FRA N EWS
An Indian Fanchise Association Newsletter
Before you franchise your
business model,Do a
June
2011
ISSUE-6
Vol - I
Franchise Feasibility
Study
Franchising an existing business can
provide significant benefits. For instance,
it provides faster growth, additional
revenue
and
increased
branding.
However, not all businesses lend themselves
to a good and successful franchise model.
Reasons being:
• Problems are faced in aptly
modelling the business as a
franchise.
• There is lack of financial returns
available for a franchisee.
• Business has its own intricate issues
that revolve around different
complex conditions and are hence
sometimes hard to solve.
• It is difficult to assess the current and
emerging competitors that may act
as a threat to franchising a business
model.
In this issue we would bring
the following details:
Page
Before you franchise your
Business Model,
Do a Franchise Feasibility
Study
From the Chairman's
Desk
01-02
03
• The business to be franchised is
primarily dependent upon the
owner's unique skills.
FranConsult: The right
place to do Franchise
Feasibility Analysis
04-05
• The proper knowledge of legal or
licensure prerequisites prior to
franchising a business is also an
inevitable aspect that is at times
must not taken care of.
Fran Buzz
06-08
• A thorough analysis of consumers’
demands and preferences are
ignored.
Hot Event of the Month
09
Case Study: Gitanjali
10
IFA Profile
11
For Indian Franchise Association (IFA) Membership, Contact [email protected]
Before you franchise your business model,
Do a Franchise Feasibility Study
Nevertheless, a feasibility study conducted by a qualified and experienced franchise
consultant can determine if these or other issues might apply. In addition, a well designed
feasibility study can provide a blueprint for franchising a business. Moreover, it makes good
sense to do a study before investing a significant amount of money into franchising.
A good feasibility study helps to uncover any hidden material which is yet not
discovered and explored by the potential franchisor and enables him to critically assess the
future success of his business expansion. A “feasibility study” is essentially and typically
the study of market forces and business issues that can or may influence a franchisor’s
business or franchise opportunity in the future. A feasibility study can provide the following:
• Industry profile
• Competition
• Market size and potential
• Current comparable franchise programs including relevant features
• Recommended franchise or license model
Once the feasibility study is completed by the consultant it is given back to the client
company to become its property. If the decision is not to franchise than the information
given is still of significant value and can be kept aside for future usage.
For more information regarding franchising a business and feasibility studies contact
FranConsult, an initiative of Indian Franchise Association.
Recommended franchise or license model
Current comparable franchise programs
including relevant features
Market size and potential
Competition
Industry profile
For Indian Franchise Association (IFA) Membership, Contact [email protected]
FROM
THE DIRECTOR'S DESK
BREAKING
BOUNDARIES
IN 2011
Gaurav Marya,
Chiarman, Indian Franchise Association (IFA)
Dear Friends,
Let me take this opportunity to introduce you to Indian Franchise
Association's Newsletter - Fra(n)ews. With Fra(n)ews, we aim to bring forth the latest
developments taking place in the franchise sector, thereby increasing awareness in the
franchise community. This newsletter would also act as a platform for all the start-ups
as well as established brands, to showcase the business potential and seek potential
franchisee's attention.
It's my sincere hope that Fra(n)ews would successfully help in
disseminating franchise knowledge to the entire franchise fraternity. In addition,
I strongly believe that it would assist franchisors in reaching out to their potential
investors, and in turn aid the aspiring entrepreneurs to get their desired brands.
Gaurav Marya
Chairman | Indian Franchise Association (IFA)
For Indian Franchise Association (IFA) Membership, Contact [email protected]
FranConsult: The right place to do
Franchise Feasibility Analysis
Are You Ready to conduct the
Franchise Feasibility study?
If Yes,
contact FranConsult
The question of how to franchise a business is
invariably answered by doing a franchise
feasibility analysis and other pre franchising steps. A
franchise feasibility analysis highlights the strengths and
weaknesses of an existing business, giving an overall
thumps up or down to the future business prospects.
An objective franchise feasibility analysis by a recognized expert will bring forth the pros
and cons of the underlying business model. A franchise consultant or an expert raises and
then further answers the relevant questions that help in finding out how well prepared a
business is for franchising. Some of the questions are as follows:
• Has the model been proven sufficiently in the market?
• How profitable are operations?
• Is there enough profit in the business model so that royalty and other payments can be
deduced and still leave the franchise owner a sufficient profit margin?
• Can the business be taught to someone else, usually a person with no experience in
the industry?
A franchise feasibility study analyzes, grades
and prioritizes the company on a variety of
these and other factors.
The franchise feasibility analysis also
documents what steps, protective measures
and documents need to precede the expansion
effort. Many of these can (and should) be done
in-house by existing personnel with a little
outside expertise. This will result in
the most efficient
use
of time and
resources. It will also produce the most
professional and user-friendly results.
