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Jun, 15 2013

BEAUTY & WELLNESS OF BOUNTIFUL BUSINESS

Are you zeroing in on master franchising for grabbing a bigger share of India's beauty & wellness sector? If yes, all you require is a knack for managing multiple franchises in a given territory, a strong financial capacity and an extensive market knowhow

MASTER franchising is the most popular expansion way for making easy entry for franchisors who are enthusiastic about marking faster brand expansion. The concept of master franchising is no more restricted to the Western countries. It's now gradually picking up pace in Indian market too.  Compared to the Western nations, the Indian market is still at a nascent stage as franchisors are of the view that it involves huge risks. While for some recognised and budding franchisors, it's the right opportunity to grow faster. So, when is it the apt time to master franchise or when does the company decide to master franchise? Also, master franchising is reckoned to be a feasible business strategy that allows franchisors to mark their footprints in virgin markets. 

 

Making most of master franchising

One can begin with franchising at any stage of business development. But master franchising happens only when the brand aspires to reach customers with a different mindset and in an entirely new location. In a master franchise agreement, the franchisor grants the franchise rights to an entire country or territory and the franchisee is permitted to open franchise outlets and grant sub-franchises to others. It's a two way process in which one agreement is sealed between the franchisor and master franchisee and the other between the master franchisee and sub- franchisees.

The big question is what is truly boosting large investments in health, beauty and wellness sector and in what sense master franchising is successful for emerging brands? Like other sectors, beauty and wellness is also witnessing a trend as franchisors are taking the master franchising route for making quick benefits. Be it about enhancing looks, flaunting your fit body and mind or rejuvenating through a holistic healing via spa therapies, Indians are no more price- sensitive and so are the brands in the business.

In health, beauty & wellness sector, many national brands like Jawed Habib's Hair and Beauty Salon, Strands Salon N Spa, Mystic Spa, Your Fitness Club-YFC, Talwalkar’s HiFi, Nandita's- The Beauty Zone, IOSIS and SPALON are betting big on giving master franchise opportunity. The trend of master franchising is no longer restricted to the international markets; it is slowly and steadily moving into the Indian marketplace too, as franchisors are ready to grab the market's pulse and infiltrate rapidly into unknown locations by appointing master franchisees with enormous knowhow.  However, all brands do not offer the master franchise opportunity.

 

Master franchising: do’s & don’ts

Before you step into master franchising, it's important to ensure that you have adequate financial resources, available funding options, right location, right partner who has vast market knowledge in terms of demographics, brand awareness among customers, knowledge of competitors in the proximity, the educational background of consumers, and the information regarding customers' readiness to splurge on beauty or fitness regimes. Besides, if you are looking to take master franchise, do all the in-depth research in terms of selecting the brand; talk to their existing franchisees to know about the franchisor's reputation in the market and the annual turnover he is having. The master franchisee is the face of the brand. If he doesn't follow the brand's standards as per the given guidelines, there are chances of failure too. The master franchisees must select and recruit their sub-franchisees with extra caution so as to avoid brand dilution.

Master franchising is not everyone's cup of tea and not all franchisors tread on the same route for spreading their robust network.  Talking about the business opportunity, Jawed Habib, Founder, Jawed Habib Hair and Beauty Salon, says: “A master franchisee gets exclusive rights to license all the brands that Jawed Habib owns. When we allot a particular territory to a master franchisee, we expect him to replicate every system and processes that are followed by us at the national and international levels. Jawed Habib's master franchisees have exclusive rights to develop their entire territory in a given period.  The master franchisee is expected to be a mirror image of our organisation at the micro-level.”

Therefore, it is clear that in master franchising, a master franchisee has to abide by all the guidelines as mentioned by the franchisor. On the other hand, The Four Fountains Spa is not in favour of offering master franchise opportunity; rather they offer multiple unit franchise. The brand strongly believes and advocates that multiple unit franchise is the route which all brands and franchisees should take.

