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May, 21 2012

TOWARDS BUILDING A BETTER FRANCHISE MODEL

When a brand is on the verge of growing vertically, there is a checklist a franchisor must follow. He should critically examine a few indicators for its business and accordingly take corrective measures to build a complete franchise-oriented development p

FRANCHISING is one of the most dynamic expansion systems in the current scenario. India is a country with characteristics such as diverse culture, language, business acumen, etc. Till recently the pan-India mantra was primarily the prerogative of international and large domestic corporations. The SME entrepreneur was mainly acting as a supplier (not brand owner) to either an established multi-level distributor channel or traditional retailer/s. Globalisation witnessed another thrust of western brands acquiring a large brand space in Indian market with fair amount of ease, franchising being a major enabler acting as an effective way to counter challenges coming from local cultures and way of living.

Indian franchisors and franchisees have passed through different phases of growth:

i. Apprehensive

ii. Curious

iii. Affirmative

Taking note of the developments that took place in the past decade, the Indian entrepreneur could not have ignored the effectiveness and applicability of franchising to their individual business expansion goals. The Indian franchise industry, however, shows a unique sector-wise distribution map, unlike anywhere else in the world, where education is the most franchised business and also the most successfully franchised business with the country's population, cultural dynamics and economics supporting it.

The success of franchising has made a profound impact on SMEs over the last couple of years, and entrepreneurs today are looking beyond mere growth and are keen to focus more on their core technical areas.

There are, however, some questions pertaining to potential threat to brand reputation, control on the business / service delivery, management of the franchisee, intellectual property transfer, and also countering the limitation of management bandwidth of the franchisor.

Though today an emerging franchisor has many examples for comparison and competition, one also needs to be careful of the fact that India is still at the early stages of its overall franchising cycle, and the recommendations for budding entrepreneurs is to not only conduct and invest in Research and Development but also approach their franchising business with a fresh perspective and a confident outlook to make their business an enterprise through franchising.

Finally, the franchisor should critically examine the following indicators for their business and accordingly take corrective measures to build a complete franchise-oriented development program.

  • Credibility
  • Refined and successful prototype operations
  • Market trends and conditions
  • Differentiation
  • Documented systems
  • Capital
  • Transferability of knowledge
  • Affordability
  • Commitment to relationships
  • Adaptability
  • Return of investments
  • Strength of management

The Indian market is responding encouragingly to the concept of franchising, and emerging franchisors have the opportunity to expand their business methodically through franchising by connecting with willing entrepreneurs.

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