The ongoing economic slowdown may have left many a sector smarting, but it has given a fillip to franchising, believes Gaurav Marya, president of Franchisee India, who is credited with bringing the franchisee revolution to India. The franchisee market in the country, currently worth $22 billion, will almost double in the next 2-3 years, he told Nupur Anand. Excerpts:
What are the advantages of a franchisee business and why should a company go for it?
A company can opt for it for three reasons. First is capital. Not many companies have cash and so, if they want to expand, they can do it with what we call other people’s money. So you can build your stores with other people investing in it. The second reason is operational capability. A business needs a lot of entrepreneurial inputs in smaller areas. Plus there are other issues such as attrition and pilferages which are easier to manage if there is a partner in it. The third thing is time. For instance, Amul has 7000 outlets and they started franchising just three years back.
Why aren’t many companies opting for it yet?
Actually, companies are opting for the franchising route increasingly. For instance, companies are expanding their base in franchising in beauty and salon, hospitality, retail, quick service restaurants, education, health care all these sectors have adopted franchising. Big companies from Titan to DTDC are using the franchising route, it is just that we don’t notice it.
So in the consumption space, out of products and services, what proportion could be franchised?
Out of smaller businesses such as Bata, Allen Solly, Louis Philippe and Baskin Robbins in the products and services space, almost 80%, if they take on expansion, do so via franchising. Among the chain stores, almost 80% expand via franchising.
One hears of quality changes in franchising.
See, as a consumer you’ll never figure out. Plus if a franchising store is structured well, then also there are no challenges. You have to understand that an entrepreneur who has his own money invested in the business will be more concerned about growing it and ensuring good delivery vis-a-vis a manager who the company is paying Rs15,000.
What are the new sectors looking at franchising?
Several sectors in the services segment are going for franchising. For instance, the real estate broking business is adopting franchising in a big way now. A lot of the broking business is done via mom-and-pop sores so the trust level is less.