Franchise business could be the shining star of India’s economy

It’s always a smart decision to franchise. The franchise business in India is witnessing a huge growth and is thriving. Ofcourse, there are challenges but overcoming them is easy if proper strategy and model are followed.

The franchise business market has been booming quite a while now. India has become the hot target for many multinational companies who are looking to foray into the country’s domestic market. Entrepreneurs have utilised this opportunity to raise their profits by taking franchisees of companies like KFC, OYO, Patanjali, McDonalds etc.

According to Franchise India, experts have witnessed a growth of 30-35% over the last five years in franchising. It is estimated that the global turnover is around INR 938 Billion. The franchising sector contributes around 1.8% to the Indian GDP and is predicted to contribute nearly 4-5% by 2023.

India is one of the fastest growing economies in the world and there is a lot of potential in the franchising business. With an exponentially growing young population, the franchise space in India will continue to witness a rise in the coming years. The expansion and escalation of these franchise businesses will also offer avenue to other people by crating multiple job opportunities across many sectors.

“The franchise landscape of India is changing due to reasons such as high disposable incomes, strong entrepreneurial activity, the expansion of urban population, etc. The Indian economy is particularly sensitive to new business prospects and franchising has become the way ahead for the growth and distribution of products and services across sectors. India is currently one of the world’s fastest expanding big economies with one of the youngest populations”.?

Why entrepreneurs are rapidly engaging in the franchise business

Reasons could be many for why entrepreneurs are actively looking to delve into the franchise market. As the franchisors are already known in market and have their own brand of products and an existing business model, it makes it easier for entrepreneurs to operate and function as their franchisees.

Since the brand is already well established, the scale and promotion of its products and services does not have to be extensive, thus saving a lot of money which would have been spent on creating an audience and generating a following. Not having to start from scratch is a value addition that saves a lot of time for the entrepreneurs too.

“Franchisors typically give training that is required to run their business models. Franchises outperforms start-ups in terms of success. It may be easier to obtain financing for a franchise business. Buying a franchise may be less expensive than starting your own firm of the same sort. The capacity of franchising to swiftly extend corporate operations into new geographic areas with low financial commitment is the impetus behind its growth”.

What franchising entails

According to a report by Grant Thornton, companies try to expand and diversify their business at an optimal cost. Businesses invest a significant amount in terms of both capital and human resources to run their operations at a particular location. Franchise business models are adopted by these companies for a wider reach and provide better service to their customers. Under the franchise business model, companies authorize entrepreneurs to sell or distribute their goods or services under mutually agreed terms.

Companies like Eurokids, Lenskart, Patanjali etc. are cashing in on this model and are earning good profits. The franchisees get to operate according to a proven model of business and thus have no problem in streamlining their functions to make themselves more efficient businesswise. Training and assistance in marketing are also provided by the franchiser.

Operating a franchise: The hurdles and benefits

Although, it seems easy, the main hurdles arise when the franchise kick-starts its operations. The process of understanding the business model and system of operations is where it gets a little tricky.

People think that taking a franchise would be easy money, which isn’t true. People have to work as hard as a start-up company to establish themselves in the market. They aspire to see growth in the coming years as many start-ups have already initiated operations in franchisee models.

An increase in the number of franchisees also leads to an increase in job creation. These franchisees gave direct employment to 14 million people in 2017. They created additional 1.8 million indirect jobs in the same year.

According to study by IBM and Oxford, 90% of the start-ups in India fail within the first five years while only 15% of franchises fail in the same period. With the business concept already in place and loopholes fixed, the model becomes more efficient overtime and hence, entails low risk and low cost compared to the start-ups.

“To acquire a franchise, one should be sure about their reasoning and research about which franchise they may want to own. Then initiate the application process and understand the details in meeting. Once should also go through the FDD (Franchise Disclosure Documents – law applied by the government) and review the franchise paperwork very carefully”.

One can find thousands of franchise options in the market but choosing the right one is tricky. Here, a franchise consultant or seller can come handy with their years of experience in the field and availability of best options in their hands making the process lot more easier.

Excelling in the franchise business with a new approach

?To operate any business is no easy job. Be it a franchise or a start-up. Both have pros and cons. It is up to one on how creatively one can promote the franchise further to increase the sales. A mix of marketing strategies and creative measures can increase the company’s brand value.

As the owner of a franchise, one will always have to look to expand their business by understanding the local market value and their spending power.

The franchise business is set to achieve many milestones in India in the next few years. We will see more franchisees mushrooming in every nook and corner. The small scale industries should jump on the bandwagon too and further their reach. The government should make operating a franchise a viable option for those in the rural areas as well.

Beside the big cities, the franchises should explore the opportunities in the smaller cities too and spread their wings. If this is done, we will see a stupendous spike in the number of franchisees across the country. These franchises will act as catalysts that will serve to further boost the economy of our country.

About Sourabh Suman

Sourabh Suman is working towards nourishing the franchise industry through skills learned over 13 years in various industry and providing consulting and mentorship to various businesses. He is working with?MicroMentor ?offering mentorship to various businesses across globe.

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