Over the last decade, the retail franchising business has seen a seachange directly relating back to the dynamic retail environment we find ourselves in. There are various factors attributing to these dynamics. On a macro level, the main trend is that of consolidation. A traditionally fragmented franchisers market is now giving way to big corporate entities which are specialising in franchising out PAN India effectively for global brands in the local market.
However, while one can observe scale with these players, the numbers are still driven by micro franchisees. India today is the second largest franchisee market with over four thousand active franchisers.
As a mall developer we need to develop a healthy relationship with macro as well as micro franchisers. The Indian Franchise Industry has grown at a healthy rate of 3-35 percent mainly attributed to these big players as well as a continued flux of professionals turned entrepreneurs in mini metros.
To achieve scale for any mass brand – international or local building the right kind of franchisee eco-system is essential. Since the last five to ten years India has emerged as the third largest consumer market and hence it is no surprise that large retail brands are getting attracted to spread in scale here. There is a long-term vision for the franchising eco-system in India hence giving way to hybrid models.
With the ongoing trend towards entrepreneurship one can observe franchising as a stable model over a start-up. Industry estimates close to 90 percent start ups fail to succeed but on the flip side over 85 percent franchisees find success. A tested global model and brand to work with ensures quicker success and return on investment.
Franchising in India apart from developing entrepreneurship is also becoming a noticeable source of employment. With each store employing from five to thirty people the overall opportunity by the industry runs into millions of jobs being created. The sectors for retail franchising which are more popular include F&B as well as fast fashion. Beauty and wellness is another segment which is showing good promise. Local beauty brands like Shehnaz and Javed Habib are seeing growth opportunities alongside big global brands like Tony and Guy who have found good results in retail franchising.
The US market is the biggest contributor to retail franchising in India with maximum demand emerging from American brands. The franchisees support in accommodating and localising the brand to the local market – from a business and customer perspective. Time has proven on multiple occasions, the brands that don’t innovate and localise perish sooner or later. India is a unique market and hence the dependence to be locally relevant for international brands on local retail franchisees makes their presence that much more indispensable.
The fastest way to achieve scale is a well-planned franchising strategy. This however needs to be balanced with a good dose of quality control. The approach needs to be balanced between self owned and franchised stores. Franchisees should be chosen basis repute and be well equipped to provide consistent quality in brand experience. This of course is a much bigger challenge in the service industry where training then plays a very big role as well.
To conclude, retail franchising is one sector which has shown great resilience in an otherwise ever-changing sector. It is now, within itself changing form to be more organised as a sector demanding more from franchisees and businesses alike yet remaining to be the best model for brands to build their footprint.