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Apr, 17 2011

Teeny Weeny, worth every penny

Big profits come in small packages, this has been proved once again by the teeny-weeny structures called kiosks and carts, which are giving large formats a run for their money.

FROM fast food, coffee and ice-creams to portable gaming and selling of perfume and watches, kiosks and carts can be found in all set-ups. Those who have big dreams to venture into business but are constrained due to lack of capital can now relax as kiosk franchising is on full swing. Carts were initially used for ice-cream selling. The history of kiosks and carts dates back to 1976 to Boston in the US but the concept did not become popular until 1980s. Since then, kiosks have grown steadily.

Fit for franchising

In the present business scenario, it can be seen that mostly the kiosks and carts are run by reputed national and international franchise brands. A major reason for this can be attributed to established brand names which attract clients and customers. Customers from all walks of life prefer branded to non-branded stuff. Moreover, in a kiosk and cart, it is the brand that lends credibility and ensures high footfall.

In the words of A.G. Puttaraj, President, Coffee Day Xpress, “Franchising has greatly helped in our development. Today, we have 900+ kiosks, out of which around 600 are owned and managed by the franchisees.” Vrinda Rambhia, Director of Business Development, Leonidas, Premium Pralines Pvt. Ltd, says, “Franchising is ideal since it helps to gain on the already successful model and it is easy to replicate the guidelines and experiences by knowledge transfer. We offer thorough training to run the franchise business.”

In line with kiosks' success, Kwality Wall's has recently introduced a new “mobile kiosk” format called 'Parlour on Wheels.' “This kiosk option provides the franchisee a KW parlour, which is mounted onto a vehicle. And therefore, it can be used for such locations that do not have any defined retail space to set up a kiosk or shop. It is ideal for use at events such as cricket matches, expo and exhibitions, rock concerts, travel and high tourist locations,” says an official Spokesperson, Kwality Wall’s.

This concept requires an investment of Rs 4 to 5.5 lakh, depending on the finance model selected. However, the Kwality Wall's Swirl's kiosk franchise needs a total investment of Rs 5.5 to Rs 8 lakh.

What makes them a success

As mentioned above, kiosks and carts are best suited to franchising. There are a number of other factors that have made kiosks and carts attain this stature. Some of them are:

Low-cost investment: A major factor that has really helped in the stupendous growth of kiosks and carts franchising is its low-cost and high-profit structure. Finding outlets in high footfall areas like malls and high streets is not easy due to high rentals. This hazard can be overcome by opting for a kiosk or cart, as it does not need high investment and can be set up near high footfall areas. Says R.S. Sodhi, Managing Director, GCMMF Ltd (Amul), “A low investment of Rs 1 to 1.5 lakh is needed to run a kiosk of 60 to 100 sq.ft.”

Kiran Nadkarni, CEO, Kaati Zone, shares, “Kiosks require much smaller amount of investment (Rs 8-9 lakh) and have the potential to break even in 15-20 months, compared to three years for larger outlets."

Less space: In addition to low rent, kiosks and carts require less space that needs low inventory for its satisfactory running. This keeps the running cost quite low. According to Puttaraj, “Area required for setting up a kiosk is 2 sq.mt to 25 sq.mt and the investment needed is Rs 2-5 lakh.”

More flexibility: Having a kiosk offers a lot of flexibility. If a location does not work for the franchisee, he can move to a better location, which can be more favourable for him and his business. Sameer Akhil Kachru, Director, Go! Chaatz, says, “Carts/kiosks can be placed in high footfall locations where impulse purchases are great. They can also be removed and relocated without any loss in capital costs (unlike large units where interiors, plumbing, electricity and branding go waste).”

Less manpower: Yet another benefit of taking a kiosk and cart franchise is that the franchisee will not need to employ a large number of people for its efficient running. Nandkarni says, “Against at least five people required in the dining format, a kiosk can be run with just two people (assembler and cashier). This reduces operating expenditure to a great extent.”

Another advantage is that unlike a mall store, the customers do not have a choice to enter. As kiosks are mostly located in the high traffic areas, people on seeing one may purchase or eat something on the spot. It is upon the kiosk owner to entice them. Making a kiosk attractive is not a big deal, as the franchisee does not have to bother about any seating arrangements or interiors and fixtures. Therefore, a kiosk allows you to eliminate many of the expenses that often plague small businesses before the profits begin to come.

From ice cream to coffee & jewellery segment

In the past, there were hardly any kiosks or carts besides that of an ice cream. However, the present business scenario ensures we see this format in many sectors. The maximum kiosks and carts formats are under the food and beverage sector with ice-cream players leading the bandwagon. Kwality Wall’s, Baskin Robbins, Vadilal's, Amul, etc are the main names in this category. Coffee kiosks are also emerging with players such as Coffee Day Xpress, Brewberrys, Gloria Jean’s Coffees, etc. Brands in chocolate and candy franchising also prefer to expand with kiosks and carts. Leonidas, Candy Treats, Sweet World, etc are the major franchise players expanding with kiosks and carts. Quick Service Restaurant (QSR) format has also taken to kiosk and carts expansion route due to their low-cost benefits. In a recent development, Kaati Zone has decided to expand in kiosk format. Mentions Nadkarni, “It is quite likely that 80-90 per cent of our future expansion may be in the kiosk format, as kiosks are much quicker to set up, within 12-24 hours once the equipment arrives.”

