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Sep, 05 2016

The Beauty of Franchising

Having a franchise outlet of a branded company offers more of leverages, Find out how inexperienced entrepreneur can also start their successful retail outlet in the segment through franchising.

Not only have salons witnessed increased footfalls, the entire beauty & wellness industry is seeing a transformation like never before. Not just global brands are foraying into the country but the investors’ community has been growing exponentially and is supporting start-ups and e-commerce portals.

Presently pegged at Rs 6,000 crore, the overall beauty and cosmetics product market in India is expected to touch Rs 17,000 crore by 2020, growing at a CAGR of 15-20 per cent, as per the recent research of exhibition firm Cosmo Tech Expo.

Franchise: Organise the unorganised

Initially started to fill the gap between high-end cosmetics and beauty products to potential consumers, franchising has taken a front seat in the business. Aspiring entrepreneurs, product distributors and sometime manufacturers, who were aiming to expand their horizons, started taking franchise route for expansion. This was done by creating multiple channels and retails outlets.

Significantly, there were multiple cosmetics brands in the country offering retail franchise. The key players in the category included Modi Revlon, Dabur NewU, H2O, L’Occitane, Nature’s Essence, Lotus Herbals, VLCC cosmetic products, The Body Shop, Shahnaz Husain Group, and others. Shahnaz Husain not only has franchised beauty salons but she also ventured into franchising of the beauty products in the category.

“Our decision on giving franchise rights is based on stringent selection criteria that include sound financial background and several other aspects such as city/town, training, location, etc. The eligibility of the franchisee is discussed and decided as per a personal interview and being given authority afterwards to set up a Shahnaz Husain lifestyle shop and sell our products. The shop has to be in accordance with a personalised style and décor,” informs Shahnaz Husain, Founder and Managing Director, Shahnaz Husain Group.

Similarly, 30-year-old Polish cosmetics brand, Inglot forayed in Indian market in 2008 with franchise partner Major Brands. All set to makeover its image in the country; the brand has plans to open 100 stores over the next four years.

Commenting on the performance of the brand, Tushar Ved, President, Major Brands India has quoted in a press statement earlier this year, “The brand has seen a growth of 18 to 20 per cent over the past seven years. Going forward, we shall introduce new products, invest in on-ground marketing through makeover activities and advertise in print. We do not plan to have tiered pricing for India and intend to continue playing in the premium cosmetics category since it is directly linked to the quality of the raw materials used at Inglot’s manufacturing unit.”

In India, over the next four years, the brand will open nearly two stores a month in order to achieve its target of 100 stores by 2020.

Lack of standardisation, documentation and quality control are some of the key factors faced by the industry which gave birth to franchise retail distribution. Chemical adulteration is another problem which negates the value and USP of these products.

Ayurveda: Raising the bar

Joining the baton was Ayurveda products’ franchise, initiated by none other than Patanjali. The home-grown Ayurvedic product franchise brand has raised the bar of existing market competition one notch high.

Using retail franchise distribution stunt, Patanjali has snatch peach of industry majors like Emami and Dabur. With an impressive turnover of Rs 5,000 crore in 2015, Patanjali has established 5,000 franchise stores in the country.

“Indian consumers perceive foreign stuff with high quality. Since 2005-06, when we established the company, we supported and promoted the fact that Indian products are equally rich in quality. You do not need to be an MNC to bring out good products,” said Baba Ramdev, Founder of Patanjali Ayurveda.

The franchisee of Patanjali is available at about Rs 7-15 lakh for which an area of about 300 to 1,000 sq ft is required. A franchisee can set up the store in rural, semi-rural or urban area as well. A typical Patanjali centre is 500 to 1,500 sq ft in size.

Similarly, various other Ayurvedic product manufacturers are investing in research to produce more effective products as they compete with synthetic brands and are opting franchise retail as their distribution channel.

“Increasing demand for natural and Ayurvedic beauty products over the review period has led to heightened competition in this area. Players such as Patanjali Ayurveda, Dabur India, Emami and Godrej Consumer Products have introduced range of new products, targeting the masses during 2015. However, the mass franchise players like Dabur and Patanjali are expected to continue educating Indian consumers about the benefits of Ayurvedic products through aggressive product promotions and in-store displays. These brands are also expected to focus on expanding distribution over the forecast period in order to increase penetration and reach,” opines Shreyansh Kocheri, Research Analyst at Euromonitor International.

Open opportunity in ecommerce

As ecommerce has gained center stage in the market due to rising internet penetration, franchise distribution of beauty ecommerce is undoubtedly high.

For instance, Sanghvi Brands’ led MyGlamm is one of the online websites offering at-home beauty services and has brought various international products to ease the in-roads for them in the market.

A young and vibrant brand, MyGlamm is breaking up cities in zones so a city like Delhi will have 50 zones, Pune will have 20 zones and a city like Indore will have 8 zones. Each zone will have a MyGlamm Owner, which will offer MyGlamm franchisee. All these franchisees have to manage 15 artists and successfully operate in their respective zones.

“All revenues will be split 80-20 between the franchisee (80 per cent) and MyGlamm (20 per cent). As all the bookings come through the App, MyGlamm will have complete control on every booking and all the revenues, ensuring there is no chance of any revenue leakage,” says Darpan Sanghvi, Founder, MyGlamm.

According to Google India, there were 35 million online shoppers in India in 2014 and now it is expected to cross 100 million mark by the end of 2016. The people using these shopping websites are rapidly increasing, which is an indication of bright future of e-Franchise in beauty products category.

Clearly, the industry is growing at a fast pace owing to the launch of many new domestic salon and wellness chains, as well as, opening up of international beauty salons. This will make the market more competitive and witness more opportunities for franchising.

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