Franchising has truly come of age in India. Not only is the sector bucking the current recessionary trend, but according to a survey carried out by FICCI – Confederation of Indian Food Trade and Industry (CIFTI) – Franchising India Holding, the Delhi National Capital Region (NCR) boasts of having 70 per cent brands of 408 brand franchisors.
Western India with 386 brands, bulk of them from Mumbai and Gujarat occupies the second spot, followed by southern India with 250 brands, mostly in Bangalore and Chennai and the eastern region with 58 brands, majority concentrated in Kolkata, disclosed the study.
The study also notes that a majority of the franchising activities are in the northern states, especially in Delhi and the NCR followed by the western region – Mumbai, Pune, Surat, Ahmedabad, Jaipur Udaipur, Indore, etc, where the franchisors want to operate.
According to the study, the per capita spend in northern India is much higher than in other states and this drives the franchisors to expand their operations in the region.
The central and southern cities like Thiruvananthapuram, Chennai, Hyderabad and Bangalore are the indisputable destinations where franchisors want to have their footprints but there is relatively less franchise activity in the east and north-eastern states except Kolkata, Patna and Bhubaneshwar, added the report.
The report further points out that recent trends indicate that the franchise system can grow strongly in times of recession. While other industries are constrained to lay off people, franchisors are having a busy time as they are recruiting new franchisees and they also need more professionals in their organisations, now more than ever before for planning and managing their network growth strategy. According to the report, the total number of people employed today in business format franchise systems is estimated at 9.5 lakh in different categories – permanent full time employees: 7.5 lakh; permanent part time: 80,000; and casual: 1.2 lakh.
The report mentions that over 30 per cent of new food outlets which are coming up in almost all the cities across the country are through franchise system, 17 per cent share of food and beverages in the organised sector is operated by franchisors in the country. There are 1200 franchisors at present, out of which 150 are exclusively dealing in food and beverage retail 75 per cent of which are of Indian origin and rest are international. There are around 18,000 franchised restaurants in the country as compared to only 2500 run by company owned by these 150 food franchise companies.
Additionally, the report states that the Indian franchising sector is growing at the rate of 38 per cent per annum with a market size of USD 7.2 billion and is expected to reach USD 20 billion by 2013. There are 1200 active franchise concepts in India and over 100,000 franchisees. Education and retail are two important sectors where franchising is prominent.
The report forecasts that Indian food service entrepreneur is ready with massive expansion plans, which provide thrust to the sector to grow at 48 per cent in the next two years. International food service brands are gazing Indian markets as a profitable investment destination and many among them have already started their operations.
There are 200 food and beverage franchises concepts across the country forming 17 per cent of the total pie. Other important sectors using franchising business model are beauty salons and cosmetics, business services, apparel, education, food and beverage, retailing, tours and travel.
The reports also points out that the biggest challenge for franchise industry is that Government has not recognised it as small business facilitator in India unlike the US. The lack of laws and Government policies thereof is therefore an impediment in the growth of franchising which has a huge potential to penetrate in the depth and breadth of the country and also a system for Indian brands to get exported overseas.