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Oct, 05 2015

Taste success via franchising

Franchise model is the most suited recipe for all the restaurant chains to taste success in India. Let’s dig deep into the article to know what's hot & what's not in restaurant industry. Franchise model is the most suited recipe for all the restaurant ch

A recent Technopak report predicted that the Restaurant sector would grow at 25 % annually for the next few years, which shows that if one aspires to be a food entrepreneur and don’t have the expertise or finances to start their own restaurant, owning a restaurant franchise is an apt thing for them. And when evaluating restaurant franchisee, one must focus on the characteristics of the business from a franchisee's perspective to determine whether this industry is the right industry for them or not. There are some wonderful advantages of having a food business, but there are also a few challenges one needs to be aware of before taking a leap into the industry.

According to a KPMG report, franchisors believe that they are providing adequate support to their franchisees; however the latter are expecting more support particularly in the post launch phase of operations.

Adding to the same lines, Narendra Malhotra, CEO, Oriental Cuisines Pvt Ltd, shared, “Franchisee has a passion for his brand but he looks for profitability, but for the franchisor, it is growth and profitability and lot about the brand.And in our case our franchisee store were much profitable than the equity store of the franchisor.”

“Lots of people think that franchising is a business in the box but it is actually not. We went back in 2012 and redesigned the entire franchised model without doing any franchising business for three years andwhen we thought we are franchised ready we could sign seven Punjab Grills and six franchised deals of others brands. For us, franchising is a business which needs to have system, processes in place,” believed Sharad Sachdeva, CEO, Lite Bite Foods.

However, many big restaurant chains believe that franchising is a critical part of doing business too. If you go to a well-known brand, chances are you're eating at a shop owned by a franchisee, and not the company, whose name is showing outside the outlet. For McDonald's (MCD), 81 percent of its global system is owned by franchisees. At Burger King (BKW), it's 97 percent. Domino's (DPZ), 96 per cent.

“In the ever growing scenario where restaurants and franchisees are expanding, we try to provide standardisation across the products. We have worked on our products, localised them according to the region,” said Akhilesh Bector, Director, Cremica Foods.

However, according to Rahul Singh, Founder and CEO, The Beer Cafe, “Franchisee is more an investor rather than an operator. It is the system and people that brings business to the restaurant.”

Though there are a lot of benefits of franchising a restaurant, such as instant name recognition and built in marketing, a brand identity but buying a restaurant franchisee and then stick and follow to the rules made by the franchisor is a bit difficult.

Restaurant Industry 2.0:

Trials & Tribulations

It’s raining ideas for Indian restaurant industry. More than a dozen 'freshly ripened' ideas are cropping up every month in the market which are worth a staggering Rs 2.04 lakh crore in size. However it goes without saying that such ideas require constant innovation and tweaking perhaps to achieve transformational business growth. More importantly, the uniqueness that a restaurant spells out to its customers through its brand can help them hog growth at 20 per cent annually, that they have hopefully targeted.

“Howsoever successful the concept may be, you have to always keep the value. Nobody today believes in eating the same food, we have to introduce that change, whether in terms of menu change, recipe change, design creation, or improvement in technology. But the thing is, innovation is a must. There is no rule today where we can survive in the fast growing market without innovation,”believes Sunil Kapur, Chairman, K Hospitality Corp.

Technology, eating out behaviour, culture in terms of cuisines and their emergence, has evolved like never before. Today people are moving towards the change they see in the global countries, casual dining and QSR chains alone constitutes 77 % of the overall market. And hence, India is welcoming chains like Jamie's and Food Jockey which is all together a different concept in terms of delivering food.

“The industry has witnessed various food trends in the last two years. 2013 saw gastronomy as the trend, 2014 was year of innovation, new learning and 2015 will be a trend which will be going towards digitalisation and how we can use technology to use our sale and to grow our business. We are in the era of technology led transition,” says Amit Burman, Chairman, Lite Bite Foods and Vice Chairman, Dabur India.

However the prohibitory government policies are a beast of an altogether different size to get rid of. A case in point, there are around 30 licenses one needs to set up a restaurant. Such archaic laws are inherently contradictory to the growth expected by the industry which is 25 times bigger in sheer size than the Bollywood industry in India.

“The regulatory environment change will be the most profitable element for restaurant business. One of our biggest issues is licensing,” shares Riyaaz Amlani, President- NRAI & MD & CEO, Impresario Entertainment Pvt Ltd.

Hence, with the industry moving forward towards change, there are still so much of space that is untapped which can shower great growth to the restaurant business in the country.

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