A wonderful shopping area, a footfall catching space, growing number of shoppers with each passing day, and the organised sector catching the buzz fast are all reasons enough for any retail franchisor to take notice.
A wonderful shopping area, a footfall catching space, growing number of shoppers with each passing day, and the organised sector catching the buzz fast are all reasons enough for any retail franchisor to take notice. Malls are growing fast with the phenomenon of creating good retail space and this space is exclusively enough for any retailer to get hold of. With a good number of malls already making their mark amongst shoppers, retailers want to book space as their exclusive territory.
Location, location, location is becoming a critical issue for every retailer. Every retailer is keeping an eye on developing markets, especially malls to grab the best space in town and booking it in advance offers exclusiveness to every retailer who wants the best location for their brands.
Who can benefit?
Whether it is the franchisor or the franchisee, the concept of booking retail space in malls is the best way to get more footfalls. But, at times a franchisee cannot be so sure whether he will get the right space for the brand. To help him out today`s franchisor is coming all the way forward to provide the necessary hand holding as he is booking space in the malls in advance.
Not only does it help in getting the franchisor the desired place in the specified territory but also helps him in getting hold of the prime land even if the franchisee backs out of the agreement due to any reason.
Is this kind of tie-up beneficial for the franchisee is a debatable issue amongst retail franchisors.
According to Sandeep Sewal, Senior VP (Retail), Australian Foods India Pvt. Ltd, "Definitely the franchisee benefits when there is a tie-up directly between the franchisor and mall developer. When a franchisor books a space in advance, he books it at a lesser rate and gets a desired location. The franchisee does not need to get into negotiations so whatever your business format, the benefit definitely goes to the franchisee."
However, Nitin Khanna, Retail Head, Span Apparels, has his own take on this. He says, "The franchisee does not have too much of benefits because we want the control with us, so we sign the property. When we have the property we decide the franchisee but if the franchisee has the property he decides which brand he wants in that space."
Another reason why companies want to keep the space with them is not to remain at the mercy of the landlord who wants to be the franchisee.
According to Khanna, "A landlord may not like to become a franchisee. We take the shops on rent from the developer and then appoint the franchisee because when the landlord becomes the franchisee we are at risk."
The right deal
Location is a critical issue and every retailer wants his brand to be seen in the best possible place. To play a decisive role on which location is right for the brand, franchisors on their own tie-up with the developers.
As malls become the preferred location for retailers it is necessary to book the space in advance so as not to lose out on the exclusivity.
This tie-up is done in advance, perhaps two years before the mall is operational. And once they find the right franchisee, the property is given to him for running the store. However, the lease agreement is in the name of the franchisor only.
In this regard franchisors have their own say. According to Sewal, "As developers are not willing to pass on land to the franchisee for a single outlet, being a national brand we can easily tie-up with the mall developers." In the words of Sewal, "You block your space in malls and typically wait for about 18 to 24 months to open, so 6 to 7 months before you know the mall is going to launch, at that time you look out for a franchisee. That is how the retailer mall concept will work"
Developers like, DLF, MGF, Unitech, Prestige, Raheja, and Parsvnath are witnessing such tie-ups in their malls. By booking space in advance, companies like Cookieman are targeting to own about 30,000 sq.ft area by 2010. In retail this phenomenon is getting hold of every retailer as he wants the best space. Most of the retailers do tie-ups on their own and hire franchisees to run the store.
Need for motivated owner-operators
As the right space is already booked by the franchisor the need of the hour for today`s franchisee is more about playing the role of an owner-operator. Companies want the franchisee to be more committed for the development of the brand and be involved in its growth and take care of its day-to-day functions.
The company on its own searched for the right retail space where it wants to display its products and services and later on looks for franchisee who can run the store.
Talking about the desired profile of a franchisee, Sewal says, "We are looking for a dynamic person, who is ready to work for 10-12 hours everyday, obviously there will be a team of persons including manager, crew supervising etc. but typically we want the person to be owner-operator. He should have access to fund, should be able to sustain the growth of a business, should be able to take any brand further and able to work in a franchised system."
Who has the last say?
Unlike any relationship, franchisor and franchisee also go together for the betterment of a brand. However, if you go by the market rules, the franchisor is booking space to have his say in the partnership otherwise the franchisee who already has the space will decide which brand he wants to have.
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