, the course material will be at network partner’s cost. Stress is laid upon to visit CADD Centre at least once, for a week, to understand the corporate culture and maintain the same at their work place. All promotional activities are handled by the network centre.
While the total invest is around Rs 8 to 20 lakh, most of it goes into machines and infrastructure. The franchise fee is limited to Rs 1 to 3 lakh, based on the size of the centre and the market potential. The annual franchise fee has to be paid in advance every year. This is a trend away from franchising since fee is required only once.
The company sees itself as the best CAD/Grafix company in the world with steady growth, penetration and coverage.
The increased understanding of the concept of franchising has helped the company’s performance as people have become more aware of the benefits of being a franchisee, and have developed realistic expectations.
Maya Academy of Advanced Cinematics
Founded in 2001 as an education division to complement Maya Entertainment Ltd, MAAC provides multiple courses and related training in a variety of areas, like, computer graphics and animation, films visual effects, film scanning and recording, composing and editing.
Implementation of the franchise model of operations has seen a growth in revenues of more than 70 per cent of the academies and an increase of 300 per cent in the companies performance over the years.
With 30 franchisees at present, the company has identified 20 new locations in India, and potential locations abroad in Asia, Africa and Middle East.
MAAC, as a long term objective, seeks to develop new and regularly updated courseware, training methodology, value additions and improved services to the student.
While the space and location requirements and the support offered are well defined, the investment runs into Rs 18 to 20 lakh, which includes a franchise fees of Rs 5 lakh. The royalty of 20 per cent is on the higher end, which is deducted from the collection on fortnightly basis and balance 80 per cent remitted to the franchisee. The collection is thus controlled by the franchisor.
PRG Education started its operation in 2002, and, within a short span of time, it has grown by 600 per cent. At present, PRG Education has 73 institutes located all over Punjab and is seeking to increase this number to 200 plus in the next year, and to around 500 plus by 2007. The company is currently targeting UP, Jharkhand, MP, Delhi, Rajasthan and Maharashtra and subsequently, other unrepresented areas in eastern and southern India.
By being a part of education providers in rural areas, the company is increasing the options available to the students. Rural franchising has a large student base, high and growing demand for quality services, effective cost operations, low operational and acquisition cost, high growth potential, and lack of quality service providers.
Saturation of markets and reduction in margins, will force education and other service providers to shift their bases to rural areas where the customer base is large.
PRG supports its franchisees by systematic approach to establish and run the nursery school. PRG is one such company which does not charge any royalty for the first year in order to encourage the franchisee to recover his costs and reach an early break even. The franchisee can use these savings for advertising and promotional activities in future.
Zee Interactive Learning Systems Ltd
An established player in the education and training category for over a decade, ZILS has introduced Zee Institute of Media Arts to provide a confluence of arts and technical skills with basic elements constituting the various courses relating to entertainment. The first ZIMA centre at Lokhandwala, Andheri (W), the hub of entertainment Industry in Mumbai, has started the first two batches for various streams.
ZILS has an established backend infrastructural support in imparting hands-on experience to students enrolled in the programme. The company offers opportunities to deserving and meritorious students to showcase their talent. On successful completion of a course, it assists students in suitable placements and careers opportunities and encourages reputed media organisations to participate in campus recruitment schemes.
The teaching methodology is designed such that students develop skills through classroom sessions, practical hands on sessions, studio round ups, film screenings, workshops and guest lectures. The selection is through an entrance exam, assessment of a film and interview.
International Institute of Fashion Technology
International Institute of Fashion Technology, besides dealing in fashion education, also offers consultancy services aimed at manufacturers and exporters in Asia, Europe and Africa, and the African sub continent. IIFT has its associate concern, International Textile & Fashion Council, which has over 30,000 members, and looks after the interests of passing out students and overseas projects.
At present, IIFT has more than 65 franchisees all over India and abroad and is aiming at a minimum of 25 franchisees in Kolkata, Mumbai, Bhopal, Jalandhar, Ludhiana, Patiala, Goa, Cochin, Hyderabad, Indore, Lucknow, Cuttack, Pune, Tamilnadu, and Bangalore, in India, and south-east Asian sectors like Bangkok, Malaysia, Singapore, and Srilanka, in the year 2005.
