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Apr, 19 2010

An impetus to education

Your plan to invest in a low, medium or a high investment franchise will depend upon the kind of segment and the city you pick to initiate your business. Here are some directions to measure market viability and explore ways to scout and select the right s

Your plan to invest in a low, medium or a high investment franchise will depend upon the kind of segment and the city you pick to initiate your business. Here are some directions to measure market viability and explore ways to scout and select the right spot and beat competition.

WITH families spending more than 20 per cent of their income on education, India offers a huge market for education franchises, estimated to be worth $ 400 crore. As per the Education Franchising Report 2009, published by Franchise India, the education sector makes up 30 per cent of the Indian franchise industry. There are about 50,000 franchised education outlets in the country and only about 2,200 company-owned outlets operated by education franchisors.

Franchising happens mostly in the education and training sector where professional skills or vocational education leads against core and non-core education. Last few years have witnessed a considerable rise of independently-owned and franchised companies in every nook and cranny of the country. Seeing the growth of education franchising, many investors running the independent businesses are vying to switch over to franchise sector, since there is a scope of achieving recognition in the local market in a short span of time. Education and training sector is very huge in India, where franchising plays a significant role in disseminating quality education.

Conducting market research

Before starting operations in a specific market or a city, a franchisor conducts a market study to figure out the profitability of a location in terms of standards of living of the people, how competitive the market is for his brand and what changes he or she should make in the fee structure of the courses to achieve good returns on investment by attracting footfalls. With the help of franchisee's knowledge about the local market and consumer preferences, the franchisor plans out strategies to popularise his brand. Once the franchisee is ready to take brand's affiliation, the viability of a particular location is verified in terms of present number of companies in the region and other factors. “We do conduct a study to determine the availability of degree colleges and ITIs in a region, preference of student community with respect to a particular course or institute, presence of industries/companies/local administration nearby for jobs and the price points operational in the market,” informs, Santosh Kumar Choubey, Chairman & MD, AISECT Ltd. AISECT would then adjust its fee structure for a backward/rural area to match the paying capacity of students. In case of fee not changing, AISECT could also offer installment option to students.

Expressing his views, Aman Bansal, Business Development Manager, Top Careers and You (TCY), considers market study as a very case specific. He says, “A rural centre's logistics differs a lot from that of an urban area. Also, factors like presence of schools, their affiliations, presence of polytechnics and colleges determine the course of our market study and choice of courses on offer. Fee structure also varies according to the demographics of the location centre.”

On the other hand, Sudhir Bhaskaran, National Business Manager, CMS, says, “Potential population and paying capacity of the location are considered, based on which we plan our franchise growth.” Naveen Gupta, CEO & ED, Frameboxx Animation & Visual Effects, adds, “We categorise the centres as per the location's standard of living and economical growth. Hence, we offer different pricing in grade A&B cities.” On the contrary, Radhakrishnan Nair N, President, Toonz Academy, says, “We ask the incumbent franchisee to do a market study and potential analysis. We provide them the methodology and templates. We do not change the fee structure for different markets, as fees are uniform.”

Stressing on the paying capacity of consumers, Sanjay Shivnani, CEO, Career Launcher (CL), notifies, “Fee structure is put in place keeping all these factors in mind, plus the student's paying capacity and ensuring a good value for money proposition to the student.” By giving authority to act effectively, franchisees of Career Launcher are free to decide their own pricing based on local market factors and competitive forces.

According to Sandeep Bakshi, National Head-Training Delivery & Operations, RT Outsourcing Ltd, “We spend almost 1-2 months looking at various colleges in and around a city and the position in terms of job opportunities before deciding upon a franchise tie-up. Our fee structure across India remains the same; we have products with different fee structure to suit their needs; we do not face any fee issues.” Deepak Choudhary, Managing Director- India Operations, EMDI, focusses on conducting an in-depth study to determine what kind of courses it will offer and at what price points. EMDI also looks at the demographics, existing industries, and how the media industry is in that city and whether the students will be receptive to its courses or not.

Considering the thoughts of some franchisors, it is believed that franchisees also play an important role in deciding and positioning the brand's image. After an in-depth analysis of demographics of a particular place and the paying capacity of consumers, fee structure of courses is decided as per the type of city.

