WHEN India Inc. aspired to grow their empire a decade ago, the term franchising was almost absent in their growth perception and industrial vocabulary. Though, some did use it, rather sparingly and with much suspicion, the concept was all but lost. In tru
WHEN India Inc. aspired to grow their empire a decade ago, the term franchising was almost absent in their growth perception and industrial vocabulary. Though, some did use it, rather sparingly and with much suspicion, the concept was all but lost. In true Indian spirit, Indian companies looked around long enough to learn from the developed world markets and decided on what they wanted. The result is there for everyone to see fast development of franchising sector in the country, with small to large corporate houses no longer hesitant in adopting the concept for business promotion.
The acceleration in investment activities abroad by Indian firms has given steam to FDI outflow, which has exceeded the total foreign inflow in the country this year. A report by Crisil Centre for Economic Research indicates that the rising tide of Indian investments overseas reflects the imperatives of operating in a global market place. On the other hand, foreign companies, especially large retail chains, have stopped waiting for the FDI in retail to open completely, and have gone ahead in entering the country using different means, more particularly, the franchising route. The biggest news that the year 2006 hosted for the Indian franchising sector is the announcement of retail giant Wal-Mart's entry into India via the franchising route in a joint venture with Sunil Mittal's Bharti Enterprises. More international chains are likely to follow.
To present some statistics; as a share of the GDP, franchising accounts for 12 per cent in the US, but, in India it does not account for even one per cent. The comparison gives a fair idea of the potential India holds in this sector. Industry estimates indicate that franchising has grown into a Rs 8,000-crore (Rs 80 billion) sector, from Rs 4,578 in 2004.
Sectors witnessing growth
India is today the world's largest franchise market after North America and is growing at about 30 per cent a year. Last one year has seen a number of new companies opting for franchising. What was once thought as a concept for small businesses only is now being opted by large corporates as well.
According to an estimate, there are approximately 750 franchisors in India, today. The Indian franchise sector is attracting a large number of companies in the categories of food, lifestyle, retail, business services, healthcare, communication, education, entertainment and travel, among others. In the category of food and beverages, the high-flying international as well as national companies are Pizza Hut, Moti Mahal, Baskin Robbins, McDonalds, and Subway. Pizza Hut has recently been awarded the Best Franchisor for the Year 2006 by Franchise India Holdings Limited Today, Pizza Hut is spread across 32 cities with 126 outlets.
Moti Mahal, another company in this category, is projected to be in every city in India and major cities around the world, in the next five years. With its present growth rate, the company aims to have more than 200 restaurants worldwide by 2010. Similarly, Baskin Robbins is operational in more than 50 countries. Currently, there are 140 franchisee outlets in India with plans to open 200 more in the next three years. In the international category, McDonald's and Subway top the list with their presence across the world.
In the primary education category, Eurokids and Kidzee are prominent names. Kidzee has 471 franchisees in 215 locations across India and abroad whereas Eurokids boasts of 350 pre-schools spread across 130 towns and cities in the country. In the English education category, Veta today has 100 franchisees and is expanding with 30 plus more centres by March 2007. In the apparel category, ITC lifestyle has become a big name. The company has two brands, viz, Wills Lifestyle and John Player. John Player is aggressively following the franchise route whereas Wills is open to franchising though not aggressively. Koutons is yet another name in apparel.
Besides these regular categories, franchising is also expanding into newer concepts. Mobile Magic is the first and the largest retail chain of mobile shops in India. More than 70 per cent of Mobile Magic's business is dependent on franchising.
In the beauty segment, Lakme Beauty Salons are performing tremendously well as far as franchising is concerned. The company aims to have 110 franchised salons by 2007.
In health category, Apollo Health and Lifestyle Ltd. aims to add 50 franchisees for the Apollo Clinic in less than two years, whereas Medicine Shoppe which has 115 stores is planning to raise the number to 150 this financial year. Along side, Gitanjali Gems, in the jewellery category, is aiming to cross the 2,000 figure by 2007.
Besides these, other national as well as international companies that find mention are Tanclean, Travelport, 7 Eleven, UPS and Dunkin Donuts.
Rating the companies
Under such an encouraging growth of the franchising sector, it is but relevant that prospective investors and industries be presented with some of the most profitable franchising companies in India that, besides recording good growth and profits, promise strong motivation to others.
It is, therefore, imperative that we, as promoters of business opportunities through The Franchising World magazine, bring to our investors a list of top 20 companies that are safe franchise investments for 2007 based on their performance in 2006.
The exercise has been conducted while keeping in mind the interest of the investors and entrepreneurs and the need for suggesting ideal business opportunities for potential investors.
Monitoring the performance of a range of companies that were into franchising during 2006, we short-listed the companies that performed extremely well. The main criteria followed for the selection of the companies was not 'how big the company is', rather on the basis of their yearly performance and how the franchisees of these companies rated their franchisors.
Though due diligence has been observed while researching the list, investors and entrepreneurs are advised to investigate and research the business opportunities that interest them on their own as well.