IIFT franchisees need to have a minimum area of 2,000 to 2,500 sq.ft, inclusive of class room equipments and furniture, franchisee fee according to city, and working capital for six months. IIFT provides complete faculty notes, ISO: 9001-2000 certification procedure, exclusive territory rights, and nationwide promotion, besides the normal support.
IIFT is targeting 100 franchise centres in India and abroad so that it can be considered as a global hub of fashion education in south-east Asia.
The increased understanding of the concept of franchising has improved the company’s performance in terms of growth and appreciation, mixed with the profitability of the business.
Cashing in on emotions and expressions, Archies has today become a brand leader in the “social expressions industry”, in category such as greeting cards, posters, stationery and gifts. In 1989, the franchise division promoted Archies Gallery and Archies Paper Rose Shoppe. Today, the company has 425 franchisee outlets cross-country, and 45 company stores.
Both the brands basically differ in terms of size and investments. The minimum investment and requirement for opening of Archies franchisees are well within the reach of any entrepreneur, and the business can be easily managed. Having a common emotional factor, the outlet can be opened in any locality, though the company prefers it to be near markets or schools and colleges.
Investment breakups are: Rs 3 lakh towards interiors, Rs 3 lakh towards stocks, Rs 75,000 towards refundable security deposit, and monthly charges of Rs 1,500 towards advertisements.
Archies is also in the export market with cards and gifts. It has also grown in brand image through international tie-ups with American Greetings, Simon Elvin, UKG, Hanson & White, and Disney.
The company is focusing on becoming one of the growing retail chains in the next three years.
Ferns ‘n’ Petals
Known for introducing the unique concept of lifestyle flower boutiques in India, it has introduced a whole new flower buying experience, which cater to the needs of all generations. It is the only branded retail chain of florists in India with 34 outlets nationwide.
The group's strength lies in its product and innovation, infrastructure and a dedicated team of highly experienced professionals. All these combined, help FNP give its client's quality products, value-added service and above all personalised attention.
The group consists of the following core divisions, FNP Retail & Franchising, FNP e-commerce, FNP Weddings, FNP Events, FNP Wholesaling, and FNP Rentals.
Today, it has 34 retail outlets in India of which 18 are in Delhi, three in Mumbai, and two in Chennai. Four more outlets have been finalised and will be up and running in the next couple of months.
FNP has emerged as the only floral brand capitalising on retailing and franchising. It is the patronage of clients and flower suppliers like FNP that has been a major catalyst for the horticulturists growing exotic varieties in India.
Madura Garments, one of the fastest-growing branded apparel company, is a leader in high quality ready-made menswear industry in South Asia. Madura Garment’s design studio at Bangalore works on innovating brands, product development and design collections, and actively participates in the retail revolution through launch of Trouser Town & Planet Fashion concept stores. Nine of Madura’s 10 production units are ISO certified, that deliver services and products.
The manufacturing units of Madura Garments are equipped with sampling facility, product development in the specialised areas, fabric sourcing, garment styling and finishing. Madura with their international expertise, plans to further improve in the areas of trousers, jackets, pre-washed garments and expansion of wrinkle-free garment range.
The company also has a web-based ordering for retailers and distributors, automatic replenishment system for showrooms, online order processing for factory, stores, reduced time to market, network with suppliers on product and design development, plan product development protocols with mills. The Louis Philippe and Van Heusen suits collections are produced in Bangalore at Madura Garment’s state-of-the-art and new factory, Crafted Clothing Pvt. Ltd.
Madura Garments is currently, poised to become a Rs. 500 crore, turnover division and has plans to proactively enhance the business through initiatives.
With 1,200 food products under its own brand, Nilgiris, the only company in India that is a manufacturer, packer, importer, distributor and retailer, has increased its market strength and brand awareness through the concept of franchising, which it is following since 1994.
Considering the floor space of a shopping centre, the company seeks an area between 3,000 to 7,000 sq.ft plus an investment of Rs 1,800 to Rs 2,000 per sq.ft. Clearly outlining expenses, the company expects a franchisee to have his own funds of up to 75 per cent and borrowings of up to 25 per cent, besides a financials withstanding capacity for at least a year to expect RoI.
