Running a successful business and plan to grow it? You may have heard about franchise a business in India, but are unsure about its potential benefits for your company, you will get answers to all your questions here, in case you plan to franchise your business and appoint franchisees across your city first, your state next, top cities of India thereafter and then the entire globe.
Like always, any business comes with certain benefits, challenges and we can help you with the key considerations you would need to know whilst you venture into this journey.
Here are some compelling reasons to franchise a business. Let’s get started.
Five Compelling reasons to Franchise A Business in India
Reason #1. Lower Costs
Franchisees pay a one-time fee to join your business, but unlike employees, they also continue to pay you a portion of your sales during the term of their franchise agreement. This indicates that the franchisee, rather than the parent company, bears the costs of setting up the franchise, training workers, and starting the business.
Furthermore, If the initial business is profitable and the franchisor is prepared to devote enough time and resources to developing an appealing franchise offer, the franchise system can be a very cost-effective way to expand a business.
Reason #2. Simplified Management
Franchisees are in charge of managing the day-to-day operations of their business units, and they are required to do so strictly in line with the Operation Manual and the Franchise Agreement.
Franchisees do not require the kind of meticulous administration that would be required for staff because they have invested their own hard-earned money. As a result, the goals of the franchisee and the franchising company are very tightly related, with the success of one being highly dependent on the other.
Therefore, the franchise network just needs a straightforward, reasonably inexpensive management system. This is often based on the close monitoring by the franchisor of the key performance indicators (KPIs) and the supply of motivational leadership.
Reason #3. Rapid expansion
Franchised networks can typically grow more quickly than company-run networks due to the advantages of self-financing business units and a streamlined management structure as discussed above.
The goal of franchising is to replicate a simple, effective business model, and if the franchisor is willing to engage reasonably in national marketing, the brand can spread swiftly across the country.
Increased sales volumes and better purchasing power will result from this, enabling the organization to demand higher discounts from its suppliers.
Reason #4. Improved Market Penetration
Franchisees are typically well-established members of the neighborhood, either personally or as a result of previous business ventures, and are therefore likely to be familiar with the area.
This may provide them a sizable advantage in securing new local clients for the franchise. They typically reside in the franchise territory, are well-known there, and are perceived as having committed permanently.
All of these qualities, which do not typically apply to business employees, will be extremely helpful to franchisees as they try to break into their local market.
Reason #5. International Expansion Growth Possibility
The franchise system again has several benefits if your long-term goals include international business expansion.
You can rapidly and easily replicate your entire franchise concept in another country using a mechanism called master franchising, leaving it up to the Master Franchisee to modify it for the local market’s language, business practises, and regulatory needs.
This is a very efficient way to grow a business abroad without having to establish branches or subsidiary firms in your target nations.
Now that you have understood how franchising a business makes a difference, in terms of business growth, let us look at the table below to understand the benefits and challenges of franchising business in India.
The Benefits and Challenges of Franchising A Business in India
| Benefits of Franchising for Franchisor | Challenges of Franchising for Franchisor |
| #1. The legal development and growth of your business can be achieved by using the franchising business model. When done right, franchising enables you to find and qualify new business partners as franchisees, giving you the opportunity to expand both your business and your brand. Franchises allow a business to expand more quickly. | #1. Lack of market awareness and education is one of the biggest problems that brands encounter. There should be greater public awareness of the various franchising models. To grasp the fundamental differences between the FOFO and FOCO models, there should be some education. |
| #2. You stand to benefit as a franchisor from an expanding and diversifying stream of income. In other words, you will continue to make money through royalties as your franchisees create their own franchised sites. | #2. Lack of brand awareness and communicating the viability of the business are two other significant obstacles that businesses have while franchising their operations. Consider the fact that 50 franchisees exist in India, and 80 percent of them do not come from the industry. Thus, it is really difficult to get them to the point where they comprehend the business. |
| #3. If you expand your network, you will be able to gain more negotiating leverage and economies of scale with the major suppliers you engage with as the number of your franchisees increases. Franchisees may also contribute money to marketing and brand development, depending on the design of your franchise system, providing you the chance to further market and expand your brand among customers. | #3. Many potential franchisees can be turned off by high capital requirements. To expand a brand alongside the franchise, it is crucial to guarantee that your franchisees receive a constant return on their investments. |
| #4. Your company’s infrastructure, expertise, and brand all have worth that you will be able to capitalise on and put to use. These “business” assets will be used by your franchisees who, rather than just supporting your corporate site, will be investing their own financial resources as well as managerial time in the process of developing their franchised locations and your brand. | #4. The ability to easily replicate their business is the most crucial requirement for a franchise. The main goal of franchising is to duplicate an effective business model. Within three months of signing the franchise agreement, the franchisees are required to fully understand how it operates. Because they’re using their capital to keep alive while they wait for the business to take off, franchisees want to learn a business quickly. |
Here’s an article that was published in ABS-CBN News with talks about business growth via franchising model. It provides the characteristics of a business suitable for franchising. To know more, read here.
Key Considerations every business owner when looking to franchise a business in India
There are several things to consider before moving forward with your plans if you’re thinking of franchising your business.
Five key considerations for every business owner to keep in mind are as below.
#1. Consistency in your business model
For a franchise to be successful, the business model must be continuously lucrative.. Even if your one business is doing well, a franchise requires a successful business plan that generates long-term results.
It is crucial for you to be able to convince franchisees that their investment is valuable and that you are giving them a fulfilling opportunity to run a prosperous franchise.
#2. Replicable business model
Franchise ownership is not a requirement for running a successful business. In fact, this is frequently the case. There are plenty of wonderful businesses that are not fit for franchising. There are other enterprises that might be suitable for franchising, but you must take into account your own role in the venture’s success.
Was your success fueled by your personality or your creativity? Not all franchisees will be like you in terms of temperament, abilities, or skills. You require a replicable business model.
#3. Market availability for your business
A sizable market is required for your franchise. Are there enough potential franchisees who fit your ideal profile?
#4. Fully functional team
Do you have a functional team in place that can enlighten and prepare franchisees? Giving franchisees the resources they need to thrive is one of the key elements in a franchise’s success.
You must have a team that can provide direction and support, as well as legal advice and public relations and marketing.
#5. Sufficient Capital availability
Do you have enough money to cover the cost of starting a franchise? Keep in mind that as you transition from being an owner and manager to a franchisor, your role will drastically change.
It costs money to create a franchise, and the fees you get when others buy their franchises are insufficient to pay these upfront expenses. Before you proceed, a financial strategy must be in place.
FAQs
Q.1. When should you franchise a business in India?
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.2. Why is the franchising business in India good for growth?
Franchising is frequently employed by companies as a low-cost growth strategy. The fact that a new franchised store does not need a capital layout in contrast to corporate-owned outlets is a significant advantage of this strategy. Also, it has been demonstrated that franchised stores perform better than corporate-owned ones.
Conclusion,
Capital, rapid expansion, motivated management, and risk reduction are the main benefits for most businesses entering the franchise market, but there are many others as well.
Get in touch with our consultants at Sparkleminds, for more details on how to franchise your business in India. If you liked our blog feel free to leave us a comment.
