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Aug, 08 2012


Are you hungry for quick RoI and that too for a proven and successful franchise system in F&B (food and beverage)? We bring to you not just a platter of sizzling opportunities but essential ingredients to make the franchise system successful in the F&B se

ANY potential investor, who mulls starting a venture, still considers these three basic needs of mankind roti, kapda and makaan, because these are such human requisites that practically make the world go round. To build business around any of these three lucrative options, there is nothing better than taking the franchise of an already established brand. Out of these three, roti (F&B sector) has always been the priority and will always be.

With changing lifestyles, the F&B sector in India has witnessed a sea change because of the eating out habits of people across all sectors and classes. About 50 per cent of the Indians eat out on a regular basis. The restaurant industry in India is growing at 20-30 per cent. Foreign fast food companies are also aggressively increasing their presence.

All these opportunities could not have been created and the growth of F&B sector was not possible without the contribution of the franchise business model. Unlike other models, it has always proved to be a boon for businesses in the F&B industry in India.

The Indian food industry is slated to reach Rs 1, 32,000 crore by 2015. With mushrooming opportunities in this sector and such an encouraging growth rate, the day is not far when India would become the world leader in this industry. Franchising has played a pivotal role in making the F&B industry taste success. According to a recent report, food and beverage companies have only 35 per cent of their total units as company-owned and a significant 65 per cent are franchise units. This indicates a greater role of franchising in this sector.

Formats in F& B

From the tiniest format, known as kiosk/ cart to large format fine-dine restaurants, franchising has become an essential ingredient in all formats. In India, franchising is majorly happening in four formats kiosk/ cart, QSR, fine dine and cafes. Of all the formats, the QSR category has the largest share of the industry pie. The USP of this sector is that it falls under value- for-money segment. From desi chaats to pizzas to burgers, this sector is growing at a great pace. While other high growth sectors are facing several challenges to their growth, franchisors of QSR brands are on an expansion spree. According to a few experts, the QSR space also falls under the recession proof category because this sector has been driven primarily by the youth. Foreign brands are also foraying into the Indian QSR sector.

Recently, Italy-based brand Ci Gusta!, a food restaurant chain, forayed into India. The premium brand has a wide product range of yogurts, gelato, soups, coffee and savouries, panini's, focaccia, croissant to complete the Italian food experience. The brand's first franchise store in India is expected to open in Mumbai and Chennai soon. The company is seeking franchisees across North, West and South India. Preferred locations for opening the brand's stores are tier I cities like Delhi/NCR.

After QSR, come small format outlets, which can be made operational in an area of 20 200 sq. ft. Cafes follow suit. The fine-dine category, however, takes the back seat in franchising in the F&B segment, as a huge investment is required in this segment.

Franchising in F&B

Profit hunger in the F&B sector is majorly satiated by the franchise model. According to a recent research report by Franchise India, F&B companies have only 35 per cent of their total units as company-owned and a significant 65 per cent are franchise units. According to Qusai Khorakiwala, Director, Monginis Foods Pvt. Ltd.: “Opting for the franchise route has brought a great deal of advantage for Monginis. To begin with, and most importantly, we did not have to put our own capital at risk. No doubt we would have made more money if we had opened our own stores, but we couldn't have grown so fast. Thanks to franchising, in the past five years alone, some 30 stores have been added. Franchising also gave us an opportunity to focus on business diversification for instance, we were able to start a packaged cake segment.”

Essential ingredients for a successful franchise

Location: A majority of the brands vie for the best location in the market to make their franchise a success. But there are a few brands that turn a futile location into a fruitful one. For example, an isolated transit location can become really popular if it has a McDonald's or a Subway. But 90% of franchisors in India prefer an already developed location. A few factors like high visibility area station, market, main road, next to a very reputed crowd puller (like a mall), parking, etc. - are a few points one should keep in mind.

Localisation: Whether it's a foreign brand or domestic, customisation to suit the taste buds of consumers in varied parts across the country is essential to run a successful business. It is all the more essential for foreign brands to do Indianisation of their entire menu to satisfy the Indian palate. For instance, McDonald's has retained its branding but made the name of its product country specific like Mc Aloo tikki, Mc Veggie, etc. For franchisors in this segment, local cuisine preferences may require, at times, 20-25per cent of menus to vary in which 5-10per cent would be further localised depending on the cuisine of that particular city or town. The franchise business model makes it easier for the franchisor to guide him about the local demands and tastes that further helps in the brand's growth. Localisation must become a part of the franchise system post experiencing the palate of the region.

Standardisation: Standardisation across all franchise outlets is mandatory for each franchisor. The goal for a food franchise system is to achieve uniformity of product and services. Store colours and layouts are designed to be similar, if not identical.

Another significant factor in this sector is whether to supply the franchisees the material from base kitchen or arrange vendors that supply the requisite products to maintain a similar taste. Adhering to standardised recipes is the most crucial part of maintaining standardisation in the franchise system.

For further opportunities and challenges read our detailed features on each sector in the ensuing pages.


Trends of F&B

=QSRs on an aggressive expansion

=Food courts are poised to grow at a rate of 35-40 per cent

=Airports, corporate houses, office complexes and medical institutes are the hot spots for the organised segment

=Franchisors focus on tier-II and III cities

=Emergence of theme-based cafes and restaurants

=More foreign players to foray into Indian market

=Specialty restaurants will witness a surge

=Healthy food options galore

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