The company has a legally approved operational guidebook which is updated regularly to ensure protection of the brand equity and the franchisee’s investment. A supermarket software called ‘Response’ systematises the management of the franchise outlets, thereby ensuring transparency.
With already 24 franchisees, it plans to enter Kerala in February 2005, add a few more outlets in Karnataka, Tamil Nadu and Andhra Pradesh, and a total 100 more outlets in the next five years.
Titan Industries Ltd.
Titan Industries Ltd, the world’s sixth-largest manufacturer of brand watches, along with other business activities, like, accessories, jewellery and precision engineering, revolutionised the watch market by introducing quartz watches. Today, the company has over 8,000 outlets in over 2,200 cities and has sold 5 crore watches.
In addition, it has the largest watch retail showroom known as the World of Titan with a current strength of 170 across 102 cities, catering to over 10 lakh buyers every year. Its Tanishq sales network covers 69 boutiques across the country.
Franchisees should have a prime selling space in the prime retailing area, with a carpet area of 800 to 1,000 sq.ft for the showroom, 100 to 150 sq.ft for the service centre and a frontage of about 20 running feet.
The capital investment includes, Rs 50 lakh in interiors, equipment and stock, signing fee of Rs 2.5 lakh, and working capital of Rs 1 lakh per month. The company has laid down pre-set uniform design and quality standards which it expects the franchisee to adhere to.
The company also offers complete guidance and support in formulating the business plan and RoI, besides the normal support offered by a franchisor.
Titan aims to have presence in 50 countries, be rated amongst India’s most-respected and highly valuable companies.
FOOD & BEVERAGE
Coffee Day Xpress
Noted for its pioneering effort in the café concept in India with Café Coffee Day, Coffee Day Xpress is a fast-serve convenience café kiosk offering quality, hot and cold beverages and variety of eatables.
Xpress, tends to bridge the gap between hangout joint, the cafes, and the vending machine, which served only one kind of beverage.
Launched in Bangalore in February, 2003, this was possible due to the increased understanding of franchising which has resulted in rapid expansion, better control over the market, improvement in services, less capital investment, less operational responsibility and multiple outlet expansion without proportionately enlarging the core group.
Coffee Day Xpress has 151 franchised outlets at the strength of 68 franchisees and is looking at establishing 90 franchisees by the end of this fiscal year, and 1,000 outlets by the end of 2008-09 fiscal. It’s target is the high captive audience locations such as streets, shopping malls, multiplexes, educational institutes and residential complexes.
Certainly, a lucrative business opportunity for franchisees, at a very low investment, with zero working capital, and minimum space, wherein the franchisee earns profits from the first month itself.
Domino’s Pizza India Ltd.
Domino’s Pizza India Ltd, a leading pizza delivery chain in India, delivering hot-n-fresh pizzas, is the master franchisee of Domino’s Pizza International. Although all the outlets of Domino’s in India, till now, were corporate stores, it now plans to have eight to 10 franchisees in the next one year in Pune, Ahmedabad, Baroda, Surat, Cochin, and Coimbatore.
The company has done well to understand the Indian market, and the consumer behaviour and tastes before opting to franchise.
Besides the normal requirements, the company provides to its franchisees, national promotion programmes and monthly forums, wherein the franchisee can participate and get a first hand information on all the best practices followed in other stores and ongoing training services at nominal costs.
As per its expansion plans, five years down the line, the company aims to see itself having penetrated most of the B class towns in the country through franchisees. The effect of franchising on the company’s performance is yet to be seen, but observing the experience of Domino’s Pizza International, franchisees have definitely contributed to the growth of the business in their territories.
Juice Zone India
Entering the hospitality business in 2002 by acquiring the master franchise of North America’s Juice & smoothie chain, it was a decided shift for the Cogent group from its business of real estate and infrastructural development, exports and trading.
The company’s model requires investments in three areas, viz, interiors, plant and machinery, concept and technology by way of store opening fee, and real estate, besides the regular support required from a franchisor.
Aiming for a massive growth and a mammoth franchisee base, the company seeks to convert traditional juice vending owners into Juice Zone franchisees within the next five years.
