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Jun, 15 2013

PROSPER WITH MASTER FRANCHISING

Master franchising is another route for fetching big profits in a particular territory. Now, retail brands are bullish about striking deals with strategic partners for raking in the money.

IS India’s retail sector set to sizzle with the concept of master franchising?  Reckoned to be the fastest moving sectors after food & beverage, retail sector is segregated into new segments that are sprouting after witnessing a huge surge with ingress of new players looking to spread their charisma via franchising. From corporate gifting, kids' wear, fashion apparel and consumer electronics, master franchising is slowly being opted by a few brands to venture into locations with umpteen potential.  In the retail sector, Chhabra 555, Promart, SkyDeelz, Gini & Jony, Greenlands, Soulflower, Beyond Petals, Sparket and Exotic Décor are a few brands that are willing to offer master franchise opportunity.

Making most of master franchising

To understand their brand's accessibility in locations where they aspire to expand, the franchisors further appoint master franchisees to take hold of market's pulse by further clinching deals with sub-franchisees who have adequate market knowledge. The reason to expand via the master franchise route is to test the waters in the particular region. Compared to a franchisee, a master franchisee has a huge role to play from selecting sub-franchisees with strong entrepreneurial zest to opening the number of outlets in the given timeframe. As a master franchisee is the face of the brand, the brand/franchisor cautiously picks a master franchisee that has extensive market knowledge and expertise in brand development. Talking about the opportunity, Asheeta Chhabra, Head-Business Development, Chhabra 555, says: “Chhabra 555 is looking for master partners with entrepreneurial spirit, strong motivation to grow and earn money, willingness to invest and create a strong goodwill, along with commitment and customer-oriented thinking. For the first six months, Chhabra 555 pays 6 per cent of sales towards advertisement in the territory, and the dealer gets the earning of 23 per cent of sales.  Chhabra 555 also fixes a target sale for every dealer from the second year onwards and has a progressive sales target linked incentive policy as well.”

Franchise requisites

Emphasising the type of master franchisee they look for, Anil Kumar Gupta, MD, Sparket, says: “The master franchisee has to be financially stable to support other franchisees in his region. He should run a maximum of 1- 3 city operations himself and the rest through the franchisees. We don't set a target on sales as we are in the business for a long haul and give lifetime rights to our master franchisees. They in turn appoint franchisees in each territory for lifetime without any fixed sales targets.”

While Mittesh Gaiwala, Creative Head, GreenLands, says: “We are looking for partners and not investors; we help them at each and every stage. Any business opportunity is run purely by passion, dedication and interest level of an individual. Also, we look for a long term partnership / commitment from our master franchise partner.” He also adds: “Once we sign our master franchisee, we open four retail outlets across that region, owned and operated by the master franchisee. GreenLands or its master franchise partner can franchise any additional outlets opened in that region and the master franchisee supplies all stocks.” Talking about the number of sub-franchisees a master franchisee has to appoint, Amitabh Banerji, Head Business & Co-owner, Beyond Petals, says: “The MF has to hire unit franchise (UF) over a period of 5 years and on an average 15 unit franchise has to be hired over that period, with the assistance of the parent company. We have an engagement plan which is a set course for the master franchise to break even in eighteen months, where the MF successfully ramps up business year-on-year to a level of Rs 4-5 cr turnover annually in five years time.”  According to Amit Sarda, Co-founder & MD, Soulflower, “Master franchisees are selected for a channel or region. MF has to be in alignment with the company's vision and business plan.”

Tackling challenges

The master franchisee is the face of the brand and if he does not follow the requisite guidelines, his sub-franchises might fail. Exotic Décor’s brand Notion follows a criterion for selecting the apt master franchisee. Akash Saini, Director-Sales, Exotic Décor Pvt. Ltd, says: “The criteria is to have a master franchisee in the central hub so that the entire state can be tapped and the deliveries to franchise stores, projects can be handled within a minimum timeframe.”

Targeted expansion

As far as fulfilling of targets is concerned, Asheeta Chhabra says: “The targets are directly dependent upon the area of the stores. We expect at least five stores from our master franchisee in a year.

In terms of tapping expansion via the master franchise route, Akash Saini, says: “The intention is to appoint franchisees in all tier I and II cities. The master franchisee would be stocking and supplying to all stores in his state and would be focusing on projects in his state or region.” While, Badal Raja, MD & CEO, Rsolutions, adds, “We are looking for five more master franchisees and additional eight unit franchisees in this financial year.”

In a nutshell, it's apt to say that the concept of master franchising is not really popular with brands as the major barrier lies in picking the right business partner who understands the market well in terms of consumers' buying behaviour, availability of retail space that assures revenue maximisaion, competitors spread across the vicinity and the people's awareness of brands.  May be in the years to come, the concept might pick up pace.

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