Have you ever wondered how American companies like Baskin Robbins, Subway establish business and gain popularity across the world in such a short span? This model is known as franchising which has enabled them to expand their business.
Franchising as a business model has been successful in developed countries and has started expanding its imprint in developing countries too.
Franchising is a business model in which small scale business owners share a single brand name of an established company. The parent company (Franchisor) allows small scale entrepreneurs (franchisees) to use the company’s brand name and trademarks by way of subscription. The franchisee usually pays an initial set up fee and shares the profits in tune with turnover and profits. The franchisor provides support to the franchisee in the areas of advertising and training, which is usually a part of the agreement.
Franchising has been quite successful for years because of the win-win model it incorporates. It offers brand exposure for the franchisor and a business opportunity for small scale entrepreneurs.
Franchising is an economical way of expansion in comparison to setting up a company-owned business abroad because the latter is more capital intensive. It also enables the franchisor to transfer the operational responsibilities when it allows third parties to operate stores.
It is also important to note here that, the potential for revenue growth is more limited because the franchisor will only earn a percentage of the earnings from the third party owned stores nevertheless; it provides an opportunity to improve brand value.
Franchising in India:
Franchising has been around in India for some time now. Ever-changing consumer trends in a market space spoilt by choices, offered by various brands in an era of globalisation ensure ample opportunities for franchising in India.
- Food and Beverages, Grocery
- Consumer Durable & Services
Few notable franchises in India
- Baskin Robbins
- Gold’s gym
- Hard rock cafe
- EuroKids International Ltd.
Why India needs Franchising?
- Provides employment opportunities in a nation where unemployment is one of the biggest concerns.
- Existing franchise models have significant contributions to GDP.
- Encourages entrepreneurship for small scale business enthusiasts.
- The demand for skilled labour could be instrumental in bringing educational reforms.
Why do Global brands think India is a good avenue for investing?
- India provides a massive market potential with the ever-growing population.
- The demand for global products has increased in tandem to the increase in buying power of the middle class.
- India provides economic labour.
What’s so special now?
India has been providing a decent platform for business with relaxed regulations, tax reductions gradually raising its ease-to-do-business ranking.
The government has been adopting an inclusive financial policy to extend the reach of financial institutions across all socio-economic backgrounds in India. Lower lending and borrowing rates, priority sector lending targets with minimal regulation has increased the exposure of the institutions to the substantial populations.
Financial institutions are looking to expand their portfolio by investing in profitable business ventures while adopting stringent provisional measures of the regulator. With proper groundwork, the franchise industry would be a profitable venture.
India’s strength rests in its demographic dividend with earning potential. The earning equates to a disposable income which is a significant economic stimulant. When the demand for quality products from global brands meets buyer potential, it creates a vibrant market place. The recent changes in policies allowing foreign direct investment in India to stimulate economic activities is also an encouraging factor.
So the trinity of a favourable environment, availability of credit and the earning potential of the demography does beg to start a business venture.