Is multi-brand outlet (MBO) franchising a boon for franchisors? Is it going to rake in the moolah? Check out how MBO franchising has turned out to be the safest bet for franchisors and franchisees.
As discerning customers' hunger for picking from wider options is indeed becoming a never-ending process, the trend of MBO franchising is steadily catching up in India. Like international markets, the concept is rapidly growing in India too, considering the changing lifestyle and brand awareness among all the strata of society. Leaving the exclusive brand outlet (EBO) concept behind, MBO franchising has now cemented its ground in busy locations such as high-streets and malls.
MBO retailing via franchising is brimming with a horde of opportunities as the concept is tremendously in rage among sectors starting from fashion clothing, accessories, jewellery, eyewear, watches, footwear and consumer electronics mobiles and automobiles. Be it a brick and mortar space or e-commerce portals, the MBO format is flooded with a bag full of opportunities. Currently Titan, Helios, Raymond, Titan Eye+, Mahindra First Choice, Carnation Auto, Kapsons, Van Heusen, The Mobile Store, Skechers, Sangeetha Mobiles, Promart, Urban Shore, Kimaya Kitsch, Siyaram's, OfficeYes.com and Planet Fashion are operating via the MBO format.
Is MBO franchising more feasible than EBOs?
When it comes to thriving brand sales, brands hop on to new boulevards or newer retail distribution formats to pull the customers to their stores. As price sensitivity is no longer persistent in customers' mindset, brands are now going gung ho about pushing sales more in a MBO format and thereby giving a touch edge to competitors retailing via EBOs.
Nowadays, MBO franchising has started gaining ground as consumers like to pick from a wide option of brands with varied price points. Whereas in case of EBOs, only one brand's offerings are retailed and it's meant for only the brand's loyal customers who love to buy from that particular store only.
Emphasising the advantages of MBOs, Jagdish Khattar, CMD, Carnation Auto India, says: “The advantages of branded multi-brand pre-owned car outlets are greater footfalls at the outlets as there is more choice for the customers, more credibility and trust, especially when buying used cars, choice for exchanging any car, warranty and certification of cars helps in reducing the risk pertaining to buying used cars, and customer benefits from the monitoring and audits done by the brand of the franchise and its own outlets.”
While, comparing both retail formats, GS Rajesh, Brand Head, Planet Fashion, says: “Four out of five customers seek a choice of brands, making the multi-brand the largest consumer segment. Most customers come with a basket of brands in their mind, and therefore, prefer to shop at departmental stores and multi-brand showrooms. Planet Fashion is undoubtedly the most lucrative business model for a franchisee, where, under one roof, he can provide a complete wardrobe solution across usage occasions, with most successful and admired brands.”
Ashish Garg, MD, Promart Retail Pvt Ltd, says: “Multi-brand franchising has come a long way in India and many players have jumped on to the bandwagon owing to the market potential.” He further says: “By offering a plethora of brands under one roof at high discounted rates, multi-brand discount stores dominate the marketplace. One of the factors being, a family preferring to head to one destination with various offerings under one roof than travelling to various single brand stores. This can be derived from the depth and width that retailers use for displaying merchandise wherein multi-brand outlets have an advantage of more width with varied products (more product mix) with different styles, options, sizes, colour patterns to choose from.” In case of a mono-brand/standalone or an exclusive outlet, retailers do stock up more varieties under the same brand name.
Both the retail formats, MBOs and EBOs, are completely poles apart. Arun Narayan, General Manager & Business Head-Helios Licensed Brands, says: “EBOs give a brand experience and showcase the brand in its full glory, while MBOs present the broader category story. The purpose of Helios is to develop and grow the premium end of the watch market by creating appealing retail spaces experiences, consumer access to brands (and vice- versa), category visibility, all of which are key to growing the market for premium and fashion watches in India.”
Multi-faceted benefits of MBOs
Business opportunity
Talking about the model they follow for MBO franchise, Arun Narayan says: “Helios follows a management agency model where we look for franchisees with a keen interest and track record in delivering high quality retail operations and customer experience.” Helios provides the stores sufficient empowerment, training, tools and incentives to deliver defined standards that are measured objectively using internal and external audits and metrics.
While, Planet Fashion believes that the association has to be a win-win venture for the franchisee and the company, and hence operates a variety of franchise models tailored to suit specific requirements. It is handled by a team of experienced professionals who evaluate each proposal meticulously before signing up.
