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Sep, 10 2012

GAINS OF EXPANDING BIZ HORIZONS

A franchisor, being the architect of his own destiny, needs to anticipate beyond totting up more products/merchandise (vertical growth) in the market. Today, thinking big by expanding horizontally (seeking new geographic locations) is the modus operandi f

BRAND expansion is hitting its stride and we identify some of the most promising brands expanding aggressively. If you wish to find your feet in today's competitive market, buck up and turn to franchising for expansion. To walk up the growth trajectory, re-branding isn't the solution as it dilutes the brand value. Expanding your brand to new geographic locations lies at the heart of the growth puzzle. Here's a look at some of the brands that have grown and are still growing tremendously by expanding via franchising.

Getting lion’s share

As the saying goes that Rome was not built in a day, similarly, brands have formed huge business empires in the course of time via expansion. Manpreet Gulri, Area Development Manager, Subway India, gives the reasons that have triggered the growth of Subway in India. “The chain's steady growth is due to its excellent pool of individual franchisees- entrepreneurs who are growing their business one store at a time. The Subway chain is 100 per cent franchisee owned and operated. They are supported by dedicated development agents and their teams in every major city,” he says. Delhi still has the highest concentration of Subway stores. The chain is expanding in territories of Mumbai, Hyderabad, Bengaluru, Chennai and Gujarat.

One cannot help revealing the brand that has grown tremendously over the last few years. In the last 2-3 years, on an average Ferns N Petals (FNP) has opened three outlets every month and has presented opportunities for penetrating unexplored markets of tier II and III cities. In terms of franchising, Delhi NCR and Mumbai have been the most successful cities for the brand. In Delhi NCR they have 36 outlets and 19 outlets in Mumbai.

The Indian retail sector has been hailed as the sunrise sector with an overall expansion of over 20 per cent a year. The Indian retail market is estimated to be $ 450 billion and one of the top five retail markets in the world in terms of economic value, according to the Global Retail Development Index. Recent statistics peg the market size of this thriving industry at $7.2 billion and it is expected to reach $ 20 billion by 2013.

In view of the healthy projections for this sector, Promart, a relatively new brand in franchising, has massive expansion plans via franchising. “For Promart, the main target has always been the non- metro cities. We want to tap the potential tier II- VI cities and present them with the brands like Levis, Arrow, Mufti, Spykar, Pepe, Flying Machine and many more at affordable prices. Promart also follows a cash and carry model, that is, upfront purchase of goods from the brands involved. This helps in availing of the latest merchandise of the season, colours and sizes as per our requirements, along with higher discounts to consumers. We also follow a cluster strategy which cuts down logistic costs further,” asserts Punit Agarwal, CEO, Promart Retail India Pvt Ltd.

Franchise scoops

Increasing competition among players with global aspirations is the sole reason that the brands wish to broaden their boundaries. With franchising, it becomes easier to grab a big share of the consumer pie.

“Presently, FNP has 114 franchise outlets pan-India and they are of course profitable as our franchise programme is very well tested and a proven formula, and right from the initial stage from the sourcing of merchandise to the training of manpower-- everything is provided by the company,” says Vikaas Gutgutia, Founder and MD, FNP.

Mentioning about their favourite city where they would like to expand further, Gutgutia says: “Bengaluru is one of our favourite destinations. We already have six outlets there and we want to have five more outlets in the city. As a large city and growing metropolis, it is home to many well-recognised colleges and research institutions, IT giants and has emerged as a global business hub. Considering the higher standard of living and the increasing wallet size, we aim at offering higher customer delight with the best of our services in Bengaluru.”

Subway is also not far behind in this race of expansion via franchising. With 286 operating restaurants in the country, 60 per cent of their franchisees own more than one restaurant. The planned growth of the brand in India is fuelled by the chain's appeal to its young and wellness-focused customers in tier-I cities. With increased level of visibility and awareness the brand is also actively pursuing the second-tier cities for added growth.

In the beginning of their journey, Promart has already signed 50 franchisees pan-India in the states of Punjab, Haryana, J&K, Maharashtra and Rajasthan, which are going to become operational within the next 3-4 months.

The road ahead

While expanding, the franchisor needs to make the ride of franchising smooth for the franchisee as well. Subway holds regular meetings for updating the franchisees with certain key procedures/processes, review of the operations management, local marketing planning and supply chain developments. “We have a regular reporting system and we monitor activities of every franchisee very carefully. If any franchisee is struggling we have programmes that can assist him to revive his business. Some franchisees in our system have successfully utilised these marketing programmes in the past. All our restaurants are 100 per cent franchisee-owned businesses. We have aggressive growth plans for opening more than 500 restaurants by 2015 (1000 restaurants in the next 10 years),” says Gulri.

After seeing the current positive response that FNP has received from tier-II and III cities like Coimbatore, Tirupati, etc., the company is encouraged to concentrate more on these cities and explore multiple outlets. For instance, recently they have launched second outlets in cities like Raipur, Kanpur, Surat, Bhubaneswar, Mangalore and Coimbatore. The brand's wish list also extends to Indore, Bhopal, Bathinda, Ahmedabad, Mysore, Cochin and Trivandrum. It plans to open about 200 outlets by the end of 2013 and also go international very soon.

The store size of any FNP outlet should be minimum 250-300 sq.ft. The franchise store should be located in the market which has high footfall or the place should be prominently visible and easily accessible. The store has to be on the ground floor with mandatory parking facilities.

In terms of investment, the opening of FNP franchise outlets in metro cities will need Rs 10-11 lakh, whereas in non-metro cities it is Rs 8-8.5 lakh. “We have a 'quality control revamp team' in place which revolves round the year to all the outlets and these visit reports give us the idea of the success of the outlets. Moreover, the outlets' monthly purchase of fresh flowers, the magnitude of sales of their merchandise and the quantum of their e-biz also help in monitoring the success of the franchisees located in various cities,” says Gutgutia.

To monitor the success of franchisees, each Promart has a franchisee induction programme that helps a franchisee understand each process in the business. “We look at franchisees in a certain area where we think we will have more footfalls such as high-streets or malls. They must have their own store of about 1000+ sq ft. Promart does the look and feel of the store and the franchisee would, in turn, help in selling the merchandise on the floor. The franchisee must investment a minimum of Rs 15 lakh for a 1000 sq ft store,” says Agarwal.

Missteps to ponder over

Though a brand's expansion generates a positive impact, there are certain risks associated with it. “Maintaining consistency of operations is our biggest challenge when we work with so many franchisees. Every franchisee has a distinct way to manage his/her business and it is therefore difficult at times to maintain consistency across the board,” says Gulri. According to Gutgutia, the main challenges in operating so many franchise stores are expensive retail space, untrained manpower and unavailability of like-minded people. He says: “We have had a couple of unsuccessful stores resulting in closure which further gave us the learning to include the reasons of closure as a parameter before finalising any franchise deal. These experiences in the initial stage of franchising have proved very beneficial and important for making our franchise formula very successful.”

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