Operating with competitors

Most of the education companies generally open their institutes in the same location, or an education hub, where all the competitors act as a one-stop solution for all the segments viz. coaching centres, English speaking, I-T training, animation training, aviation schools etc, to cater to the requirements of the consumers. Commenting on this aspect, Choubey of AISECT says,  “As these educational hubs offer a steady set of walk-ins, placing one's brand in such an area offers advantages of high visibility amongst the direct TG, opportunities of cross-selling, concentrated marketing, road shows etc. Alliances could also be forged with some of the existing players in the hub for fulfilling complimentary training needs of the students.” On the other hand, Deepanshu Khurana, CEO, i360 Staffing & Training Solutions, accepts that this is done to optimise marketing costs and help in generating easy student walk-ins. He adds, “Such areas ultimately become student hubs.” Himanshu Jain, Vice President, Sales & Marketing, iProf Learning Solutions India, considers that the key reason is that the students' footfall is already high in that locality and you can capitalise on those students as well sell your products without incurring any huge market cost. In other words, the captive audience is readily available on minimal efforts.

On the flip side, Sharad Talwar, CEO, IndiaCan, says, “Some institutes try to be located near competitors to survive under their shadow; however, at IndiaCan, the goal is to be located close to the customers rather than the competitors.” Opening an institute in a competitor's domain would also be favourable for an established franchisor to get observed easily which gives choice to the consumers.

Right location

As location is important to an institute, it becomes necessary for a franchisee to be careful in scouting and picking up the right spot and then negotiating the lease deal. One should conduct a thorough research to figure out the scalability and visibility of the location. As the return on investment (RoI) depends largely on the location type, deciding a particular location for your franchise business plays a prominent role in its success. For the convenience of the franchisees, most of the franchisors assist their prospective franchisees in selecting a site and negotiating the pact. Says Shivnani, “A location which is convenient for students is the best for CL, and it must be close to a bunch of colleges or in a residential area. We give advice to our franchisees in site selection and also take part in this decision.” Mathai Chackochen, CEO, Inter Networkz, believes that it should be on the road facing or close to a bus stop or railway station, which would help the students in commuting quickly and be on time for class. We help to negotiate the right location.” Agreeing to him, Amol Arora, MD, Shemrock Group of Schools, says, “Shemrock also believes in neighbourhood policy, and it prefers all its branches to be located near residential areas. We help and provide guidelines to the franchisees to select a location.”

Talking of apt location for opening the institute, N.Subramanian, Country Head - Operations, Cadd Centre, says, “We recommend a location on the main road that is easily accessible by the local transport. We get involved in choosing and finalising the location. If the need arises, we also help our franchisees to negotiate for the right rent and location. The property owner gains more confidence when he notices that the company is also fully involved.”

City-wise variation

On the basis of his/her investment, franchisee makes up his/her mind to either go for a low cost to a high investment franchise of a personality grooming or finishing schools to a professional/vocational education franchise. The level of set-up cost and working capital of different segments generally varies from city-to-city. For example, a pre-school franchisee would not require much infrastructure, such as, computers, specialised staff, updated course content, to run the centre, than a coaching centre or an I-T training centre or aviation training centre franchisee would require. From a low, medium to a high capital investment franchise, the number of employees necessary for managing the centre operations would vary from 5-10. For instance, the franchisee of a tier-I, II, III or IV city, has to pay a maximum to minimum franchise fee depending on the type of city and real estate prices of the location.

From segment to segment, the breakeven differs on the basis of admissions or number of footfalls the franchise gets on day-to-day basis. When the franchisee starts getting returns on investment, he/she reaches breakeven point, which may happen within few months or year's time. Such as, the franchise of an EMDI, reaches break-even point within 1.5 years, whereas, an I Pay, I Learn  franchisee may reach break-even point within nine months.

Planning strategies

Franchising in the education industry has opened doors to investors to raise the standards of learning for the betterment of the students, and helping them find opportunities. The industry has a huge demand and potential to grow, given the fact that it has fuelled a fierce competition amongst franchisors impelling them to introduce various niche concepts to the business of education. At the same time, companies invent various marketing strategies to promote brand business suiting to local needs and conditions. Commenting on various strategies, Subramanian says, “On a large scale, we are using television, radio and newspapers to marketing and advertising. We choose customised and region specific strategies to advertise locally which include mailers followed by a focused telesales. A direct sale, test drive programmes and seminars generate more walk-ins.”

