The Hindu Business Line : `Franchising, a way forward for brands'

Chennai March 16 Chasing the deep pockets of consumers, almost all global and domestic brands are engaged in expanding their retail horizon across the country. And, not surprisingly, the franchising route proved to be a quick and easy way forward for them. Franchising, apart from being a preferred mode of expansion for many brands, also opens up an all-new world of business opportunities for millions of entrepreneurs across the world.

There are over 16,000 franchising companies with sales worth $2 trillion around the world. More than 1.5 million franchisees employing over 20 million people directly.

Organised Retailing

With organised retailing making rapid strides to cash in on sustained economic growth, a thriving class of urban consumers and increased exposure to global brands, franchising in India has been growing at over 30 per cent year-on-year in the last couple of years. And, at present, there are about 1,500 franchisees across categories close to 60,000 products and services.

According to Mr Anurag Batra, Managing Director, Exchange 4 Media group and publisher of Franchise Plus (a business opportunities magazine), the growth in the Indian franchising industry is more likely to come from services segments such as healthcare, education, financial services, food and grocery.

However, by and large, it was admitted that organised franchising is still in its infancy in India, learning through trial and error. "Franchising accounts for a meagre 2 per cent of the overall retail industry in India as opposed to nearly 50 per cent in the US," pointed out Mr C.Y. Pal, National President, Franchising Association of India.

The National-level Indian Franchising Summit, organised by Franchise Plus along with the Franchising Association of India, in New Delhi recently discussed various issues relating to franchising model. The two-day summit witnessed speakers including Mr Vikram Bakshi, MD, McDonald's India (North & East); Mr Harsha Agadi, CEO, Church's Chicken of the US; Mr Pattabhi Rama Rao, President, Australian Foods India Pvt Ltd (Cookieman India); Mr Partha Duttagupta, CEO, Barista and Mr Pramod Khera, MD, Aptech, debating a range of issues from emerging opportunities to learnings from global experiences and from building a win-win partnership model to whether a new regulatory & legal framework required for the industry.

Mr Bakshi of McDonald's believes that franchising is a globally proven format for expansion. "It lets the brand owner stay focused on the core development of business, and more importantly it facilitates rapid access to necessary capital for expansion." However, the fast-food brand is yet to try the franchisee route for expansion. "It may happen anytime before the end of the year," he said.

Mr Bakshi says there are certain issues, such as lack of transparency in deals and lack of ethics in the business, that need to be addressed. "To succeed in this business model, there must be clear understanding between partners, a well established network, transparency in deals and innovative products and services," says Mr Bakshi.

Right Partner

In the franchising model, there are certain brand essentials such as logo, looks of outlets (both interiors and exteriors), product delivery standards, service delivery, value propositions and communication tone and style, states Mr S.B.P. Pattabhi Rama Rao of Cookie Man.

"Franchising is an integral part of our business model," he says. The Australian brand Cookie Man currently has 10 franchisees and 20 outlets across major cities in India. According to Mr Rao, the brand also plans 75 franchisees and 350 stores, including 250 express model, before the end of 2010. He believes the trick is in identifying the right "partner" and not just the "franchisee".

Fostering Partnership

Talking about Cookie Man's approach in choosing it's `partners', Mr Rao said there are certain key factors such as planning, identifying, standardising, training and learning, communicating and more importantly fostering a partnership. According to him, there must be an extensive process that involves exposure to business, getting the candidate to work at a store and experience the business first hand.

"We, in Cookie Man, in fact conduct three levels of interviews with relevant panels and even psycho analysis test by experts," he says. All these are aimed at ensuring uniform customer experience, effective monitoring, leveraging economies of scale, to give a franchisee access to standardised systems and training modules, he explains.

Does franchising require a new set of laws to have an orderly growth in India? "Not necessary," says Ms Seema Ahluwalia Jhingan of LexCounsel Law Offices. The issue is not of new laws. It is enough if the existing laws are effectively used. "More laws would only stifle the growth of this model here," says Ms Jhingan.

Creating enough awareness about the model is the need of the hour, argues Mr Pal of the Franchising Association of India. "There is a need to educate people here on the format to have an orderly growth in the industry and to bring in best practices," says Mr Pal.

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