We at IFA, believe that the Franchising as a
mode of doing business is an easy and risk free
business to a quick expansion. IFA being a
non profit organisation with a vision to create
awareness about the strength lies in franchising.
For Indian Franchise Association (IFA) Membership, Contact [email protected]
FranConsult: The right place to do
Franchise Feasibility Analysis
At FranConsult , we would help your business format to convert into
a franchise business and help you grow faster day by day. We would
help clients by developing their models in to a franchise format through
proper strategic planning, competition mapping, feasibility study,
designing operational procedures, legal agreements and compliances.
Franchising in the safest mode of business as adding manpower, opening an offices or outlets
is no more a headache for expanding or increasing the sales for your business. In USA around
45 % of GDP is generated through the franchise business and India is gearing the same mode
with annual growth rate of 30 – 35% with a GDP contribution at 6 % shows a huge potential
in India.
In case you would like us to study the feasibility of your business to model it to franchise
format, please do write to us as the myth that this business is not limited to F&B/Lifestyle/
education / manufacturing sector only. For more details about our consultancy please feel free
to contact FranConsult
For Indian Franchise Association (IFA) Membership, Contact [email protected]
FRAN BUZZ
Several U.S Food Chains foray into the Indian
Food market
Attracted
by
its
growing economy and huge
middle class, several U.S.
restaurant chains are heading
to India to sell sandwiches and
burgers,
pancakes
and
sausages, coffee and ice
cream. They follow in the
footsteps of international
fast food chains which have
already established their
presence here.
Business is brisk at a
Kentucky Fried Chicken
outlet in a New Delhi market as
customers line up at
lunchtime to place orders.
U.S. restaurant chains like KFC, Pizza Hut, and
McDonald’s are cashing in on India’s growing
appetite for fare being sold at western food
chains - pizzas, burgers and sandwiches.
The market is driven by a country where
about 700 million people are under 30,
are earning larger pay packets thanks to a
buoyant economy, and are quickly
acquiring a taste for Western fast food and
global brands.
Yum Restaurants India runs eating outlets
like Pizza Hut and KFC. Its Chief Marketing
Officer, Sandeep Kataria, says dining out
is catching on in a big way. As people do
become a little bit more affluent, they are
looking at places to be able to go out, have
a good time, also break away from the
routine of everyday eating at home.
Honestly, the opportunities, the options
available in India for leisure are limited. What
does a typical family end up doing in India
currently is to mix shopping along with a
movie along with eating out. That therefore is
a great opportunity for companies like these.
It seems business will only get bigger and
better. Increasing numbers of nuclear families
and hectic work schedules are also helping
fast food gain popularity in a country where
home-cooked meals and traditional curries
have ruled the roost for decades.
Food Chains keen to capitalise on MENA’s USD 30
Billion Franchise Industry
Alternative Dining Experience Restaurants
Management L.L.C, announced the grand
launching of the Dukkan Falafel concept,
by the grand openings of its first 4 outlets in
Dubai focusing on expanding their operations
to capitalise on the growing franchise industry
in the Middle East and North Africa (MENA)
that is estimated to be worth USD30 billion.
menu items, and recipes, the freshness of our
food, and the intimate cosy atmosphere will
allow our diners to re-live the authentic Falafel
dining experience.”
“Modernizing, and Conceptualizing the great
tradition of eating falafel, without losing any
of the traditional taste and its glamour was our
objective” said Rami Wardeh, Chief
Executive
With a total of 20 outlets expected to be
opened by the end of 2012 just in the UAE,
and expansion plans that includes the
GCC, India, Southeast Asia, and a major
development in The US-Canadian Market,
Dukkan falafel will be the largest Falafel
restaurant chain in the world, with more than
200 operated outlets planned by the end of
2015.
Officer and Co-founder of Alternative Dining
L.L.C., he also added “The originality of our
Dukkan Falafel is now offering both
individual and area development Franchising
For Indian Franchise Association (IFA) Membership, Contact [email protected]
FRAN BUZZ
opportunities, in the UAE, GCC, and India.
Alternative Dining Experience Restaurant Management L.L.C, established
in 2009, operates, manages and franchises restaurants, and has ventured
into the luxury segment of catering in the UAE. The company’s strategy is to
differentiate its restaurants by emphasizing consistently on high-quality food
and service, serving generous portions at moderate prices in distinctly designed
restaurants.
Franchising - a New Business Mantra to cater
to India’s half a billion middle class
India is a country of youth. Any forward-looking
businessman would know: A younger population means
more years of economic productivity, as well as higher
potential spending power over time.
