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Jul, 12 2011

Some ups, downs and now going North

1,200 franchised concepts, 150,000 franchisees and the numbers are bound to increase. After a radiant 2010, 2011 started on an optimistic note, we go deeper to discover how radiant the previous year had been and how lucrative the present year seems.

FRANCHISING industry is clocking a resounding growth at 25 to 30 per cent per annum in the country. Franchising across sectors saw an upsurge making the industry look lucrative to investors and fascinating to brand owners. A correction in the economy post the economic downturn brought back buoyancy in the franchising and once again proved the robustness of the franchising model. The past year saw an addition of brands across sectors and categories to expand via franchising. A glance at five prominent sectors and their performance over the past one year.

Industry performance in the past five quarters considering QIV 2009 as the base

Education & training

Education & training has now become one of the most preferred sectors for Private Equity, venture capital and investment of course. Strong government backing pertaining to higher budgetary spending to spur growth of the education and training sectors across the globe, particularly in India, is a key point for companies in this sector. Franchising in education saw a growth of 30 per cent in the first quarter, 47 per cent in the third and then the growth dipped to 19 per cent by the end of the first quarter of 2011.

Entertainment

Media and entertainment industry registered a growth of 11 per cent in 2010 over 2009 and is estimated to achieve a growth rate of 13 per cent. Correspondingly, franchising in entertainment saw a growth of 66 per cent in the first quarter of 2010. Touching its peak and registering a growth of 166 per cent in QII, franchising activity in this sector declined in QIV and was recorded to 66 per cent in the last quarter, ending December. Franchising activity in the sector remained constant in the first quarter of this year, ending April.

Fashion & Apparel

The Indian apparel industry grew by 10 per cent over the past five years, a growth rate faster than that of the overall Indian retail market and the flight is expected to continue. However, the past year saw a drop in the consumer spending on clothing. Apparel, from being the second largest in terms of consumer spending until last year, attracted lesser money than it did in the past. Consequently, franchising in fashion & apparel industry saw a consistent dip in the number of accounts. The category saw a drop of 41 per cent in QI of 2010, 66 per cent in QII and 69 per cent in QIII. The fourth quarter of 2010 saw an addition of brands wanting to franchise and the trend continued until the end of the first quarter of 2011, which saw an increase of 27 per cent from the subsequent quarter. Nevertheless, the industry holds new and significant growth opportunities for foreign and domestic players considering the growing passion for fashion in India's high growth, fast changing retail clothing market.

Food & beverages

Franchising in F&B saw a 24 per cent growth in the first quarter. The growth dipped and by the end of QII the growth was recorded to be 10 per cent. The growth bounced back by the end of third quarter and documented a 50 per cent leap; QIV witnessed another leap clocking the growth at 75 per cent from the same quarter, in the previous year.

Health & beauty

Healthcare is one of the largest sectors in terms of revenue and is second only to food and groceries in terms of consumer spending. The industry is projected to reach 300,000 crore by 2012. A shift in consumer spending patterns makes the sector a profitable investment option. Franchising in healthcare and beauty in the past year saw a consistent yet slow growth. From a 10 per cent rise in QI, the figures dipped by 20 per cent in the second quarter of 2010. Franchising in the sector revived and the sector saw a surge of 21 per cent in the first quarter of 2011.

Methodology

Data for calculating the index has been sourced from Franchiseindia.com and is reflective of the listings on the site. Listings have been categorised by sectors or industry. The index has been calculated on the basis of accounts added to the site, till the end of QI of 2011, keeping QIV of 2009 as the base. The data shows an increase or decline in the number of accounts sector-wise.

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