We are in 2023, and post covid the Indian franchising scenario has evolved greatly, with Manufacturing, Retail, F&B and Education and all types of service businesses showing growth signs. GST has stabilized fairly well and all businesses are getting even more organized by the day.
Across India today, franchising a business has become quite common, but doing so successfully requires careful planning. When we say that something is “common today,” we mean that every business owner who has successfully built his or her company considers growth and expansion as the next logical step for it, and it’s literally possible to do this for every type of company.
In addition, if you are already running a successful business, there is a high possibility that somebody has approached you to give them your franchise. It may be a customer who loves your product or service and knows it will do well in his location as well. Don’t lose these prospective franchisees, and read how all business owners who are searching for information on “how to franchise your business in India” can find assistance in the following guide.
A 7-Step Successful Approach on How to give franchise of your business in India
Following the successful establishment of your company, you have decided to turn it into a franchise. Well Done! But, as mentioned earlier, we do need to prepare behind the scenes.
Start preparing for a franchise in India by following these essential steps.
- Be sure your brand is ready to franchise.
- Safeguard the intellectual property of your company.
- Get a financial disclosure statement ready (FDD)
- Create a franchise agreement
- Provide a guide to operations for franchisees.
- Registering the FDD.
- Create a plan to achieve your sales goals.
Step #1. Be sure your brand is ready to franchise.
The first and most crucial step is to ask yourself more questions about your business.
- Is my company profitable and in good shape?
- Can I afford to franchise and grow my business or borrow the money I need?
- Can I successfully clone my business model?
- Have I ever been able to successfully grow elsewhere?
- Do I get what it takes to promote and sell franchise opportunities?
- Do I have faith in my abilities to guide and support franchisees?
Don’t worry, the answer may not always be yes for all your questions, but it is always better to get honest answers, which can get you clarity about your weak spots, which you can rectify well before establishing your company as a franchise business.
Step #2: Safeguard the intellectual property of your company.
Protecting your business’s IPs generally means protecting the trademark of your business. You must get your brands trademarked and registered appropriately before starting this journey. This is crucial in order to preserve your brand’s integrity and uniqueness. You will grant your franchisees the right to use your intellectual property, including the brand name.
Don’t forget that this can be risky if it is not properly protected. You may require the assistance of a professional to help you at this stage.
Step #3: Get Your Disclosures of Financials, P&L & Balance Sheets in Place.
Without it, you must not franchise your company to another person. This is a key document prepared by every franchising business. In the USA The FDD is divided into 23 sections, which cover topics like the company’s history, finances, intellectual property (IP), partners in business, territories, trademarks, exit and termination clauses, and much more. However, In India we do not have any such disclosure compulsions. However, you must have your P&L and balance sheets in place and be open to the idea of sharing your numbers with prospects who want to buy your franchise.
Step #4: Create a draft franchise agreement in India.
This is a document that binds both parties—the franchisor and franchisee with certain expectations from the franchisee. In order for them to get aligned with franchising, it is important that the franchisee reads the agreement carefully before signing so as to avoid any issues in the future.
Basic elements of the franchise agreement include:
- Upcoming and recurring franchise fees
- Renewal terms of the agreement
- Termination and post-termination clauses
- Any transfers to third-party clauses
- GST & Other statutes and compliances.
- Timeline to begin the franchise
- Sales target minimum requirement (if any)
- Territory protection clause
- Inventory and equipment specifics
- Mediation and arbitration clauses in case of disputes
- Non-competence agreements
Step #5: Provide a guide to operations for franchisees.
This is a guide that will include the day-to-day operations of the franchise. Confidential, preferably digital, and easily changeable are easy ways to understand how an operational guide is to be prepared. This is not a legal document, but it is part of the franchise agreement.
Always remember, the operational guide is mandatory if you want your franchise to follow exactly how you run the business.This is initially prepared in the form of standard operating procedures (S.O.P’s) and then detailed franchise operations manuals need to be done.
Step #6: Registering Your Franchise Agreement In India and Your Domains.