One way to reach out to this immense pool of
consumers quickly is via the franchising route, as an
estimated half a billion new consumers vault themselves into
the middle class over the next few years. These newly-arrived
middle-class consumers will be demanding better quality of
services, products and all manner of discretionary consumption trappings that come with
progress up the economic ladder.
For instance, Singapore wellness chain Kenko Holdings
opened its first Indian flagship store in Bangalore in May 2009,
another outlet has opened in the same city, followed by
another in Chennai in less than two years. Evidently, Kenko's Indian
franchise partner agrees that along with India's economic boom
will be a concurrent growth in demand for wellness services
from the stressed working populace. This partner has gone
from holding a mere area franchise to signing a memorandum
of understanding upgrading itself to a master franchisee covering the entire country.
In another franchising deal, Singapore holding company offers naan and biryani in a themed
lifestyle concept that appeals to consumers and fans, centred around what is arguably the
world's most famous football club.
Since last year, MUFB has secured three franchise partners and opened six outlets across key
metropolitan cities in India.
With the country's growing number of young and affluent citizens, coupled with the football
club's popularity, MUFB is receiving a franchise enquiry every other week. Thus, franchising
with its growing popularity is getting bigger and bigger day by day.
For Indian Franchise Association (IFA) Membership, Contact [email protected]
FRAN BUZZ
Indian Franchise Association (IFA) and Centre For
Management joins hands to announce the
commencement of 2nd batch of “The learning
Centre”
After the grand success of The
Learning Centre (TLC), Indian
Franchise Association now takes
an immense pride to announce
the initiation of a Professional
Diploma
in
Franchise
Management Course by joining
hands with its associates Centre
of Management which would
be offering exhaustive study to
create an in depth knowledge on
franchising.
The Learning Centre (TLC) was
conceptualized with a mission to impart the highest standards of quality franchise training
and education to management students, professionals and entrepreneurs. The program brings
tomorrow's franchise leaders together in an environment that stimulates the mind and creates
a dialogue, not just discussing what franchising is today, but what it will have to become in the
future. Experts at TLC believe that through the application of better practices, resources and
methods, franchise talent can ensure consistent results and can better compete and excel in
the Franchise sector.
The Association between IFA & Centre of Management has enabled the latter to enjoy the
prerogative of running/offering the course in its college vicinity. In other words, Centre of
Management is now licensed to execute the classes on courses related to Franchise
Management for The Learning Centre. Leveraging on the practical examples, students learn
essentials of franchising and run through multiple case studies.The course is an extension to the
landmark education initiative for professionals as it will benefit them with expert On the Job
training and internship vis-à-vis seamless support for their placement in the burgeoning modern
retail and franchise sector along with the joint certification "Certified Franchise Professional".
For Indian Franchise Association (IFA) Membership, Contact [email protected]
HOT EVENT
OF THE MONTH
For Indian Franchise Association (IFA) Membership, Contact [email protected]
CASE STUDY
GITANJALI GEMS
HOW GITANJALI GEMS DOUBLED THE NUMBER OF STORES
THROUGH FRANCHISING
Problem Statement
During the global recession in 2009, the Indian market was
one of the few that registered growth, while other key global
jewellery markets like USA, Japan and Europe saw major decline in
consumer spending and demand for jewellery.
In the context of the strong performance of the Indian
economy and increasing importance of the Indian market, the
Gitanjali Group, the largest integrated player in the global gems and
jewellery sector developed a perspective for rapid expansion of the reach of its jewellery
brands across the country.
The company aimed at more than doubling the number of stores from 900 to nearly 2000 in
next 3 years.
Action Plans
A close study of the business dynamics revealed that the best means of achieving this was
through the franchising route. In a very high value business like gems and jewellery the capex
required for rapid expansion would have been prohibitively high; so even if it resulted in
higher returns for the company, the capital required would have limited the rate of
expansion.
The strategy is to de-risk the business as much as possible—go for franchise retail rather than
company-owned stores, looking at revenue-sharing as well as capex-sharing rental models.
Solutions
The company took a decision that
paying a 30-40% commission on sales
generated was justified as it would
translate into larger volumes. Similarly
when dealing with expansion of stores
in malls, the company opted for a
revenue sharing model.
If the retailer and store owner share the
expenses, the latter’s share of revenue
could go up to 11-12% (compared to
7-8% in the revenue-sharing model).
By adopting different types of
innovative models, the company has succeeded in expanding its store base to 3500 point of
sale outlets (with over 900 stores), but also realised a 15-20% increase in store earnings.
This has also established a strong base for further expansion in the coming period.
For Indian Franchise Association (IFA) Membership, Contact [email protected]
IFA PROFILE
For Indian Franchise Association (IFA) Membership, Contact [email protected]