Archive for category: Blog

Big Business in Franchising

Few days ago while walking out of MacDonalds, I wanted to compliment the shift in charge for their usual quick service, the clean look and feel and their ever so reliably delectable burgers. On the drive back, I wondered who was the real owner of the outlet? Didn’t have a clue and probably I’m one of the thousands who visit that outlet everyday but are unaware about the ownership of that store. Enter Franchising business. So we all know what franchising is – where one party allows the other to use it’s trademark or trade name as well business systems and processes.

Take a look around – everywhere there are big boards of franchised business models. From education to personal care to dining to business services and much more – everywhere. Any google search will throw up startling figures on the franchising industry in India. Frachising is valued at USD 13 billion per year growing at about 30% with over 1800 franchisors and 11 million people employed directly or indirectly. Further, all future indicators are pointing a big boom in the coming years.

So why is franchising business attracting the attention of entreprenuers? With global exposure and lifestyle changes an average urban Indian family wants to eat, shop and consume products from the same brands as their counterparts say in US or Australia. Call it the Globalisation of Indians. But there’s much more to it. Entrepreneurism breeds franchising. India is churning out more and more entrepreneurs who heavily rely on franchising model to ramp up the scale of operations. Coupled with this, the relatively low risk profile of franchising business encourages investors to give it a try. For international brands, franchising presents a low investment high return and quick results approach – everything that you’d want as a foreign company when entering in foreign markets.

My simple two point formula for international brands seeking international expansion particularly into India is. First, once you have selected India to be your destination country you must target prospective franchising partners. This can be efficiently done market market entry consultants. Consultants work by promoting a franchise within a particular market through and will often employ a strategy of directly contacting the best potential partners to determine interest. Generally, consultants will not ask the franchisor to visit the country until they have generated serious interest. A consultant will typically derive the bulk of his/her fees based on successful introductions made.Fees generally range between 10 and 20 percent of the initial franchise fees collected from the franchisee. Another option to enter the market is through focused trade missions which franchisors access to interested franchise at multiple levels.

Second, once a franchisee partner is finalised, the relationship between the franchisor and franchisee must be carefully structured. One consideration is whether the relationship will grant the franchisee franchise rights for an entire country, or at least a substantial region. The barriers and costs involved in entering India may make individual business unit franchising unfeasible for the franchisor. In such cases, franchise arrangements can be structured so that the partner franchisee would not only develop individual franchise units, but would also sell franchises much the same as the international franchisor. Franchisors typically are compensated in these arrangements through a combination of initial fees, ongoing fees, and unit-opening fees.

Currently there is no specific legislation on franchising in India. With recent talks of FDI reforms in single and multi brand retail it can expected that franchising will become a sub-industry under retail sector. The franchising business could see some consolidation and perhaps even exodus of the weaker brands. But on the whole, the industry will grow rapidly for the next deacde or so.

So, the next time the Pizza hut delivery is at your door, remember he’s not there just because you crave for “cheese burst” but because they see big business in this patch of the world!!!

Taking the Game to the next level

I recently took a few days off and traveled to an offbeat place about 6 hours north of Delhi with some friends. When we got there we were amazed to see what was in store for us. The “offbeat place”, situated miles away from the nearest highway, had a platter of adventure activities on the taking. There were Quad Bikes; Paint Ball Adventure and Ziplines – definitely not your average Indian vacation items.
Naturally, we did them all and as it always happens – time flies when you’re enjoying every second of it. On the journey back, I wondered how many such places I could recall in my lifetime of vacations. None was the answer and yet it was a no brainer – we probably wouldn’t have had near as much as fun as we did had the place not offered the extra spice of adventure activities.
That brings me to the moot point – why hasn’t adventure tourism taken off in India in a bigger way given that there millions of us who take at least one good break every year. Mindset, could be a partial answer, in that many Indians like to visit inter state family and relatives during the holiday season leaving out the scope for any adventure (pun intended!). But that still doesn’t give the full picture. I suppose what’s missing is the number of quality adventure sport outfits and locales. They aren’t anywhere close to what they ought to be. Plus at a grass root level the curriculum of our schools teaches us a lot minus adventure activities.
Don’t get me wrong – everyone has done paddle boating in lakes or elephant riding but would you call these things the “adventure” part of your vacation? And by the way, did you pay attention to the life jackets provided by the boat company? Were they service worthy or was there a medical id box at hand?
Also, it’s only in recent years, the better schools have started to talk about adventure games for children as part of the courseware not just to build physical fitness but also foster a competitive spirit and team bonding.
For me, the direct opportunity lies in bringing forth adventure sports in India, not just for the “once a year” vacation guy but also for the everyday school girl who has an adventure bone in her body. Everything from equipment supply to training to enforcing world class safety guidelines is a chance to do business in this country.
And for those who think Quad bikes and Ziplines are kid stuff, well there’s “extreme adventure” too!!!