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Franchise 2015-09-22

How scalable is restaurant franchisee in India?

The Indian franchise industry is expected to grow 30 per cent annually. The figures of total franchising industry is believed to have reached $ 24bn and focused to touch the $ 35bn mark in 2020.

By Deputy Features Editor
How scalable is restaurant franchisee in India?

Food in India is as diverse as its culture. Just walk a mile; you can feel the difference not just in language and attires but in tastes as well. Indians’ love for all kinds of foods makes restaurants a good business idea. So, what better way than a restaurant franchise to enter and expand in the flourishing food industry.

Today, several leading global food brands, such as Dominos, McDonald's, Yum Brands, Baskin Robbins and Subway, have already established their strong presence in India by adopting the franchise route. KPMG India report says, the Food and Beverages sector is expected to grow at 9 per cent by 2017 from 5 per cent in 2012, opening about 27,000 franchised outlets.

As per Murali Krishna Parna, CEO, Sagar Ratna, “Restaurant franchise is an important channel for speedier expansion and can be used if appropriate systems and processes are in place.”

With restaurant franchising gaining momentum and finances coming from all corners of the globe, the industry can expect a hefty growth in coming years.  According to the latest report by Francorp, “The Indian franchise industry is expected to grow 30 per cent on yearly basis. The figures of total franchising industry is believed to have reached $ 24bn and focused to touch the $ 35bn mark in 2020.”

Building long-term relations

Long-term sustainability is an important aspect which a business demands today.  And hence, to enter into any partnership, it is an essential area to be looked upon. According to industry experts, franchising in itself is a partnership and it’s important that in a partnership for long-term sustainability, the vision and goals need to be aligned. Though in Joint Ventures, an involvement of fewer people need to be aligned, but just like in Chinese Whispers, one is not sure on the next level of franchisee, what their understanding would be. It’s therefore important for the brand to stay as close and direct with the customers ideally, but good systems and processes can also help achieve the same objective.

Commenting on the same, Unnat Varma, Pizza Hut India said, “We are big, highly reputed and global brand and this calls for two things- one-we have to choose partners who can give us scale which means they have capital to invest and they have very strong organisation culture to give similar values and the work culture we talk about. So we need partners who can build such type of organisation- build team, sustain team and grow the business. Second, as we are highly reputed brands, we look for partners who are committed to the long term call and food safety aspects that we follow in the whole of the world.”

However, a Sagar Ratna franchisee needs to operate a 400 to 3,000 sq ft space in an appropriate location depending on the type of format. The chain operates Base Kitchen formats, Service Kitchen formats and Kiosk based formats and operates as per location.

Location...Location...Location

Whenever new brands enter into an unknown place or demography, they take franchising as a route to expand the service as the franchisee being a local partner is well aware about the best location in the particular area where the brand is going to open its outlet. Meanwhile, each store needs to be profitable, because many a times, franchisees don’t average out the profits across stores, for him, his store has to make money.

“We have different formats for different locations. Locations ideally are assessed for business potential based on the Footfalls, Residential households and the type of households, Strength of offices or work places, Competition intensity, Price sensitivity and importance of the location for people to visit (what need). We share our learning on the site selection with our prospective franchisees,” added Parna.

Growth Prospects and Future agenda

India is going to be the largest market for consumer in terms of consumption by 2030. And with this it brings lots of opportunity for emerging players like FIO, Tea Trail, Cha Palace and global chains like Carl’s Jr, Wendy’s and Jamie’s which are entering the Indian market via franchising mode.

Speaking on the same lines, Vineet Wadhwa, CEO, FIO comments, “Way back in 1980 when Wimpy came to India, I was involved in franchising the company which took the sole franchisee and then wanted to further sub-franchise. So, I know, franchising is very in-depth and keeping that in mind, we have now started developing our core strengths. The business plan is very clear, we have worked on the strategy, we are very clear on our terms and conditions and we are actually going to roll out our franchising.”

“We believe that we are sitting in a national opportunity. And we see a potential of 1,000 of restaurants in India in the years to come,” added Varma.

However, there are no set rules and formulas that can lead a restaurant franchise to a hit. But, the critical ingredients of success in restaurant franchising are the ability to trust each other and work so as to not compromise the brand standards for short-term gains.

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