On the other hand, Ashish Garg, says: “Promart follows the cash and carry format for all our franchisees, which means that the company has the first right of refusal from the brands as we buy the merchandise upfront on cash. This helps us get the latest stock, colours and designs from the anchor brands which in turn work in our favour.”
In terms of maintaining consistent standards, S Ravt Kant, CEO-Eyewear Business, Titan Industries Ltd, says: “Interactions with our franchisees are undertaken on a regular basis in order to provide the required business training, in addition to participation in strategy development and exchange of ideas.”
Treading over hurdles
Like other business models, MBO franchise is also a tough row to hoe. Running a MBO franchise is not a child's play, rather it involves challenges pertaining to maintaining each brand's standards that is retailed via MBO. Ashish Garg says: “There are many challenges involved when it comes to franchising; retailers often face issues like helping the franchisee understand the concept, logistics, financial regularities, etc. Maintaining the same look and feel in each store, etc. becomes important for which proper education needs to be imparted to the franchisees. Though we are a very cooperative brand, we have a basic set of rules and regulations that we urge every franchisee to follow.”
In terms of challenges the brand faces, Promart feels every entrepreneur comes with his own mindset and might want to follow his own procedures and processes. For this, Promart maintains very transparent relations with their franchise owners, so in case of any complications, they explain their concerns freely but expect the same rapport from all their franchise owners.
Interestingly, Planet Fashion portrays it differently. GS Rajesh says: “Most multi-brand dealers have a tendency to offer an excessive width of brands. This not only increases stock levels but also hampers the customer experience as it leaves them confused. At Planet Fashion we present only selected brands; however, we offer complete selection in each brand. Our merchandisers select the best designs across leading brands and put together an exhaustive assortment.”
On mentioning about the automotive sector, Yatin Chadha, VP - Retail Business (Franchisee & COCO), Mahindra First Choice Wheels Ltd, says: “Unlike a single brand store, which only sells vehicles from that OEM's stable, at Mahindra First Choice, we have to take cognisance of the fact that the Indian automotive market is becoming increasingly dense with 38 OEM players selling 250 models and 2000 variants. This in itself brings a lot of complexity into our business model; every outlet catchment has its own product mix customer demand.” Mahindra First Choice focuses on the three pillars of continuous training, product quality and implementation of its systems which has allowed it to successfully address the challenge. Mahindra First Choice also has three company owned company operated (COCO) super stores, which helps the brand in understanding consumer needs and defining customer experience at its franchise stores.
Commenting on how one can overcome challenges while operating the MBO format, S Ravi Kant, says: “The brand mix and stock mix for each store has to be mapped to suit the customer profile in that catchment. This is done based on the analysis of the sales potential profile of the specific catchment. A rigorous approach towards understanding consumer preferences and ensuring the availability of the most suitable brands / stock mix at the store level helps maximise sales by increasing conversions.”
Rolling out for massive reach
Mahindra First Choice (MFC) is currently having 256 outlets. Going ahead the company is planning to add another 100 outlets this fiscal year. MFC also plans to double franchisees in the next two years taking the number to 500 outlets.
While GS Rajesh says: “Planet Fashion currently operates 170 stores, of which 80 per cent have franchisees involved. By the end of this year, we shall add over 30 stores, focusing primarily on smaller towns, which would be through the franchise route.”
Buoyed by the positive response, Jagdish Khattar, says: “We have got an overwhelming response to the franchise model and we have already signed about 20 centres. Our philosophy is to develop a sustainable business for the franchisees and the numbers will follow automatically. By the end of the FY 2014, we should be having more than 75 locations.”
S Ravi Kant is also keen on adding over 40 new stores this year and these would be across all regions and formats. All new stores planned are through the franchise route only.
On the other hand, Arun Narayan says: “We expect to get to about 60 stores by the year-end; almost all new stores will be franchisee managed. We are also considering handing over some of our existing company stores to good franchisees, wherever feasible.”
Naresh Mehta, Director, Retail BD & Franchise Operations, Retail Division, Raymond, says: “We would be tapping IV and V tiers for expansion. We have a buy and sell model. We would be opening 50 stores within this year. We are looking to tap good retailers.”
In the case of Planet Fashion, they would be adding over 30 stores via franchising, focusing primarily on small towns.
In a nutshell, MBO franchising is the safest route for spreading wings rapidly. MBOs attract more customers as they are able to see through a mixed bag of merchandise of each brand displayed under one roof. It's indeed a feasible investment option for franchisors who wish to scale up their business expansion strategy.
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