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Mar, 01 2007


Over the past one year some companies have performed extremely well and have taken forward the business of franchising. We have short-listed 20 companies that are considered safe investment for businesses

Over the past one year some companies have performed extremely well and have taken forward the business of franchising. We have short-listed 20 companies that are considered safe investment for businesses.......', '

Over the past one year some companies have performed extremely well and have taken forward the business of franchising. To suggest to potential investors the ideal business opportunity, we have researched on companies that are into franchising and have caught the attention of the franchising world and which promises a strong growth in 2006. We have short-listed 20 companies that are considered safe investment for businesses

INDIA, today, is definitely being observed as the next franchising destination by international players. Foreign Institutional Investors (FII) have been pumping in extra dollars into the country, driving key stock market index which has already crossed the 9,000 point mark.

At the recently held India Economic Summit 2005, Mr Paul J. Ostling, CEO, Ernst and Young, had observed, “Performance of Indian companies have proved that India is a profitable place to do business. Unlike in previous years, foreign firms are not complaining of archaic government policies but are talking about available opportunities to invest in India.”

Already foreign majors are in the process of setting up their frontline companies in India. Starbucks Coffee Company, the American coffee retailing giant and a major global player, is in the process of tying up with an Indian partner, not waiting for the FDI legislation to happen. Other foreign firms, that are willing to invest in India, are also waiting in the wings for the government’s clearance on FDI.

The franchising model is a vibrant concept with new entrants, such as companies that are already established and offering franchisees, or prospective franchisees, adopting the format every day.

Franchised operations are becoming more popular in geographically vast and culturally diverse nations like India, because franchising helps to overcome the difficulties posed by chains of company-owned outlets. India has come of age in franchising with more and more Indian investors and entrepreneurs seeking an opportunity to start business.

Franchising in India, which took off in the early 90s has, over the last 15 years, gradually matured, more particularly during the last couple of years. This is partly evident from the stream of investors and franchisors that have increased by over three folds since the first franchise show was organised in India, in 2003. According to figures, the franchise companies that opted to showcase their business proposals increased by 500 per cent in 2005 from that of 2003. The number of investors also increased by five folds in 2005.

Since the 90s, sales from franchised business have grown at an average rate of 20 to 30 per cent compared to an economic growth rate of 6 to 8 per cent.

International franchising is also in an interesting phase in India, as globetrotters like to shop at franchised stores. Global franchise organisations like Pizza Hut, Marks and Spencer, Mcdonald’s, Subway, HP, Holiday Inn, Medicine Shoppe, Marrybrown, Domino''s, Gold''s Gym, Kodak, Kentucky Fried Chicken are bullish on the potential of franchising in India and are doing well. Since India is a self-governing and competitive territory for doing business, franchise companies enjoy economies in scale.

However, most Indian investors are still not conversant with the best franchise opportunity in which to invest. A profound shift from being an employee to owning a business is also observed during the last one year. Simultaneously, the industry has also grown exponentially. There has been a definite shift in the sectors in the industry. The IT sector acceptance curve has again leaped frogged, and is being seen as a profit generating sector. The shift is more towards education and software development.

The education sector has recorded a huge growth as well. The portfolio is diverse - from children education in computer basics to expertise in languages and competitive exams, including foreign universities admission exams.

Investment levels are also up, mainly due to the availability of easy loans from financial institutions. Earlier the government had reduced tariff, freed up the rupee, abolished licences, and carried out reforms in the capital markets.

But, what sets India apart from other developed countries, is the high density of work force available as against a limited number elsewhere, except, of course, China. The search for more human sources became more pronounced in western countries with the dependance on IT increasing in the late 80s and through the 90s. India during the closing years of the last century, therefore, became a large pool for technologically qualified human power base. India today has a pool of high skilled and technologically sophisticated labour, an independent and impartial judiciary and a robust legal infrastructure.

Overview on franchising

Franchising is understood as establishing a relationship with a successful business in order to use its proven system and name, and running it in accordance to the rules, thereby capitalising on its existing brand awareness for a quicker return on investment.

The new user of the brand name is, therefore, answerable to the brand owner and simultaneously, needs his assistance in business.

The biggest advantage of franchising appears to be the reduction of risk in the investment as the investment is in an already proven business, which could be the result of better management as well as a well-known name. Most small businesses fail because of weak management, however, this is not the case with franchised businesses.

Sectors witness to growth

The franchise business model has the potential to drive growth in several sectors in India, such as beauty, healthcare, food and beverages, education, household services, and travel.

India''s beauty and cosmetic market, currently pegged at Rs 4,500 crore, is burgeoning beautifully, growing between 15 per cent and 20 per cent, annually. Post liberalisation, while the Indian companies charted out ambitious plans to meet the growing demand for beauty products and services, foreign companies made a beeline to gain a toehold in the Indian market. Some firms expanded through franchising, some through joint ventures and some through company-owned and managed outlets.

Coffee culture has grown by leaps and bounds in the country. Cafes and coffee pubs, which have mushroomed across the country, have become a hotspot for the young and the old, alike. Chains like Barista, Mocha, Café Mocha and Cafe Coffee Day have become hugely popular hangouts for the youth as a whole and trendy consumer.

With growth in incomes, Indians are spending more on health and beauty products. There is also scope for entry of more such chains. Footwear and clothing, home furniture, household goods, travel sector, and home services sector appears

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