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Jan, 01 2008

Low capital investment

There are two major factors that need to be considered when you start a business; available capital and available property; the latter, preferably your own. Franchisors will gladly sell a franchise to you if you have a property of your own in a prime lo

There are two major factors that need to be considered when you start a business; available capital and available property; the latter, preferably your own.

Franchisors will gladly sell a franchise to you if you have a property of your own in a prime location. The reason is simple; no probable dispute with the landlord and no haggling over rents. In other words the property is secure. In case you do not have a property and need to lease it then the rentals will have to be minimal as renting a premises will amount to more expenses, lesser profit margins.

Investments in various categories of franchise businesses today are particularly large. This is mainly the result of competition whereby attempts are made to attract customers by displaying top-end fitouts and high-quality products. However, you can also take loan from banks that recognize franchising, in which case your profits will have to be in accordance with your expenses.

Businesses that require less capital are mostly those having limited infrastructure and over head costs. Such formats are largely in the service industry, e.g. education, brokerage or food in the kiosk model.

Today, with more and more malls coming up, big companies are franchising the kiosk format business. The kiosk model is largely taken up by the food and beverage sector. Sectors like artificial jewellery, candies, ice cream, brownies, gifts and flowers are finding the model to be useful and profitable. Some prominent companies operating kiosks across the country are Hindustan Lever Ltd, Ferns ‘N’ Petals, Candico, Mr. Orange, Brownie Cottage, Big Time, Trenz, Wimpy and Sweet World.

While the cost of establishing a permanent retail location can be exorbitant, you may spend up to Rs 50 lakh or more, a kiosk format can be an easy way to get a foot in the door with less investment. The investment for a kiosk ranges from just Rs 2 lakh to 10 lakh, where most of the times, the infrastructure and equipments are provided by franchisors.

Though profits from kiosk business are certain, the primary challenges in such a format are sustainability, securing a good location and recruiting effective sales staff.

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