Franchise is a motivating business opportunity that can lead to the foundation of a successful business empire. In a straight, one line definition, franchise is a marketing concept adopted by companies for business expansion. Where implemented, a franchiser licenses its know-how, procedures, intellectual property, use of its business model, brand and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, set out in the franchise agreement.

Franchising in India is at a growing stage. As per a report published by Franchise Asia, the growth of the franchise industry in India shows no signs ofslowing down. The sector proved to be highly profitable in 2017 and 2018 is ontrack to produce similar results. India’s gross domestic product (GDP) grew by7.2 percent in the fi nal quarter of 2017. It is expected that this growth willcontinue over the next number of years, reaching an estimated 7.4 percent bythe end of this year and 7.8 percent in 2019. India is now seen as one of theworld’s largest and fastest emerging markets, and its vast population size andcultural diversity have made it a prime environment in which franchising canthrive. The franchise industry is growing at a rate of 30-35 percent per annumand the sales turnover of the sector was recently valued at over US$ 7 billion.

Over the last number ofyears there has been a huge growth in an interest in entrepreneurship in India.Th is has incited growth within the franchising sector, as franchises provide the perfect solution for budding entrepreneurs who wish to invest in the security of an established brand, whilst enjoying the freedom offered by franchise models.

According to a KPMG and Franchise Association of India (FAI) report, the current estimated market size of the Indian franchise
industry is US$ 50.4 billion, an increase from US$ 13.4 billion in 2012. In the US, among the top prospects for franchisors are education, food, retail, and health, beauty & wellness services. Other industry sectors with potential include apparel, travel and tourism, and business/ financial services.

How to Choose Right Franchiser & Franchise

Choosing the right franchise is about matching your personality, skills, experience and motivation to a particular franchise. It’s about getting a good fit between you and the business. Here are a few recommended pointers to be kept in mind while screening prospective franchisees. It is imperative for both parties to be on the same page, as mutual understanding, trust and overall earning is very important in this partnership. Some want to work on long term basis with the franchisers. It is a two-way street, the franchiser needs to be as enthusiastic about the brand as the franchise is.

– Pointers While Screening Prospective Franchisees
– Having an interest in entrepreneurship
– Being able to work independently
– Being well organised and proud of one’s personal presentation.
– Being able to organize and motivate others to get things done.
– Working effectively as part of a group.
– Being attracted to continuous improvement.
– Being trustworthy in giving accurate information.
– Having a realistic understanding of the franchise relationship and background in retail business.
– Drive and passion along with great organizational skills.

Why Franchising is Important

The right franchisee will give the brand market insights and a deeper understanding of what will and won’t work in that particular region:

– Knowing the expenditure involved in setting up the store as well as maintaining a fixed budget.
– Research is crucial when finalising on a retail partner, being aware of the history as well as a proven track-record will help on establishing the partnership.
– Integrity and past experience (track record) also plays an important role.
– Relationship building along with the business
– Brand pedigree
– Proven business model

How Franchising Works in India

India offers mainly four types of entry points for franchises, which includes:
– Direct franchising
– Master franchising
– Regional franchising
– Local incorporation.

Direct franchising is where a company creates a direct network of franchises. This works well for local companies with pre-existing experience in India. However, it can prove to be challenging to foreign companies entering India for the first time. In this case, the owner company directly provides sales and support services to the franchisees. A common example of direct franchise is the franchise opportunities off ered by Monsoon Salon & Spa in metro cities like Delhi, Mumbai, Pune, Chandigarh, Kolkata and more.

Master franchising is where a company awards exclusive rights to develop a foreign brand to a localentity, often accompanied with a large investment made by the franchisor. The owner recruits a specific person or a company to provide services to franchisees in a specified territory which can typically be a major market or even one or more states. The master franchisee is then in charge of developing the company’s brand either through cultivating a sub-franchised network or opening outlets owned by the master franchisee (though the two are not mutually exclusive). A master franchise can own a number of individual franchisees in a certain area, however, the same is not applicable for a direct franchise.Generally master franchise model is adopted by fast food restaurants, real estate agencies, and convenience food stores.

Regional franchising operates in the same way as master franchising but covers only a specific regional area as opposed to the entire country. Given India’s diversity along with the complexity of state-specific laws, many franchisors choose a regional franchising approach.

Local incorporation is when a foreign franchisor forms a subsidiary company and awards it franchising  in India. The American fast food chain Subway, for example, has established a subsidiary in India, which handles their franchising network.

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