Another sector where kiosks are becoming increasingly popular is the artificial jewellery. Customers while walking in any traffic areas get lured by the beautiful and trendy jewellery in small kiosks. Trenz and Estelle Jewellery are few players who have expanded via kiosk format. Kiosks and carts can also be found in retailing of watches, perfumes and other accessories.

Position them right

Location is a significant parameter to determine the success and failure of kiosks and carts. Kiosks and carts do well especially in areas like shopping malls, multiplexes, in vicinity of big retail outlets, high streets, local fairs and exhibitions. All kind of kiosks, including coffee, chocolates, ice-cream, jewellery, watches, sunglasses, etc can generate maximum profits in high footfall areas like these. According to official spokesperson of Kwality Wall’s, “Our kiosks are located in malls and food courts. They carry the core ice cream menu and require a space of 10 sq.ft to 12 sq.ft front with a depth of 10 feet. Franchise investment in this format begins at Rs 6 lakh onwards.”

There are limitations too

Kiosks and carts have innumerable benefits but are marred by few drawbacks as well. The main shortcoming is the lack of display due to small space available. In both kiosks and carts, there is space crunch and as a result, franchisees may not be able to display and store large variety to increase his sales. Says Sodhi, “Lack of space can pose a problem for displaying and storing all the goods but vertical showcases, instead of horizontal ones, can be a possible solution. We have kept vertical freezers in all our kiosks.” In case of F&B, hygienic conditions can create problems. Customers may raise questions regarding the cleanliness of kiosks and carts. Another setback can be that the fewer number of employees in the kiosk can give rise to long line of waiting customers. As shares Puttaraj, “Maintaining standardisation in terms of quantity and quality becomes a major challenge. Moreover, slow initial returns on investment, even though they may go higher after some time, also pose a problem for struggling franchisees.”

Ambiguity of local laws governing the kiosks and carts is another major challenge. Some cities do not have clear laws laid down by the respective Municipal Corporations and therefore, they are subject to varies interpretations which can create a sense of insecurity to the franchisee. Then, due to the nature of some kiosk locations, especially in malls and high footfall locations, there is a lot of demand for them and hence, the rentals for these locations are at a premium. Also, most of the kiosks locations are given on short-term lease. Hence, continuity of business for these locations can be an issue.

Still, they are the best bet

Kiosks and carts can surely put you on the success track but gaining and retaining success depends upon the location and on how well an entrepreneur can manage it. In words of Sodhi, “This is just the beginning for kiosks. They have a tremendous future due to their low-cost benefits. However, products and services that franchisees deal in also affect success.”

BOX

Kiosks are small-sized shops, having a semi-permanent fixture and are generally present within a larger establishment such as a mall, departmental store, etc. The structure of a kiosk could be designed as a standalone like a terminal, or a semi-enclosed booth.

A cart is smaller than the kiosk and can be easily moved from one location to another. It is what our popularly known rehriwallas carry, who have become more organised in the 21st century.

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Not all that rosy

Limited life: Kiosks and carts may have a small life. It is just during certain occasions (fairs and exhibitions) that their sales increase.

Extensive marketing and decorations needed: Due to its small size, kiosks can go unnoticed if they are not highlighted.

High rentals: Opening a kiosk in malls needs high rental, which can cause severe problems to franchisees.

Not so popular among premium players: It is generally seen that carts and kiosks do well in case of certain sectors as ice-creams, coffee and other beverage kiosks, artificial jewellery and other such products. There is a limitation of premium categories players in this format.

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Upcoming franchise destinations

With kiosks and carts emerging as profitable business model for expansion via franchising, it has given rise to new franchise destinations, such as:

Airport, Railway Stations: Franchise brands in categories of books, gifts, coffee, luxury brands, watches, jewellery and accessories are best suited for airports, railway stations and metro stations. Travellers love to purchase souvenirs while waiting for their flights and trains. Kachru shares, “Airports and railway stations are great places to expose the brand and get high sales units, though rentals are high.”

Hospitals: Considering the need and demand for medicines, tea-coffee and quick service food outlets in hospitals 24 x 7, large number of franchisors are exploring hospitals as locations to open kiosks.

Educational Institutes: Educational institutes like school, college and university campus are also fast becoming a suitable location for kiosks, especially for QSRs, coffee, juice, stationery, gifts and greetings companies. Sodhi explains, “We have more than 500 successful kiosks located at educational institutes like IITs, Infosys, schools, etc.”

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