Q: How big is the franchisee business in India Today?

In India, acceptability for franchising is growing by the day and it has a fairly wide industry spread. There are approx. 1150 established franchisors, 75,000 franchisees with an annual turnover around Rs.12, 000 crore and employing around 350,000 persons. Between 2004 and 2007, the franchised Business systems grew in the country by almost 100 per cent, and this proved a positive sign for small business development in India and the catalytic role played by franchising to spur the growth of the system.

The growing middle class in a country is usually the biggest contributor to the growth of franchising in the country. The rising income of the middle class brings forth larger spend by a consumer.

Q: Leading sectors focusing on franchising?

Today the consumer is brand conscious and demands better quality in all walks of life whether it is in education of his child or buying goods from a grocery store. This inevitably gives rise to up gradation and standardization of branded goods and services distributed through franchising format.

In India the highest franchising happens in Education sector followed by Food & Beverages. The most upcoming sector would be Retail particularly fashion franchising as Apparel, footwear, accessories, home furnishing retailers are looking to penetrate in various parts of the country.

The emergence of service sector also plays a vital role in growth of franchising. Services right from Beauty Salons to dry cleaning, travel bookings to bill payments all get organized through the route of franchising to offer enhanced service levels to customers.

Once Small Business sectors begins to be viewed as big income opportunities as entrepreneurs and even corporate aggressively enter into small business domain and add scale to it. While they may open their own stores or service centers in the metros and bigger cities, they prefer franchising as a means of increasing their market penetration particularly in tier 2 & 3 cities where localization is as important as standardization of the product and also because it requires a huge capital outlay.

International brands also appear on the franchise scene from western world and bring more competitive systems to the marketplace making domestic systems wake up and get more aggressive in their approach thus pushing the entire industry forward.

Q:  How can one gain by having a franchisee and the numerous models?

Franchising represents a different approach to starting a business. For an upfront franchise fee plus ongoing royalty payments, the parent company teaches its business model methods to the franchised-operator who shoulders all operating and financial responsibilities of the outlet. Not only will a franchisee be working within a proven system but the instant brand awareness and credibility is another one of the major pros of buying a franchise business. Additionally, a network of support is available to franchisees. This includes technical and managerial support from individuals who are knowledgeable about your specific business as well as the benefit of shared marketing. According to the U.S. Dept. of commerce, Franchised starts have a mere 8% risk of failure compared to 85% for non-franchised start-ups, it is easy to understand Why Franchising is now becoming a welcome business strategy for economic growth in India

There are three distinct models of franchising - Product Distribution Franchising, Trade Name Franchising and Business Format Franchising.

Product Distribution Franchising: Product Distribution Franchising primarily involves a co-operation for the distribution of goods, mostly in retail business. Under what name or how the marketing of the goods takes place does not necessarily have to be regulated in the franchise contract. For E.g.: FMCG Goods, Soft Drinks.

Trade Name Franchising: Trade Name Franchising means that the franchisee uses the trademark/business name of the franchisor in order to sell its own products or services. For example, international hotel chains like Marriot, Hilton.

Business Format Franchising: Business Format Franchising is a combination of the other two types of franchising and is found within various areas of business. The franchisee uses the franchisor's trademark/business name in order to distribute the franchisor's goods or services. The franchise contract regulates, among other things, the freedom of action of the franchisee when it comes to marketing, running the business in general and choosing what goods or services to offer besides the franchisor's range. Business Format franchising is true franchising and is used by business models which combine both product and service in its format. Today franchise companies prefer this Business model because it helps to duplicate the entire experience of a store or outlet in various regions and countries.

Business Format Franchising truly began in India in 1990’s primarily with homegrown companies like courier services and education services who wanted to expand their network. Companies like NIIT and Aptech can truly be regarded as the torchbearers for franchising in India.

Q: Can a small player from the region say a bakery owner start his franchisee and How?

Yes it is possible for any small player right from a bakery owner to a pre-school owner to dry cleaning unit or retail brand, to take franchise route provided the business meets important critical factors of franchising:

1. To sell franchises, a company must first be credible in the eyes of its prospective franchisees.
2. A franchise organization must be adequately differentiated from its franchised competitors. This can come in the form of a differentiated product or service, a reduced investment cost, a unique marketing strategy, or different target markets.
3. A business must transferable to be able to thoroughly educate a prospective franchisee in a relatively short period of time.
4. A concept can be adapted from one market to the next.
5. There should be an existing pilot store to demonstrate that the system is proven and is generating healthy bottom line.
6. The Business systems must be thoroughly documented to effectively communicate it to franchisees