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Dec, 02 2015

The future of franchising

BOT- build operate transfer, a concept that is used widely by brands in franchising but is still lesser known. BOT briefly means that a franchisor operates an outlet for a specific period of time in order to make it the best for the franchisees and then s

In a way, homework of a franchisee is in advance done by a franchisor. We tell you more on the BOT concept and how it is beneficial for any franchisee?

Via BOT a franchisee gets everything in place. He just enjoys the goodwill and returns of the outlet. The real hard work is done by the franchisor.  A franchisee only pays for the project cost and can quickly start the outlet without hassles. After sometime, he can also join hands with a new partner to operate his outlet.

Future Model

BOT is assumed to be the future's big thing in franchising. It is predicted to be the best move for the franchisees. BOT model was firstly adopted by major construction companies and then it shifted to other sectors and industries. In areas like Europe, BOT is termed as concession. It is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project. BOT is a win-win situation for both franchisor and franchisee. Suppose a franchisor takes a shop on rent in a Mall or high street, he can very well operate it and when it comes in a profitable state; he can sell it to a franchisee. This not just builds goodwill for the brand but also makes a well-built ladder for the franchisor to climb a step up.

India's leading floral and gifting solutions brand, Ferns N Petals (FNP) works on a BOT model and has grown 3-4% via this model. As per Anil Sharma, Vice President, Retail & Franchise for FNP: “For us BOT is an ideal arrangement for awarding franchise for both the parties involved. Franchisee gets a well established, operational store with set fixed clientele and minimised risk. This model develops very unique and strong understanding between franchisor and franchisee as there is more trust involved and vision and mission of franchisor is very well understood and practiced.” FNP has its 9 stores in Delhi and one in Mumbai (Lokhandwala) that are examples of BOT model.

Growing via BOT

Bangalore based CUPPA, has 45 outlets pan India and works on BOT model. It opened first café in Bangalore in 2009 which was a company owned outlet and after that a franchise outlet in 2010.  The brand's strength lies in teas.  It serves a variety of national and international teas along with coffee. Sushil Kumar, Retail Head of the brand comments: “We have a standard design for the café and maintain the same throughout to get the uniqueness of the café. The entire supply of equipments, furniture, crockery, cutlery, uniforms, software etc is supplied from out end. The franchisee need not spend his valuable time in search of the vendors instead he will only have to invest and be rest assured that he gets the products at a competitive price.”

Doing the reverse 

London’s famous luxury salon brand, Truefitt & Hill does not follow the BOT model. It does just the reverse. The brand firstly hands over the entire salon to its franchisee and then it tries to acquire it from the franchisee once it's up and running successfully. The brand emphasises on locations as poor location does not generate healthy profits. The brand has already shortlisted 75 best locations across 40 cities in India and will be opening salons there in next 3-4 years via a mix of franchise and company owned salons. 

Why it's a gain for both?

Franchisor

  • For the franchisor it acts as a great step to maintain his brand's goodwill
  • A franchisor is relaxed as he hands over a successfully operating outlet.
  • Great way to gain entry into rapid growth story of the Indian market.

Franchisee

  • A franchisee is saved from all the hardships and ground work
  • Growing and maintaining an already operational outlet becomes easy task for franchisee.
  • Greater transparency and control for managing resources during operational phase.

 

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