With commitment to opening 27 franchisees within the next six months, the company is also aiming to sign 50 more stores and take the tally to 75, targeting prime locations in major cities, metros and mini metros with a population of over 10 lakh.
Apollo Health and Lifestyle Ltd.
Apollo Health and Lifestyle Limited (AHLL), a fully-owned subsidiary of The Apollo Hospitals Group, is setting up a large chain of state-of-the-art healthcare clinics called Apollo Clinic in India and abroad that will cater to the day-to-day healthcare requirements by offering a comprehensive range of services under one roof, at competitive prices.
With these Apollo Clinics, Apollo Group is realising its mission of taking quality healthcare to every nook and corner of the country through franchising. Today, 28 Apollo clinics are operational across the country and at least 20 more are expected to open over the next few months, in Bhopal, Gorakhpur, Jaipur (the second in the city), Mumbai, Surat, Varanasi, and Qatar (the first international clinic), among others.
The company has awarded franchise for 60 different territories in India, Bangladesh, Saudi Arabia and Qatar and is expected to sign another 20 to 25 franchisees by the middle of next year. More than half of the company’s clinics are less than a year old, hence, financial performance is unavailable. Those operational for more than a year now, have reached cash break even levels in the first year itself. In terms of revenue, the clinics have seen a growth of over 100 per cent in the past two years.
The company expects the prospective franchisees to have the ability to invest Rs 1.7 crore in an Apollo Clinic, partially financed through a bank loan. Given the high end of investment involved and the complex nature of business, the company is very stringent about adding on franchisees to its network.
Besides the normal support, the company offers to its franchisees assistance in project financing, selection and procurement of medical equipment, customised software development, and national level marketing support.
In the next five years, the company plans to set up a chain of 250 Apollo Clinics, spread across the top 100 cities and towns in the country, and about 40 to 50 clinics in the neighboring SAARC countries and the Middle-East.
Blazeflash Couriers Pvt. Ltd.
Mr.S.D.Aggarwal, joint managing director, Blazeflash Couriers Pvt Ltd, is credited with having turned a loss-making unit into a successful courier company, delivering the best possible service to its clients. Mr Aggarwal identified roadblocks and potential areas of business activities and successfully streamlined the operations of the company in a very little time. Blazeflash has, today, carved a niche for itself in the industry and has established a reputation of a quality service provider.
The company’s success lies in its USP, which is doorstep booking, flexibility, personalised service, safety and security of every consignment booked. The number of offices and workforce is sizable to its operating methodology. Operating through its 215 self-owned offices, 3,500 franchisees and a skilled workforce of 4,000 it serves more than 2,500 destinations.
Part of the success of the company lies in providing top priority to customer service. The staff at the centralised Customer Service Cell is provided with adaptable and easy to use formulas to resolve the complaints.
Another plus point is that the offices are inter-connected and an on line tracking system facilitates the customers to know the status of their consignments at any given time on the internet.
Eureka Forbes Ltd.
Eureka Forbes Ltd, Asia’s largest direct sales organisation, was set up in 1982 to market health and hygiene products. Today it has 140 offices covering 90 cities with over 5,000 plus Euro champs. The network has also been expanded with Franchise Direct Operation in 446 towns by appointing 446 Sales & Service Franchise. To focus on customers’ satisfaction it has opened 838 exclusive Service Franchise spread over 150 cities of the country.
Having adapted the franchising route in various areas, the company has developed a vast network of operation points that has brought it in direct contact with the consumers, both in sales and in servicing. It plans to introduce innovations and is recognised as the best service providers in the country in its category.
It has also innovated its marketing and sales and services strategy by employing more field staff.
The Medicine Shoppe
The Medicine Shoppe® India, the Indian master franchisee of The Medicine Shoppe® International Inc, the world’s most reputed pharmacy, started operations in February 1999 under the master franchisee of Melrose Trading Company.
The only ISO 9001:2000 certified pharmacy chain, it has brought new factors with it in the healthcare industry, and ensures that systems, services, products and procedures are standardised.
Newer concepts include counselling by pharmacist, free good health membership card, free health camps, prescription history of every member, free accidental insurance and mediclaim given on purchases, SMS alerts to remind customers of their medicine purchases.
