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India's Food and Beverage (F&B) industry presents a pool of choices to entrepreneurs. As new brands and formats are rapidly evolving, thinking outside the box approach has done wonders in cooking up appetizing earnings through franchising.
WAY ahead of other sectors with its double-digit growth, F&B today is the most favourable segment among entrepreneurs. Today, global and domestic players have gamut of choices to choose from while serving distinct cuisines to suit the Indian palate.
Previously, the market was highly dominated by mom and pop stores and street vendors selling snacks and other food stuff on the go. As today's consumer is quite conscious about eating out at a hygienic place, they prefer to spend on quality foodstuff available at competitive pricing. In this fiercely competitive market, Food & Beverage industry has continually evolved with transforming consumption patterns and acceptance of foreign brands. Besides, past failures of some brands have given due credit to the process of customisation.
Samir Kuckreja, CEO and MD, Nirula's, feels, “Franchising has evolved tremendously in the past 10 years in India. There has been a tremendous increase in the availability and acceptability of unique franchise concepts. With fast paced growth, the entry of numerous food brands, development of new retail formats and the franchising models have also evolved. They have developed from a traditional entrepreneurship set up to a highly competitive format, from simple management contracts, to formats that include pure and mixed franchising models.”
Fazle A. Naqvi, Chairman and Managing Director, Brand Calculus (Master franchisee of Canadian Smoothies and Juices brand Jus Booster Juice in India), believes, “Over the years, the biggest change has been in two areas - convenience as well as experimentation. The Indian customer has become more experimentative with cuisine and food choices. The F&B industry has reacted to this demand and in some cases, led this change in providing these options bundled with convenience to the Indian consumer.”
In India, the concept of kiosks, carts or vending machines is mainly inspired from the international market. The F&B industry offers good prospects in new and trendy formats such as juices and smoothie bars, frozen yoghurt, café lounges/cafeterias, pizza chains, bakery, confectionery, ice-cream parlours and specialty food kiosks, wherein the franchisee can choose any category to initiate the business venture. In India, the idea of fruit bouquets has also come to India through Edible Arrangements. The concepts such as Quick Service Restaurants, fine dining, fast food courts and specialty restaurants have emerged in a big way. Considering the success tasted by the global brands in India, Indian brands too quickly jumped on the bandwagon to create their brand's appeal in consumer's mindset by choosing the high footfall locations to generate revenues.
Currently, the F&B industry is around Rs 58,000 crore and growing at a phenomenal rate of 40 per cent per annum. The main growth drivers of the industry would be the 440 million strong middle class, which on an average consumes three meals a day, that's a staggering 1,000 million meals.
Despite starting their own businesses, why are investors teaming up with franchisors? The reason is, it's a proven formula, quick way of market expansion and source of raising capital by way of selling products through standardised format. Mrityunjay Kumar, Business Head, India, New Zealand Natural, a division of Exotic Gourmet, believes, “Franchising in India has matured pretty well in a decade. Now investors/entrepreneurs are more desperate to take up an established brand instead of putting in huge CAPEX and overhead in creating a new brand and then make money. It's always better to get associated with a brand, as they have already evolved with a system created with lots of R&D and challenges faced in different markets. This is a major reason along with liberal government policies and lucrative financing options, which has created a boom in the franchising industry.”
Vicky Singh, Director, Dish Hospitality Pvt. Ltd, says, “For the brand owner, it provides sale without extra investment on their part and for the franchisee, they are already working with an established brand, so their risk is low. They get the success of business and marketing from the brand. The brand also advises on site selection and of course, handles the food and quality.”
Expansion has always been on a high in this sector. Naqvi reveals, “We are planning to open about 100 franchise stores in the next two years. These will be across major cities in the South, North and West of India. East India will follow later.” Kumar adds, “We have aggressive expansion plans for India. We have already signed two stores at Kolkata, two at Mumbai, one in Ahmedabad, two in Jharkhand and one in Delhi. We are targeting 27 stores by the end of this financial year.” Anil Bansal, CFO, Cocoberry, says, “The company is planning to open 100 franchise stores by next year.” Shares Kuckreja, “Our plan is to take our outlet count to 150 by March 2012. Franchising is the next big ticket item for Nirula's.”
'Be not afraid of growing slowly, be afraid only of standing still,' this Chinese proverb clearly depicts the situation of every business owner. Challenges in the F&B industry involve customising and cultural assimilation, menu planning as per local/regional flavour, deciding on strategic pricing, maintaining uniformity in terms of food quality, identical store layout and maintaining hygiene, finding right food suppliers, choosing a suitable location and high cost of real estate. Kumar says, “We keep on localising through new flavours and cultural assimilation and we have done it to a great extent without changing our core values. It has started paying us off and is reflected as growth rate in the number of stores as well as volume of ice cream sales.”