Franchising Fuelling SME Growth in India

Written by Sparkleminds

India is set to become a $5 trillion economy by 2025. Small and Medium Enterprises (SME’s) are going to probably play the biggest role in this growth. The initiatives from the Government of India through Make in India, Start up India, Pradhan Mantri Mudra Yojana, and Public Procurement Policy are all aimed at strengthening the fastest growing segment of the economy and Franchise Business Model.

Within this, franchising is going to play its part along with advancement of technology (IT & Telecom development) and logistics. Look around you, and you will see franchised companies offering products and services to you at every step of your consumption. The Kirana stores, the courier companies reaching you with your favourite items that you shop, the pizzas, burgers, dosa’s and roti’s that you eat at your favourite restaurant are franchised. The beauty salon that you go to, the preschool that your infant is just enrolled in, the school in which your child just passed his CBSE, the tutorials that kids are going for advanced courses, the computer centres, the gyms that you go for your fitness, the path lab where your blood is diagnosed, the hospital where you are treated, the list is endless. You name the industry or type of business, and you will be surprised to know that there is a possibility of franchising it or there is somebody out there already on the franchise pathway.

Franchising Fuelling SME Growth in India

More and more SME’s are using the franchise route for expansion in India. It provides instant access to initial capital that the franchises bring in, they get dedicated man power and above all they can focus on their part and leave the last mile to the franchises and all of them benefit from completing their part of the responsibility.

What is so special about franchising that SME’s could leverage?

  • Instant Expansion Capital : The first and foremost advantage about franchising is that SME’s get immediate access to expansion capital, which at most times comes at a very high interest rate or at cost of equity. Franchises bring in their capital and expect to take a return on profit. You don’t pay interest nor have to give away any equity. What more could one ask for.
  • Talent Acquisition: It is very difficult for SME’s to afford top-notch talent. With a good franchise business model and an effective recruitment team, you could virtually get great talent to either market your business or operate it or provide the support you seek. They will also not take salary and will work on a share of profit. Hence, there is no pressure on the franchiser to pay huge salaries to a non-performing team.
  • Market Penetration: You could now start servicing different markets with the help of your franchises. You have instant connectivity with local entrepreneurs playing their role, understanding the local dynamics and providing the platform for any franchiser to enter any new market. It is often seen that the costs of entering any new market is very high, and franchising provides a very reasonable platform to capture newer consumers.
  • Innovation: It is frequently seen that franchises provide great local feedback. The knowledge received from operating in different markets ensures that the franchiser could invest in R&D and develop new products or services which the franchises may be able to sell easily. There is constant innovation as the franchiser has to be on their toes to be market relevant and stay ahead of the competition.
  • Standardization & Accountability: One of the biggest advantages of franchising is that there is great emphasis on documentation. You have proper systems and processes laid down, there are operations and training manuals done to get the franchises to operate the business, laying a strong foundation for standardization of the business. In addition, the franchiser is accountable for the franchises’ profitability (not in the real sense, but morally) and hence has to ensure that all their costs are in place. The entire business operates on set standards and hence provides a great platform for creating a SME that is bound to become a MNC.

Hence, if you are operating any type of small and medium-sized business and are wondering what could be the best way to expand it, then explore franchising and get started with the expansion of your brand?

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