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Jun, 15 2013

MASTERING ART OF MASTER FRANCHISING

Be it business tycoons like Vijay Mallaya, the Ambanis, Tata's or small industrialists, every entrepreneur aspires to take his company a notch higher and stretch the arms of his business across the globe. Franchising came as a breather for almost all indu

LIKE the colours of rainbow the service industry has under its ambit almost all sectors. Be it any industry such as the education industry, corporate gifting, travel and tourism industry, cleaning industry or consumer services industry, many brands have chosen to take the master franchise path. For a layman, master franchise is a franchising contract in which the master franchisor (the owner of the brand name) hands over the control of the franchising activities in a specified territory to a person or entity called the master franchisee.

For the CMD of Aloha India, K Kumaram, master franchising addresses the segment of entrepreneurs who aspire to do business on a large scale. Elaborating on the business model he says that the expansion is a multifold process which happens as a ripple effect. Master franchising and subsequent sub-franchising employs a multi-layered approach to the business which allows aggressive expansion as the master franchisee appoints a network of sub-franchisees who in turn promote the business for their own units. He explains that appointing a master franchisee also permits penetration into a relatively unfamiliar market through a local person who knows the region well, understands the local market trends, the people's language and cultural factors which contribute significantly to the development of the brand and spread of the product.

On what master franchising is, Anup Jaju, MD, Wonder sheets, India, says: “Master franchise gives a chance to the company to tap very serious customers, who can focus on repeating the success models in multiple cities, areas or states. Also, it helps in better economies for franchisees, hence they can leverage on their costs and management. The company or franchisor also gets a chance to expand in a faster way entrusting the penetration to the master franchisee of the area, city or state. In all, it's a win-win situation for both franchisor and franchisee.”

Vivek Gupta, Founder & CMD, Iktara Kids, feels that master franchising is the best way to expand across the globe. He says that when the need is to expand on a pan-India level, one needs local players who believe in the business concept and can give service on a local level. That's where the concept of master franchise comes in. One has to see the service and logistics of the business and sitting in Kolkata or Delhi one cannot give service to franchisees on a pan-India level. So they appoint a master franchisee at the state level so that they can take care of the area franchise (district level) and unit franchise (per location) in terms of service and quality.

Bright prospects in India

But how feasible and successful is master franchising in India. Aloha India's Kumaran firmly believes that opportunities are immense in India as many businessmen are looking forward to starting new enterprises. This particular form of franchising offers the opportunity for the franchisee to participate in a business model that has already been proven successful. Among other benefits of master franchising Kumaran says that rather than being alone in a business venture, the master franchisee usually receives continuous support and training from the experienced franchisor. Further, the franchisor typically passes on up-to-date technologies that can be useful in building the business.

Opportunities in India are immense if tapped properly, feels Gupta. “Generally, a lot of companies see master franchising as a stepping stone to have their presence felt in a state /district without actually understanding the way of doing it. If the master franchisee is taken into confidence and a proper road map is shown to him, he can be a real asset to the company's growth,” he says.

Opportunities on cards

As master franchisee Aloha India is looking for partners who will help them carry forward their objective of spreading the Aloha concept of providing a holistic whole brain development of children with the help of their internationally accredited programme. To be a master franchisee of Aloha, one must have a keen interest as an entrepreneur and a positive attitude to work while maintaining quality. The master franchisee should have the will to devote his time and make Aloha his main activity. He should also be the type of person who is actively involved and has a high degree of visibility in the community. An ability to hire and retain employees is a valuable asset as the franchise grows. He should be a visionary and will need to expand the business to take it to the next level. He must be flexible, organised and have an outgoing personality. About finding master franchisees Jaju of Wondersheets says: “We are targeting master franchisees region wise, state-wise as well as country-wise. We can club various business territories and make a considerable region for a master franchisee to have a complete pie of the business of that region.”

Gupta of Iktara Kids says: “We are looking at people who have high aspirations in life, have fund backing and who are looking at second line of business. People need to be dedicated to this business and allocate time, money and energy.”

Expansion spree

Every brand seeks to grow into a bigger name and frames its expansion plans accordingly. Wondersheets is expanding in two major ways. First, every year they are adding new products in their manufacturing and distribution line  which have global market and long term growth prospects. Second, they are beginning distributorship in many remaining territories of India, Africa, the Middle East, South America, South East Asia and Europe. Similarly, Aloha is hoping to spread outside India into countries in the Middle East and Africa. Likewise, Iktara Kids is planning expansion in a huge manner and plans to open about 50-75 unit franchises, about 8 master franchises and 40 area franchises at the end of March 2014.

  • One needs to pay a visit to the franchise locations to see how they operate first-hand. It is also wise to speak with other master franchisees to understand how the entire concept works and find out if they have experienced any pitfalls that could be avoided.
  • Some people buy a franchise exclusively on the brand name. They don't consider what will involve in actually operating the business. In reality, it is much more important to pursue a business that one is going to really love.
  • People assume they do not have to work hard to make their business successful. They believe franchise based business will operate by itself and because it is a franchise it is guaranteed to succeed.
  • Franchisees often don't properly read the agreement provided by the franchisor and don't do adequate research by contacting existing franchisees in that system. They should read the franchise agreement so that they really understand what they are getting into.
  • By and large, master franchising can be a very nice business opportunity, creating quite a decent income. However, it is important to find the best match for one's skills and interests so that one has the highest chance for success.

Caution & care

  • Don’t give master franchise to someone out of desperation to open the territory and with just the capability of initial investments.
  • There should be no ambiguity in roles and responsibilities of franchisor and franchisee.
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