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Dec, 07 2010

Tempting trade

International brands in the rapidly evolving Indian Food & Beverage industry are smelling success like never before. Whipping up profits via the franchise route, these brands are not only on an expansion spree but are paving way for several others to foll

THE Indian Food & Beverage industry has transformed into a scrumptious source for international brands who are now cooking up tasty profits. These brands after their expansion in metros are now making inroads in tier II cities across India. According to industry experts, the Indian F&B industry is one of the most preferred sectors for foreign investment and this is evident with the growth and influx of several foreign brands, especially through franchising. According to The Food Franchising Report 2009 there are 1,200 franchisors at present, out of which 150 are exclusively dealing in food and beverage retail; 75 per cent of which are of Indian origin and rest are international.

Business potential

The industry is expected to touch US$ 330 billion by 2013. Experts anticipate that a fair share of the international companies are aggressive towards franchising and are likely to double their presence in the coming years. The healthy growth of international brands such as Subway, KFC, Pizza Hut, Dominos Pizza, Gloria Jeans Coffees, Marry Brown, Baskin & Robbins is paving way for other global franchise brands. Justifying the potential of this industry through the franchise format, Vinod Mahboobani, Vice President  Business Development & Legal at Yum! Brands in India, avers, “Given the success we have had with Pizza Hut & KFC and other multinational players, I think it is well established that franchising route is a feasible option in India. The market is growing at a CAGR of over 25 per cent and the opportunity is huge. There are four to five leading players that dominate the market while we are seeing a lot of new entrants. We see the key players stepping up the ante and expanding rapidly over the foreseeable future.” Manpreet Gulri, Development Agent, Country Head at Subway Systems India Pvt. Ltd, shares, “Franchising has helped establish our brand and allowed it to grow more rapidly in both domestic and international markets.”

Franchisability

Training and support are vital parameters for franchise success. Says Manish Tandon, President, Citymax Hospitality Pvt Ltd, Gloria Jean's Coffees, Master Franchise Partner for India, “As a country Master Franchise holder, we plan to have a hands-on approach towards the business and provide in-depth training for franchisees in business development, store operations and marketing. The franchisee will be responsible for maintaining the high and stringent standards. His role will be to run the coffee house as his own business, as an entrepreneur. As the Master Franchise Partner, we will provide the franchise partners with all the tools, resources, ongoing training and support necessary to ensure consistent growth.”

Standardisation often comes through various forms of support from the franchisor's end. States Mahboobani, “We have set up a separate organisation in India that provides a great deal of support to the franchise partners in all critical functions, starting with operations, training, R&D/QA, business development and marketing. Franchise partners are required to set up a dedicated organisation of their own to support the restaurant business and manage the day-to-day operations. Our franchisees play a critical role in the execution of our brands via forums such as marketing co-op and supply chain co-op.”

Expansion

Divulging the expansion plans of Baskin & Robbins, Subroto Mukherjee, COO, Graviss Food Pvt. Ltd, says, “From the year 2005, we have been in rapid expansion mode and currently stand at 410 outlets across 97 cities in India. We will continue to penetrate the market rapidly and intend to grow at 60-70 outlets every year.” Sharing Subway's plans, Gulri says, “We currently have 182 Subway restaurants across India and plan to expand to 250 locations by 2011-end. We intend to have 500 restaurants by 2015. Over the years, our growth has been very aggressive and sustained with India having the potential of becoming one of the largest markets for the Subway chain around the world.” For Marry Brown, expansion is going on an aggressive note across India. States Haral Harikrishnan, GM-Operations, Marry Brown Family Restaurants, India, “Marry Brown in the past few years have expanded aggressively in the southern part of India. There are over 35 outlets and we will be looking at opening 20 more by this financial year-end.”

Flip side

Even though foreign brands are tasting profits, there are challenges galore. Explains Mukherjee, “Main challenges are sourcing ingredients like standard milk and cream. Logistics and distribution also impede expansion. Sourcing quality manpower is also one perennial problem we face and the situation is becoming very challenging every day.” Besides, escalating real estate rentals, lack of infrastructure, high import duties and lack of brand awareness are some of the challenges. Tandon quips, “The unique name of our business makes us memorable, but also leads to confusion concerning the nature of the business we are in.”

Exit option

Most of the international brands in India provide exit options for their franchisees. States Mukherjee, “Once a franchisee has been appointed, he cannot dilute his stake in the parlour. However, if ever he opts out of the store and the business, we help him in selling off his business to new or other old franchisee interested in the business.” In case of Yum! Brands, the exit of a franchisee should be approved and in certain cases, the company helps them find potential buyers.

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