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Jul, 10 2012

Rejuvenating profits the ‘healthy’ way

Healthcare is perceived as one of the recession- free industries with no fear of customer footfalls slowing down in any case. In this exceptionally widespread sector, diagnostic or multi-specialty clinics have carved out a niche by involving franchisees t

UNDOUBTEDLY, India's healthcare sector is currently booming. The key factors propelling the sector's growth are people's focus on leading a healthy life, affordable cost of treatment of ailments and increase in disposable income of the middle class, a rise in medical tourism and substantial increase in health insurance, as people are willing to splurge money on healthcare services. Another factor that has given a boost to the growth of the sector is franchising, as it has helped many healthcare clinics strengthen their brand's network. Like the trends in global markets, India's healthcare too has craved out a niche area in the domestic market.

In the healthcare sector, its sub-segments such as diagnostics, dental care, skin and cosmetic surgery clinics, trichology and other multi-speciality clinics are immensely flourishing via franchising and are offering multifarious business opportunities to doctors, pathologists, trichologists, dentists, dermatologists, physiotherapists and aspiring franchisees who wish to run their chain of diagnostic centres or clinics. Of these, diagnostic labs and dental clinics are the most franchised categories in the healthcare sector and they have been driving rich dividends.

India's healthcare sector offers power-packed business opportunities for franchisees that yearn for setting up their own chain of clinics or diagnostic centres. Take a look below at the three major categories.

Diagnostics industry

With getting a detailed and accurate diagnosis of a disease/health risk from a certified laboratory becoming the need of the hour for hospitals and clinics, India's diagnostics market has been in the pink of health, of late.

In an endeavour to tap India's ever-growing healthcare market's needs, key diagnostic chains like Dr Lal PathLabs, Metropolis Healthcare Limited, Thyrocare Technologies, SRL Ranbaxy, Health Square and Xcyton Diagnostics Private Limited, have chalked out their plans to multiply their laboratories and collection centres by either partnering with existing laboratories or with aspiring franchisees. Besides domestic chains, Germany's largest clinical laboratory, the Medizinisch Diagnostiche Institute (MDI), also has plans to set up over 1,000 collection centres and a logistics network to transport samples across the country. As far as market potential is concerned, India's diagnostics and pathological lab test market has the potential to grow at a CAGR of 18.9 per cent in the period 2009-2013. Currently, there are over 12,000 hospitals and 15,000 diagnostic laboratories contributing extensively to the overall healthcare delivery market in India.

Dental care

Though the dental care sector is still at a nascent stage, it is a thriving segment of the healthcare market that's revving up its revenues by opening franchised dental clinics in every nook and cranny of the country. The dental care industry has tremendous growth prospects in the years to come. As per the statistical data available, the market size of the healthcare industry in India is pegged between 5-20 per cent. Dental clinics own a 10 per cent market share of India's total healthcare industry. Currently, India's dental care industry is dominated by a few organised brands such as Dr Gargs Multi-specialty Clinic, Dentistree, Dentzz and Perfect Wellness (a healthcare division of FX Group). They are tapping the market by opening a mix of franchised as well company-owned centres.

Single & multi-specialty clinics

When it comes to ensuring one's health and wellbeing by taking preventive measures to reduce health-related risks, consumers don't really worry about spending a few bucks. Considering this trend, single and multi-specialty clinics are exploring better avenues to offer multifarious services under one roof. This enhances not only their daily footfalls but also helps in extending a brand's reach to the masses. Nowadays, franchising in multi-specialty clinics is quite a rage. Be it eye care, skin- or hair- related problems, now all can be served at a one-stop shop. In this category, brands such as Praba's V Care, Dr A's Hair Restoration Center, Eleganze Skin & Cosmetics Surgery Clinic have chosen the franchise route for expansion.

‘Healthy’ franchise model

For India's healthcare sector, franchising seems to have become the 'talk of the town' as many single as well as multi-specialty and diagnostic chains all over the country are spreading their wings via the franchise model. For opening an associate collection centre under the banner of Metropolis Healthcare, a franchisee will require an investment of Rs 3.5 lakh and an area of 250- 300 sq ft with toilet as a basic amenity. In the case of the franchise of Gargs clinic, an aspirant will require an investment of Rs 15 lakh and an area of 500-1000 sq ft. In dental care business, one gets a RoI between 70 and 80 per cent.

