Benefits of Starting a Franchise Business in India

India is one the world’s largest and the fastest-growing emerging markets, and franchising has become a successful business model for many local companies. If we go by numbers, India is the fifth largest country in terms of consumer capacity and retail destination. It is the second fastest growing economy in the world after China. The consumer spending in the country has increased to 75 per cent in the last four years and according to business analysts it will quadruple in the next 20 years. However, franchising in India has not yet attained an industry status even though the industry size is USD 7 billion growing at a rate of 25-30 per cent annually with over 1800 franchise formats operating in the country employing over 1 million people in the sector.

Globalisation and market liberalisation has fuelled brand awareness among the Indian masses making the importation of foreign brands to Indian shores an attractive business opportunity for local businessmen. Foreign brands such as McDonald's and Pizza Hut have studied India's tastes and needs and customised their products and menus to suit local preferences.

Many foreign companies consider franchising to be a convenient method of entry into the geographically vast and culturally diverse Indian market, which offers a very favourable franchising environment.

Although in a nascent stage, franchising is gaining popularity in the retail segment in India, more particularly in the areas of food products and drinks, restaurant chains, consumer goods, and computer training centres. Franchising is one way in which a company can take advantage of India’s vast market with a degree of control that other traditional forms of distribution cannot match.

Even though, franchising is creating thousands of opportunities for business owners and jobs seekers, it is still in its early stage of development. Simply to expand a business through franchising is not enough; it also needs knowledge on how to run a franchise business model. In India, the knowledge on franchising is inadequate and there is also no training being imparted to leverage the present status of franchising. We should also remember that India is a multi-ethnic country; therefore, it becomes all the more important to understand the trends and market that governs each region.

What is franchising?

In a nutshell, franchising is a business system where under the franchisor grants a license to the franchisee to use the franchisor’s diverse intellectual property rights,namely, know-how, designs, brands, trade marks, patents, and trade secrets along with the franchisor’s proven name, reputation and marketing techniques to market the franchisor’s products or services in return for a sum of money. The franchisor provides training and continuous assistance to the franchisee.

Difference between franchising/ distributorship/ agency

The terms franchise, distribution and agency are often loosely used. Distribution and agency are the more traditional forms of distributing goods or services.However, they do not allow the principal to exert any real control over the distributor or the agent. The key distinguishing feature of a franchise is the higher degree of control that a franchisor exercises over a franchisee. The franchisor has a say in all important issues such as branding, methodology and mergers.Although corporate entities such as subsidiaries or joint ventures allow as much if not more control than a franchise, they entail a much higher financial risk.

Franchising in various sectors in India

Food and beverages

Some of the well-known brands in this sector that have received an overwhelming response in India include Baskin Robbins, Subway, McDonald's, TGI Friday's, Taco Bell, Pizza Hut, Dominos Pizza, Ruby Tuesdays, Barista, Costa, Wetzel Pretzel, Papa John's and KFC.

A study has revealed that more than one third of new food outlets are operated through the franchise system. The rapid development of mall culture has also encouraged the growth of food and beverage franchises. Fine dining restaurants, quick service restaurants, cafes and juice bars are among the leading franchised food segments in India.

Beauty and health care Fitness clubs such as VLCC and Talwalkers have established chains while hair and beauty salons offering domestic branded products including Shanaz Hussein, Biotique and Habibs, and international brands, for example, L'Oreal and Tony & Guy, have marked their presence through the franchise model.

A rise in the standard of living in India has increased demand for quality health services and has resulted in health-care service providers, spas, beauty salons and clinics opening new businesses in the cities through franchises. Apollo Hospitals has set up large chain of state-of-the-art health-care clinics in India and abroad, offering comprehensive health-care services.

Education

The increased acceptance of the importance of education by the Indian population and the proven success of education franchising in India has led to a boom in the amount of business owners wanting to expand their education brands using the franchise route. According to a recent survey, India is one of the largest markets for education in the world in terms of the number of students, offering vast franchising opportunities. Currently, out of the 1,200 franchises in the country, 32 per cent are in the education sector. Professional and vocational courses in the fields of aviation, hospitality, retail, financial services and insurance capture almost a third of the total share of education provided through franchises, followed by training in the IT sector. Franchising in the pre-school sector has grown particularly in the past decade.

Getting into franchise business is a wonderful opportunity for anyone. According to the experts, franchising business is the safest business as it involves minimum investment with more revenue. That's why more and more people are now moving towards the available franchising opportunities. Buying a franchise of a well-known brand is an excellent option to start a new business from scratch or could offer a quicker way to take an existing business to the next level. This option offers several advantages - not the least of which is an opportunity to latch on to a tried and tested model. A well established franchising brand also affords instant visibility, and with most rules being laid out already by the franchisor.

India now presents huge opportunity for franchising organizations. A number of international and corporate giants stationed abroad always look for the opportunities to launch their franchising business in India. India's vast geographical expanse, multilingual culture, strong and powerful economy and also growing middle class all clubbed together provide excellent franchising and business opportunities in India.

Low labor cost is another main factor that makes India a favorable destination for franchising. The cost of hiring an employee in India is much lower than the west, that's why, so much work is outsourced to India and many companies are setting up their operations here. Hence, if you wish to achieve success and also the revenue then this is the time to hunt and cash on the franchising and business opportunities available in India.

On the whole, India is the chosen destination for franchising as it provides everything one needs to flourish. This is the reason why franchise business is booming in India. Expert market analysts also have predicted that the franchising opportunities in India will continue to grow very rapidly and there will be lots of benefits available to the people who are involved.