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Jun, 10 2011

HOMECOMING FOR INT’L BRANDS?

The scintillating success of home-based franchises in developed nations is motivating enough for Indian entrepreneurs to enter this arena. However, the volatile Indian market is not as easy to conquer as it may seem.

The scintillating success of home-based franchises in developed nations is motivating enough for Indian entrepreneurs to enter this arena. However, the volatile Indian market is not as easy to conquer as it may seem.

TO gauge the growth of home-based franchises in the West, particularly in the US, is this recent report by Peter Schwarzer, research director for FRANdata, a market-research firm for the franchise industry. He looked at a sample of about 80 home-based franchise brands and found that they were expanding at an average annual rate of 7 per cent from 2007 through 2009 (the most recent data available). Overall, franchises grew at 2.2 per cent a year during that period.

Citing the iconic status coupled with widespread recognition that home-based franchises have gained across the years in developed nations, Margaret McEntire, Owner, Candy Bouquet International, which is looking forward to India debut, says, “Home-based businesses are much easier to run and definitely less expensive. Some of our most successful store locations are home-based. They save the expenses of rent, utilities and more. Internationally, you can do the same and the product definitely will sell itself with its beauty and gourmet candies and chocolates. These bouquets can last up to a year too. Sanjay Chaturvedi, CEO (India), ActionCOACH, feels the same. “The concept of home-based businesses has taken off well internationally. The trend visible overseas is that an increasing number of corporate executives are looking at entrepreneurship and more control over their lives, be it time, money, destiny. So, a significant number are evaluating home-based business franchises. Secondly, the economic downturn in the past few years caused a number of executives to re-evaluate their plans, adding further momentum to the growth,” he states.

Chasing the challenges

The unorganised manner in which home-based franchises operate, advertently points out to the underlying potential and the inadequacies that plague the system. Industry experts point towards lack of awareness and attitude that is predominant amongst a vast majority of the Indian diaspora. Even though the market is highly untapped, the fact remains that local franchises should necessitate awareness, letting global brands enter the market with a long-term approach and investments to match.

A handful of global brands offering home-based franchises like RE/MAX, Kinderdance International and ActionCOACH have pointed out the pitfalls within the system. Kirthana Ramarapu, Director, Kinderdance India, states, “Because of import duties, transport, royalty, etc, the cost of the product or service becomes high. Products or services in a home-based segment should be modestly priced to be successful. Moreover, most of the home-based businesses in India are not organised and lead to bad service and late response time.” Chaturvedi reasons, “Another factor is the acceptability of newer concepts. In the Indian market, there is a wait and watch policy, 'let us follow once the concept is successful' approach followed by the majority. The newer products and services that have been proven elsewhere need to be tailor-made for Indian consumers by highlighting the USP of the service provided and by providing guarantees to assure customers.”

Much like the home-based segment, some of the international low-cost franchise brands that entered India are being pulverised by the limitations. Observing the worth of the market and the latent potentiality, Brijesh Purohit, Managing Director, Keen to Clean Group, an Australian cleaning franchise, states judiciously, “For international brands, it is a bit difficult to enter and understand this segment. But once you enter this segment and have a volume and the number, you are there. Definitely for the first couple of years, it's difficult because you don't have enough number of franchisees to justify your investment and the expenses. But once you have the confidence and volume, it naturally goes on the right track.”

Pointing out the stark difference that exists between the matured western markets and India, Chaturvedi elucidates, “The difference is that we have started recently in India though there is no denying there are many trends that are amplifying and becoming increasingly visible. The need for small and medium businesses to be coached to a much higher level of performance through the implementation of world-class systems and processes is very much there and the MSME sector is critical to the future growth of India.”

Tapping untapped potential

While on one hand, the home-based segment in India faces scarcity of brands, there are a handful of international brands who have ensured decent break evens and are churning out impressive RoIs for their franchisees. Experts corroborate this to the emerging awareness amongst the local population and confidence of franchisees to reap rich dividends from an international brand in the home-based segment. Elaborating further, Chaturvedi says, “An international brand brings in the rich experience of established business processes and systems in various nations worldwide. The protocols that have been tried and tested worldwide are used to ensure the running of businesses efficiently and effectively.” Adds Purohit, “If you enter into the Rs 10-15 lakh segment, there is a huge potential out there because people can afford it easily.”

Brands like Kinderdance International, ActionCoach and RE/MAX, which entered India in the recent times, have succeeded in tapping the underlying potential in this unorganised home-based segment. Counting on the optimistic scenario, Ramarapu states, “Four out of our six franchisees are home-based. Kinderdance India started from home and it was only when it had to be expanded pan India that a corporate office was opened. We plan to expand in at least 15 major cities like Ahmedabad, Delhi, other parts of Mumbai, Lucknow and Chandigarh. We also target to have Kinderdance offered as part of the curriculum in the Top 10 schools in each of the major cities.” While Chaturvedi states, “In India, we have two home-based franchisees and there are a large number of prospective franchisees who are in the pipeline. We expect the numbers to grow significantly in the near future.”

McEntire has been flooded with offers for master franchisees from India and is set to make an India debut with her brand Candy Bouquet.

But how these international brands continue to maintain standardisation of their products and services to which Ramarapu informs, “In a timely fashion, we have a quality control panel that periodically visits franchisees to extend support and make sure that the standards are maintained and programme deliveries are appropriate. Since we cater to young children, we like to keep up the parents’ trust and do better as we grow.” McEntire shares, “We work like any other floral wire service and have specific websites and patterns to follow that are uniform. Customers can order their own individual preferences though. For instance, if someone is diabetic, the home-based franchisee can make a candy bouquet from diabetic/sugar-free candies.”

These international brands have also been paving way for women entrepreneurs across India to take up franchisees and work from the comfort of their homes. While Kinderdance International has a special model called 'Teachers Turn Entrepreneurs' wherein women who join in as teachers have a great career path to own their own Kinderdance Franchise and upgrade their skills, ActionCOACH offers franchisees to women who are corporate professionals and are looking forward to have a balanced work and personal life. The franchise scouts for women who have a very successful corporate career but are inclined towards entrepreneurship.

Fine-tuning the future

From branded services to high dividends, the Indian market is surely and steadily fine-tuning its way for brands to invest and reap profits. Says McEntire, “In many areas, the rents are very expensive. This type of a franchise can be a real advantage.” Tony Fitzpatrick, Managing Partner at Franchiseyourbusiness, Ireland, states “India has a tradition of home-based businesses and franchising there is a booming industry. Home-based franchises are particularly attractive there since they need not be expensive either to buy or to operate. Tailor your package to suit the market. The opportunity is too good to miss.”

Ramarapu sums up on a similar note, “With the current global exposure, many companies are now bringing their products to India. Consumers are also understanding the product and willing to accept them even from a home-based seller.”

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These international brands have also been paving way for women entrepreneurs across India to take up franchises.

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