The company is looking for franchisees in Andhra Pradesh, Karnataka and West Bengal and aims to open 100 franchisees by March 2005. It sees its franchisee as someone willing to do something new in the field of pharma retailing.
Sify, pioneers in internet and e-commerce in India, offers integrated end-to-end solutions with a comprehensive range of products and services, for business to consumer (B2C) and business to business (B2B) segments. The company’s B2B services include connectivity solutions like electronic data interface, virtual private networks, security services, network management services as well as e-solution services.
The company established the first private TCP/IP public data network between all the major cities in the country that revolutionised business computing in India. Sify also has the distinction of being the first Indian internet company to be listed on the NASDAQ.
With an extensive network of 2,000 internet browsing centres, operational in over 66 cities, called I-way centres, the company is on the lookout for the active participation and partnership of business-savvy entrepreneurs as franchisees for the I-way chain of internet browsing centres.
Sify offers opportunity to development partners for providing web-based solutions including web-designing, web-hosting, and online content. The company expects its partners to be capable of designing and developing unique web sites. As a sales partner for internet-based products and services, one is required to be in business for 3 to 5 years, preferably as a dealer of concept selling products, like cellular phones, credit cards and computer hardware, manage a team of about five persons.
Thyrocare Technologies Ltd.
Thyrocare, the world’s largest thyroid-testing laboratory, played a pioneering role in bringing networking into Indian diagnostic service industry through its massive network of Authorizes Patient Service Centres (APSC). Since its inception, the company has been growing at over 200 per cent every year.
Thyrocare is a blend of healthcare technology, information technology, networking acumen and astute utilisation of the strengths of courier and air cargo logistics. The model has three components, one, procuring the specimen from the market, two, analyzing the sample in the laboratory, and, three, reporting the results to the patients.
An apparently simple investment and space requirement for the collection centre, Thyrocare expects from its franchisee a refundable deposit of Rs. 50,000, a 200 sq.ft. premises for operation, a computer and internet connection.
Thyrocare’s healthcare system infrastructure includes an operation area spread across 60,000 sq.ft. state-of-the-art fully automated analyzers. The facilities available at thyrocare healthcare centre are internationally acclaimed world class reagents, globally accredited quality reports at affordable costs, internet driven web-based solutions for timely reports, 24 hours services throughout the year, through a massive network spread across the country.
For education and training the company requires a 20-acre campus exclusively for training on advances in diagnostic industry, and for marketing and other facilities.
Thyrocare, with a massive network set-up spreading across the country, reaches out today to 1000 cities, about 10,000 laboratories, 100,000 consultants, 1,000,000 medical doctors as regular contributors.
Hughes Escorts Communications Ltd.
Hughes Escorts Communications Ltd. provides turnkey networking solutions to corporate enterprise in India, primarily using the satellite medium, and is stated to be the largest satellite services provider in the Asia Pacific region, according to Comsys. DiRECWAY, Hughes’s offering in the satellite broadband space, is the world’s leading broadband by satellite service for consumer, small business and enterprise markets.
Currently, the company has about 150 signed up franchisees, 32 operational franchisees, across 23 cities, with 16 to be operational shortly. Besides the retail space and investment, the company expects its franchisees to serve and manage customers as defined by the quality norms of HECL.
HECL offers to the franchisee a complete business opportunity backed by Hughes, which includes technology and service strengths, market strategies, and transparent revenue sharing model. Training in the DiRECWAY fusion initiative is an ongoing process.
Channel management executives of the company, placed strategically across the country, provide marketing and management support to the franchisees. The company targets setting up 5,000 centres over the next three years and a revenue of Rs 100 crore from this new venture.
An increased understanding of the concept of franchising led the company to operate on a sound financial basis, with increased value for the company’s shareholders and financial rewards for franchisees thereby, directly impacting company’s performance.
For your own interest, we suggest that you first select the type of business that best suits your personality, and not merely a business that interests you. For example, if you hate cricket, you will not be suited for a sports business.
The success of any business depends upon the person running that establishment, and what may be suited to one person might not, necessarily, be suited to the next. Identify the category that links with your personality and interests, and then research and evaluate the companies in that category, before finally shortlisting the one that suits you the most.