On the other hand, for acquiring Dentistree's franchise, one must be willing to invest Rs 44 lakh to Rs 60 lakh for an area of 1,500 -2,000 sq ft. In the case of Dr Lal PathLabs, a franchisee will require an area of approximately 200 sq ft and Rs 3-4 lakh of investment for opening a collection centre.

Diet chart for franchise growth

In the healthcare sector, training and operating a brand's franchise by following the standard operating procedures have an utmost role in protecting the franchisor's name. Dr Mir Ali Reza, Executive Director, Dentistree, considers franchising apt for his brand's penetration across the country. About the need for franchising to realise their plans, Dr Mir Ali Reza says: “We have seen and experienced the need and potential of professionally managed dental clinics across different geographical locations, as we are all set to play a larger role by replicating our models and seek positioning across major cities in southern and eastern parts of India.” Ameera Shah, Managing Director & CEO, Metropolis Healthcare Ltd, strongly believes in imparting training to direct their franchisees for successfully operating the brand's franchise. She says: “The training that we impart to franchisees is more in technical areas, largely related to lobotomy and the technical requirements, as per the NABL accreditation, for associate collection centres and quality assurance.”

For marketing the brand, Dr Gargs follows a completely different marketing strategy based on verbal publicity, and the company spends 5 per cent of its profits on it.

Whereas, Metropolis Healthcare supports its franchised collection centres by rendering them support in training, marketing brochures and whatever is needed to facilitate the sales promotion activity.

Testing times

A major bottleneck hindering the growth of the diagnostics industry is a dearth of skilled medical technicians. Other than this, the major competition in the diagnostics industry comes from small labs that indulge in unethical practices involving commissions for physicians who refer patients to them. To deal with this situation, organised labs in the diagnostics sector offer their customers all types of tests, and accurate and timely delivery of test reports that can be downloaded from company's website as well. On how he dealt with the intricacies of the dental care industry, Dr Ruchir Garg, Managing Director & CEO, Dr Gargs Multi Speciality Healthcare & Dental Research Centre, says: “The main challenge faced by our company is that there is no dental insurance company in India to serve dental patients. This is a major drawback for branding a dental chain like ours, as due to excessive competition in this segment, you need to offer something new to your customers to drive them to your brand. Our company is in the process of developing a dental insurance plan to cope with the challenges.”

For Shah, a lack of skilled workforce in this sector is the biggest challenge. “A lack of availability of skills is one of the biggest issues facing the healthcare industry today. Trained manpower at all levels is a big lacuna, and in a services industry good people are your biggest asset. As an industry leader, Metropolis faced a lot of poaching from other companies, as they realised that the fresh talent is best trained here.”

In terms of selecting the right partners, Metropolis Healthcare prefers to partner with clinics/ radiology centres.

Franchising: A way to wealth & wellness

It is anticipated that in the coming years, there will be an extensive penetration of healthcare brands in Tier II and III cities. Presently, Dr Gargs operates five clinics. About their plans to expand further, Garg says: “We are hoping to open more than five centres in Delhi and the NCR.”

Dentistree, on other hand, is looking forward to opening at least 200 centres in India and 50 centres across North Africa, the Middle East and Australia. Currently, Metropolis has an existing network of 85 labs and 600 collection centres. Furthermore, it has plans to add 12 labs, 4 wellness centres, 29 company-owned collection centres and 90 new associate collection centres by FY 2012-2013. Additionally, it is also planning to set up labs in smaller cities of India.

As for Dr Lal PathLabs, they have a network of over 1,000 centres, and moving further they plan to have 2,000 centres by the end of 2012.

The way forward

In the healthcare sector, private equity investments are steadily picking up pace and the sector is anticipated to go into a consolidation phase in future. Franchisors have started tying up with the existing labs and clinics so as to cut on cost related to the infrastructure. Top-notch industry leaders estimate a bright future for the healthcare sector in India. Meanwhile, the diagnostics sector is also set to thrive with a bang, as overall health treatments are based on test reports. The opening of multi-specialty hospitals in the country has been the major driver for the success of the diagnostics sector, as patients nowadays look for quality and convenience in collecting test reports from reputed labs. Over the next few years, it is believed that India's healthcare sector will have a massive potential waiting to be tapped to the maximum.

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