Consumers today, are more cautious about choosing the right training centre which offers quality education to brush up skills in any of the specified vocation. Like other sectors, marketing in the education and training is multi pronged. “Our marketing strategy integrates various elements of ATL and BTL support to essentially highlight the saliency of our programmes and their relevance in the job market today. Our advertising aims at ensuring maximum information dissemination to students, so that they can make informed decisions while choosing their programs and institutes,” informs Choubey.

On the other hand, Arun K.Khetan, CEO & MD, New Age Knowledge Solutions Ltd adds, “We adopt various strategies across the board, including technology backed promotions to drive, which we build up as a campaign rather than throwing it at sporadic intervals.”

Influx of education providers

After successfully making a pan-India footprint, some established franchisors from different domains of education and training sector like Aptech, NIIT, IIHT, Cadd Centre, Veta, Career Launcher, Karrox entered into the international markets to cater to the Indian diaspora in countries such as, Middle East, China, Malaysia, Srilanka, Nigeria, Egypt, Myanmar, Bangladesh and Singapore.

According to Ninad Karpe, MD, Aptech Ltd, “Wherever we are unrepresented and there is a potential for educational business, we are targeting those places; we plan to open 150 centres in 2010 to 11.” At present, Frameboxx has 57 centres in India. Commenting on his company's expansion plans ahead, Gupta informs, “We are looking to expand in Nasik, Trivandrum, Coimbatore and Mysore in India, and Middle East and South Asian territories abroad. We plan to expand to 75 centres by 2012.” Besides, CMS is focussed on north, west and south for franchise expansion in 2010-11. Bhaskaran adds, “We have 58 centres at the moment. Going ahead, we plan to start another 70 training centres by 2010-11.”

Currently, EMDI has four franchised centres across India. Going ahead, Choudhary explains, “We are looking at targeting cities like Indore, Hyderabad, Chennai and Jaipur where the media and event management industry has an existence.” Internationally, EMDI is targeting Abu Dhabi, Bahrain and Syria.

“We plan to open 50 new centres in the next two years. We have enquiries from Africa, Middle East and China, which may get concluded soon,” enlightens Nair N.

IACM plans to appoint 300+ odd franchisees in Tier-II and Tier-III cities, besides six major metros over next four years. Internationally, IACM would soon sign/start five centres by 2010.

Bakshi of RT Outsourcing Ltd, says, “We plan to cover entire India and to achieve this objective we are keen to open 12 more centres.” Presently, Top-Careers-and-You (TCY) is operating over 30 centres and its immediate focus area remains north India. Going further, Bansal adds, “Our target is to have 100 centres up and running by 2012 (in India), while, we have over 400 franchise ventures worldwide.”

“We plan a systematic penetration across India with focus on tehsil and district head quarter towns/cities and are concurrently consolidating our exiting network while making forays into international markets starting from Singapore,” reveals Gurmeet Singh Arora, Chairman, ABC Montessori.

Avinash Gupta, President, Tally Solutions, says, “Presently, we have 1,800 plus centres, and we further plan to have 4,000 plus centres by the end of 2012.” Shivnani, on the other hand, believes, “Our biggest growth vehicle is the new vocational division and we will have more than 200 centres of Career Launcher in a year's time.” On the other side, AISECT plans to take the strength of its network to 15,000 centres by 2012. Besides looking at expanding in the Middle East and SAARC countries, Shemrock Group of Schools aims to have 350 centres by 2012.

Recent trends

Last year, the education and training sector had seen an entry of organised players into different leagues to cater to the growing needs of consumers.

  • I-T training and education major Aptech Ltd entered into 'English Speaking' by launching its new brand, English Express, an English Learning Academy.
  • The company also sealed a major buyout in the animation and multimedia education space by acquiring Maya Academy of Advanced Cinematics (MAAC) for Rs 76 crore.
  • NIIT also launched 'NIIT eGURU range for schools, which comprises of 'interactive classrooms for teachers, 'Math lab' and 'IT Wizard' for students and 'Quick School' an Education Resource Planning solution for school management.
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