A well-baked idea

I run a bakery. Do you believe going the franchise way is a wise decision to improve reach?

New Delhi

Malini, yes, franchising is possibly a great way to move up the value chain in the bakery business in particular. The bakery business in reality is a local business with local needs, tastes, desires and one's palate dictating choice. In the bakery business, small is really beautiful. As the market gets saturated by national players with national offerings that are lowest-common denominator taste oriented, local players will gain with local offerings. Franchising local brands is a great way to go. A national brand with a national brand image, but a local taste relevant to the market it operates in, through a local franchisee, is a great way to go for.

The “Brand” is a thought that lives in people's mind, you said in one of your replies. Then is there not a risk in branding oneself? For example, I do not go for ICICI or Reliance. The products may be good. But the image in my mind is not good. Is branding not risky then?

Badlapur, Maharashtra

Milind, branding is risky for sure. Brands live in people’s minds. And the minds of people are not necessarily rational, and are most of the time fickle. In such an environment, brands face several risks. One of the big risks is that of being negatively associated. Negative association could be a function of the acts of commission of the brand in question, or for that matter due to the acts of omission of the brand.

Worse still, negative association could be a function of the fact that the competing brand has precipitated such negative association. Managing brands is therefore a very dynamic task that needs to approach millions of dynamic minds forever in flux. From all this madness emerges the strong brand of strong repute.

What are the bottlenecks new entrants in the café segment will face? I am planning on entering the market.

Mumbai

Mohit, the one big bottleneck that new entrants will face in the market is the bottleneck of the high-street location that is really prime. The existing 24/7 cafes have done most of their early seeding work in the big cities. To that extent, big cities are saturated, at least in terms of high-street and mall locations. Newer entrants might want to explore the non-traditional residential areas and even the highways for instance. Newer entrants would do well to look for opportunities in new towns and cities. India is a nation of Tier II towns now. The one-million-plus population towns offer a great big opportunity for new entrants. Existing players will face the heat of too much competition for the same piece of real estate as well. This means that rentals are bound to cascade upwards. This will hurt the margins of existing players, who were hitherto operating at competitive rentals, with most landlords keen to welcome a cafe chain of repute, as they normally become marquee clients that attract exciting footfalls. Further, the valuation of the entire neighbourhood of shops goes up when a marquee cafe is located within the premises.

Surely property investors are swung by brand image? How much is this swing and how much does it weigh on the property?

Ahmedabad

Jayant, in terms of weight, I personally propagate a laundry-list to follow. In the beginning the property you invest in is a piece of land. Location is therefore the first priority to look at. And then it is the building. How is it built? What are its parameters? With what integrity and care is it following the laid down law? And then it is the builder and her (why should it always be a ‘he’?) reputation. Each of these parameters has brand image as a small or big part of it. The brand, at the end of the day, is a reputation. To that extent the brand is omnipresent, omnipotent and omniscient in every breath of a builder's enterprise. It cannot be ignored. Weight is a matter of individual perspective, but this is a weight that cannot be ignored. It’s a weight to watch. The key point to remember if you are an investor or a buyer is one of being real and rooted to the ground. A good way of doing this would be to first look at every aspect of the property, and do a final audit of the brand value-add that the property touts. Here, it is good to do a brand integrity check as well. Has the builder gone overboard in his branding? Has he promised the sky, and is he delivering a pot-holed road? How much of fluff is there in his branding, and how much of integrity? I would gravitate towards brands where the brand-integrity norms are palpable. I would be repelled by brands that are gimmicky. I would be repelled by brands that use a brand-endorser who has nothing to do with the property at all as well. My advice then: Do a complete brand value-add audit and be sure that the builder is convincing you, and not “con”-vincing you!

Harish Bijoor is a business strategy expert and CEO, Harish Bijoor Consults Inc. Mail your questions to cat.a.lyst@thehindu.co.in

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