India is a “sizzling” market for franchising. Take a stroll through any Indian metropolis or upcountry market, and the bustling markets will greet you with the best top brands. While the Indian economy has seen many ups and downs in 2019, the franchise industry has had a busy year. Since 2013, franchising in India has grown fourfold and is now valued at USD 50.4 billion. The majority of this expansion can be attributed to professionals, particularly those with an IT background.
The Indian franchising industry is growing at a rate of 30-35% year on year and is expected to reach USD 100 billion by 2024. With over 4,600 active franchisors and nearly 2, 00,000 outlets operated by nearly 1.7 lakh franchisees, India is already the world’s second-largest franchise market after the United States. Multi-unit franchising has increased by more than 36% in the last two years. However, the Indian franchise market is still in its infancy; the industry accounts for roughly 2% of the national GDP (GDP).
This industry is growing rapidly, so let’s answer the question should I franchise my business?
Here are the five try-and-convince signs that it’s time to turn your business into a franchise:
1. Current Resource Restraints
Most businesses choose this option when they lack the time, money, or personnel to expand their current operations. Franchising allows a business to expand without incurring new debt.
Franchisees pay the initial costs of launching the business in new locations, so expanding the current business model costs the franchisor very little.
2. Company Credibility
Companies will also choose to franchise if they have a track record of public approval. When your product is recognized as an industry leader, it’s time to take your brand to the next level.
3. Unique Product or Service
Companies with a sustainable advantage benefit from the franchise model. These are the businesses that offer a unique service or product that isn’t going away anytime soon. They (and their franchisees) can distinguish themselves from their competitors.
4. Replicable Business Model
A company that can succeed in the “next town over” is another ideal franchise. Do these businesses have systems in place to manage services on an immediate basis? Your franchise will thrive if you have procedures in place to quickly teach someone how to operate your business model.
5. Demonstrated Profitability
Franchises that can generate a return on investment of 15-20% are generally regarded as wise investments. These businesses will provide a good return on investment for a franchisee.
How to Make My Business a Franchise
If your business reaches these five criteria, it may be time to consider franchising. You can begin by taking the following steps:
Create Your Franchise Business Plan
The first step for a company that decides to franchise is to develop a franchise business plan. These plans specify how territories will develop and how quickly they should expand.
These plans should also outline the staffing and support services that franchisees will have access to, as well as any fees they will incur along the way.
Larger companies’ franchise business plans typically address more complex issues. These plans will address issues such as antitrust disputes and channel conflicts.
Expansion costs are routinely assessed so that franchisors can adjust their growth strategies.
Draft Your Franchise Agreement
Make sure you have a franchise agreement in place before opening any locations to franchisees. The franchise agreement is a contract between the franchisor and the franchisee that outlines each party’s obligations to the other.
Franchise agreements are never identical. They contain specific information about the particular business in question.
Business territories and how credit requests will be handled are two items that may be negotiated in the franchise agreement.
Develop a Franchise Disclosure Document (FDD)
The franchise disclosure document, or FDD, tells prospective franchisees everything they need to know about your business.
This document is divided into 23 sections, which franchisees should read through before signing. These sections cover a wide range of subjects, from trademarks to dispute resolution.
Identify Your Franchise Fees
Before the franchisor and franchisee sign on the dotted line, franchise fee terms must also be specified.
Typically, the initial franchise fee covers the right to use the company name and product. These fees may also include training or other on-site assistance to help the franchise get up and running.
What Are Your Next Steps?
Now is the time to ensure that your business model meets the “franchisable” criteria listed above for your franchisees to succeed. It’s also a good time to speak with a franchise attorney about drafting your franchise disclosure documents.
If you’re still wondering “should I franchise my business?” you can find more information on our website. Create a solid foundation now so that you (and your franchisees) can expand your empire and watch it thrives for years to come. To know more, contact sparkle★minds today!
