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Fabindia Overseas to take franchisee route for its expansion plans

Saturday, 26 April 2014 - 8:00am IST | Agency: dna

Fabindia Overseas, backed by L Capital and PremjiInvest, is all set to pursue the franchisee route for pushing the next level of growth. The Rs 1,000 crore retailer of Indian ethnic wear (men, women, kids), lifestyle and home furnishings products, Fabindia will be opening a slew of franchised outlets across the country with the first one set to hit the market in the next 45-60 days, said a top company official.

Instituted in 1960, Fabindia has been only operating company owned and company operated (coco) stores since opening its first store way back in 1976.

Subrata Dutta, chief executive officer, Fabindia Overseas Pvt Ltd, told dna that the company operates 175 coco stores across 73 cities in addition to five international stores and is planning to add 200 stores in India in the next two years. "A majority of the new stores will be opened using the franchise route. This fiscal will see 50 stores getting added of which 20 will be coco and the balance franchisee stores. As for capital expenditure for the 20 coco stores, Dutta said the company would invest around Rs 25 core and will fund it through internal accruals. Next fiscal, 150 new stores will come up and all of them will be

franchisee owned and operated," Dutta told dna on the sidelines of launching their contemporary western wear brand FABELS.

In the next two years, the company will also spruce up its international presence with 10 stores in Asia Pacific and 15 stores in the Middle East.

The company has already worked out a format for the franchisee stores which will be spread across 1,200 to 1,500 square feet area and will largely come up in tier II and III markets. The franchisee partner (owner of the property) will be required to invest to the tune of Rs 35 lakh including merchandise and will have the option to choose the kind of store s/he wants to operate.

"From just apparels to lifestyle to home furnishings, franchisee partners can decide the merchandise depending on the markets they are operating in. We have worked out a profitable model for the franchise operations in a manner that each store operator will get roughly 35% return on capital employed (ROCE) – including the stocks – and should be able to recover the entire investment in a little less than three years," said Dutta, adding that the franchise outlets will primarily cater to tier II and tier III markets while also help the company spruce up its e-commerce play.

While the company has its own e-commerce enabled portal and an exclusive tie-up with Myntra.com, the management is creating a separate vertical to be headed by an e-commerce specialist reporting directly to the CEO.

Designed to be a service to all other verticals, e-commerce will operate as a profit centre. "We don't want e-commerce to be cost centre and will get a share of the profit," said Dutta.

Fabindia, which doubled turnover in the last five years – partly also through a few acquisitions, will now be looking to replicate the same every two years. The addition of new stores will help the company achieve the numbers. "We feel it's a $1 billion opportunity for the company and that's exactly where we are now heading. We currently have 1.3 million customers and our plan is to take this number to 10 million in the coming years and franchising and e-commerce will help us reach this opportunity," he said.

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