Depending on the state you live in, you can find out, as per the laws, if the local laws, you will have to print your agreement in your legal documents provided by your bank or at notary or gazette centers. You can get your franchise agreement registered by paying the necessary stamp duty. Nevertheless, it is always better to check with your lawyer about the franchise agreement registrations in your city of India.
Step #7: Plan a strategy to meet your sales objectives across all markets in India
Last but not least, setting realistic sales goals. Create unique strategies for your business as India is complicated and needs a lot of customization from one market to the other. Consider good ideas to achieve your set targets within your micro markets in which your franchisees will operate. Furthermore, you can also make use of a marketing tool in the beginning that will serve to grab attention.
Did you know that the best time to franchise your business in India has come? Well, yes, this year is predicted to be good to franchise your business in India. An article published by Amit Nahar, CEO of Sparkleminds, tells us about how the Indian economy has grown tremendously with the rise of franchise business and how you can turn your business into a franchise . Click right here to read about this article.
Points to consider before you franchise your business in India
The franchise businesses that fail often start off with five problems. Hence, think about these five factors before attempting to franchise your business..
#1. Estimate your return on investment (ROI)
Does your existing model earn a decent income? Deconstructing a franchisor’s business plan frequently reveals that it isn’t very profitable. To delve deeper, we must consider the investment necessary to generate the desired profit.
One of the most important metrics that most franchisors seldom take into account is this profit-to-investment ratio. Nevertheless, it is perhaps the most crucial factor in deciding whether or not to franchise your company. No matter how big or how many sites a franchisor has, it is also a vital metric.
#2. How difficult is it to make a profit?
Maybe we discover that our company has a fantastic profit-to-investment ratio. Great, but keep going. How difficult is it to make that money? How much time will it take? Work on this before taking the leap.
#3. Does the success of your business depend on you?
A franchisee opening in a new market won’t be aided by a franchisor’s personality, drive, or established reputation in their own area. Your franchisees must support a tried-and-true marketing strategy in order to bring in and retain customers. They aren’t interested in your motivation, relationships, or personality. Check, does your business have this independence?
#4. Does your business have a secret ingredient or USP?
It doesn’t necessarily follow that your success in your local market will translate to success abroad. Many factors can contribute to success in your local market, including your charisma and personality, a lack of local competitors, and your network.
Your product or service must have a secret ingredient or a Unique Selling Point—something radically unique that makes buyers want to buy it—to ensure franchising success. Your idea might be the first of its type.
#5. Have you made an investment in your own brand?
We discover that hardly any new franchisors have well-developed brands. Even though you may have invested years in creating a fantastic local business, your brand may be uninteresting, outmoded, or dull.
How do you do it? Making sure your brand is distinctive in how it appears, sounds, and how you provide your product or service requires investment on your part. It also helps if the colors and emblem of your brand are stunning or visually appealing.
Franchise Your Business FAQs
Q.1. What does it mean to franchise a business in India?
The act of replicating a profitable business concept across numerous locations is known as franchising. In order to start the procedure and advance towards the start of a new franchise, you, the business owner and franchisor, would create a franchise agreement.
Q.2. Is it worth turning your business into a franchise?
Only if it fits with your long-term growth objectives and plan should you consider franchising. Only franchise if your objective is to grow your brand and create a structure to help and support your future franchisees.
Q.3. How do you know if a business is ready to franchise?
Understanding what franchising means, establishing your goals, determining the strength of your business and understanding any costs involved in franchising your business can help business owners know if they are ready to start a franchise business.
Conclusion,
In the end, deciding whether or not to franchise your business comes down to whether or not it is prepared for franchising and whether or not it fits with your long-term growth objectives. Most successful business owners hire experienced franchise consulting firms to guide them through the entire process. The smallest of business owners can easily hire the top franchise consultants in India like Sparkleminds, and they will ensure that you save a lot of time and money and save you a lot of costly mistakes while franchising your business.
Speak to our consultants at Sparkleminds to help you franchise your business in India. We can also help you market your brand on our portal, FranchiseBazar which can attract investors looking to start a franchise business in India.
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