The franchise market has been booming for quite some time now. India has become a prime target for many multinationals seeking to penetrate the country’s domestic market. Entrepreneurs have taken advantage of this opportunity to increase their profits by taking franchises from companies such as McDonalds, KFC, OYO, MakeMyTrip, Patanjali, etc. branded outlets, selling everything from food to clothing.
According to Franchise India, experts have seen a growth of 30-35% over the last five years in the field of franchising. The worldwide turnover is estimated to be around SR 938 billion. The franchise sector contributes about 1.8% of India’s GDP and is expected to contribute almost 4% by 2022.
India is one of the fastest growing economies in the world and there is a lot of potential in the franchise industry. With an exponentially growing young population, the franchise space in India will continue to see an increase in the coming years. The expansion and escalation of these franchise businesses will also provide opportunities for others by creating multiple job opportunities in many industries.
“The franchise landscape in India is changing due to reasons such as high disposable incomes, high entrepreneurial activity, expanding urban population, etc. The Indian economy is particularly sensitive to new business opportunities, and franchising has become the way to go for the growth and distribution of products and services in all sectors. India is currently one of the fastest growing large economies in the world with one of the youngest populations,”
says Pankaj Solanki, founder of Business Bazaar, which helps investors connect with entrepreneurs to become franchisors.
Why Entrepreneurs Are Quickly Entering the Franchise Industry
There are many reasons entrepreneurs actively seek to enter the franchise market. As franchisors are already well known and have their own brand of products and an existing business model, it is easier for entrepreneurs to operate and function as franchisees.
Since the brand is already well established, selling and promoting its products and services does not need to be extensive, saving a lot of money that would have been spent building an audience and generating a trace. Not having to start from scratch is an added value that also saves entrepreneurs a lot of time.
“Franchisors generally provide the necessary training to manage their business models. Franchises surpass start-ups in terms of success. It may be easier to obtain financing for a franchise. Buying a franchise can be less expensive than starting your own business of the same type and there are many benefits of franchising as a business. The franchise’s ability to quickly expand company operations into new geographies with low financial commitment is driving its growth,” Solanki points out.
What is the franchise
According to a report by Grant Thornton, companies are trying to expand and diversify their business at optimal cost. Businesses invest a large sum in terms of capital and human resources to manage their operations at a particular location. Franchise business models are adopted by these companies for wider reach and to provide better service to their customers. Under the franchise business model, companies allow entrepreneurs to sell or distribute their goods or services on mutually agreed terms.
Companies like Pantanjali, Eurokids, Lenskart, etc. take advantage of this model and make good profits. Franchisees operate under a proven business formula and therefore have no problem streamlining their functions to make themselves more commercially efficient. Training and marketing assistance are also provided by the franchisor.
Operating a Franchise: Obstacles and Advantages
“I had acquired my MakeMyTrip franchise by directly filling out a form on their website. Later, I received a call from their salesperson informing me of their business model. Acquiring the franchise was like a walk in the park,” says MakeMyTrip franchise owner Pramod Singh.
Although it may seem easy, the main obstacles arise when the franchise starts its operations. The process of understanding the business model and operating system is where it gets a little tricky and difficult.
“The main challenge is when our store goes live. It takes time to understand the system and the booking process,” adds Singh.
“People think getting a franchise would be easy money, which is not true. We have to work as hard as a start-up to establish ourselves in the market. We aspire to growth in the coming years, as many start-ups have already launched operations on franchise models. We may even soon take over the United States,” he adds.
An increase in the number of franchises also leads to an increase in job creation. These franchises directly employed 14 million people in 2017. They created an additional 1.8 million indirect jobs in the same year.
According to a study by IBM and Oxford, 90% of start-ups in India fail in the first five years, while only 15% of franchises fail in the same period. With the business concept already in place and the shortcomings corrected, the model becomes efficient over time and therefore carries low risk and low cost compared to start-ups.
“To acquire a franchise, one must be sure of his reasoning and his research on the franchise he wishes to own. Then launch the application process and organize a “discovery day” meeting. review the franchise documents very carefully. Either buy or lease a location and get training and support. The process may seem tedious, but partnering with franchise facilitators like Business Bazaar will make it easier and give your business one step ahead,” says Solanki.
“You’ll find thousands of franchise options at Business Bazaar, and you can choose the best one for yourself that you think will provide you with the most benefits for at least a decade. Business Bazaar helps you achieve your goals of selling more units, increasing your franchise business, building your brand image and controlling your costs effortlessly,” he says.
Excelling in the field of franchising with a new approach
Running a business is not an easy task. Whether it’s a franchise or a start-up. Both have their own advantages and disadvantages. It is up to each individual to determine how creatively one can further promote the franchise to increase sales. A mix of marketing strategies and creative measures can increase the company’s brand value.
“As a franchise owner, I always look for opportunities in nearby towns to grow my business by understanding the value of the local market and their buying power: what if I expand my franchise into that local town, by what will it benefit me?” Singh tells us.
“Marketing is about strategies. It would not be wrong to say that there is no magic formula for marketing. It’s a basic procedure that depends on a person’s creativity, approach and vision,” says Solanki.
The franchise business is expected to go through many milestones in India over the next few years. We will see more franchisees proliferating in every nook and cranny. Small industries should also jump on the bandwagon and expand their reach. The government should also make operating a franchise a viable option for people in rural areas.
Apart from big cities, franchises should also explore opportunities in small towns and spread their wings. If this is done, we will see a prodigious spike in the number of franchisees across the country. These franchisees will act as catalysts that will serve to further stimulate the economy of our country.