While SPALON's Founder Dr Roopa Lakshmi Bhat is quite buoyant about offering the master franchise opportunity to investors who are already in the beauty industry and who know the power of  a workable salon system. The selected master franchisees will be empowered with third party operations in a specific territory. They will also be responsible for recruiting, training and appointing sub- franchisees in their area. On highlighting the opportunity they offer, Amit Chawla, Head-Business & Franchise Development (India), Strands Salons Pvt Ltd, says: “We are offering a chance to be a part of our business, where the master franchisee works as 50 per cent partner for a given area and is the face of our company. The opportunity we offer an investor is to partake in a business concept which has already been fully developed. We, along with the master franchisee, look after training and development needs of franchisees and work with them for prosperity of the business.”

In a master franchise agreement, the master franchisee has minimum targets of selling a brand's franchise in the given territory. Talking about the sale targets, Rizwan Sayed, Director, YFC-Your Fitness Club,says: “A minimum of 10 franchise sale per year is always the optimum sale expected  from a master franchisee in his territory. This number is quite achievable as there are going to be only four master franchisees in the whole country giving every master franchisee a minimum of five states.” In terms of do's and don'ts of master franchise agreement, Rizwan Sayed feels: “A master franchisee should always believe in the brand which he is selling and should not over-commit from what has been promised by the parent company. It's always good if the master franchisee has only one point of focus while taking up this opportunity.”

Amit Chawla, says: “There should be respect for brand image, a focused marketing approach along with advertising and a sound financial background is appreciated.” He feels: “Targets are decided taking into consideration the territory population and diversity of small and big towns, the minimum target starts from 50 salons in three years for the smallest territory.”

While Nandita Sharma, CEO, Nandita's- The Beauty Zone, says: “A master franchisee will surely have more knowledge of the local market than the franchisor. On the other hand, we are well-versed with product and servicing, this will help both of us in developing a proper strategy of expansion and will minimise the costs with regard to establishment structure, marketing, variable cost, etc., and in turn maximise growth manifold.”

According to Vishal Rupani, CEO, Talwalkars HiFi, a person needs to commit a minimum number of 30 units in order to become a master franchisee. On highlighting more on do's rather than don'ts of a master franchise agreement, he says: “Listen to the franchisor because he speaks with relevant experience, expert domain knowledge and ultimately his success depends on your success. Adhere to all brand standards, processes and norms set by the franchisor. Follow all specs on project standards, operations, and manage-ment. This will ensure the highest quality and prepare you for success.”

 

Tackling challenges

Mainly, the master franchisees have to face challenges from selection of right sub-franchisees to finalising the right territory that assures profitability and remarkable customer footfalls, besides, setting up a team for managing operations, scouting for sub-franchisees and further managing relationship with sub-franchisees. According to  Anurag Kedia, Director, The Four Fountains Spa, the brands that follow master franchise route face challenges pertaining to managing scale. There are typical targets set for the expansion, which is agreed between the brand and the master franchisee. Even if the master franchisee does not have a good grip on the business, he is forced to scale up because he is bound by a legal agreement, else risks losing his contract. He says: “There is a high premium attached to exclusivity in a territory. Hence, the investment requirement can be significant for any master franchisee. At Four Fountains De-Stress Spa, we do not charge any franchise fee and hence our franchisees find it attractive to scale up with us.”

 In terms of challenges the brand faces, Jawed Habib says: “Typically, any retail brand that forays into new territories has the biggest challenge to keep its first store up and running to showcase it as a successful franchise model. The second task is to populate the entire territory. Here a lot of factors come into play- geography, culture, lifestyles, socio-economic feasibility, good location, catchment area and so on. These could sometimes become your entry barriers.” To beat the challenges, Jawed Habib Hair & Beauty Salon closely works with its master franchisees in all aspects of marketing, promotion and in successfully creating a scalable business model.

 

Targeted expansion

On confirming their plans for this fiscal year, Jawed Habib, says: “We would be appointing four more master franchisees within this fiscal year. Rizwan Sayed says: “Maximum reach and the benefit of having a local person with a fair idea of the demography and the market-this will help in having better franchise owners.”

 

Conclusion

The bottom line is master franchising is not everyone's cup of tea. It's not a risk-free business. Get into it only if you think you will be able to make the most of it. Rest all depends on the brand's master franchisee. It doesn't mean if the brand is established/emerging you will be able to make maximum revenues. It depends on how you present the brand's image to the customers.

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