You are on page 1of 68

Retailing in India Retailing in India is one of the pillars of its economy and accounts for 14 to 15 percent of its GDP.

[1][2] The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people.[3][4]

As of 2013, India's retailing industry was essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the industry, and these were present only in large urban centers. India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population).[5]

Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process. [citation needed]

In November 2011, India's central government announced retail reforms for both multi-brand stores and single-brand stores. These market reforms paved the way for retail innovation and competition with multi-brand retailers such as Walmart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple.[6] The announcement sparked intense activism, both in opposition and in support of the reforms. In December 2011, under pressure from the opposition, Indian government placed the retail reforms on hold till it reaches a consensus.[7]

In January 2012, India approved reforms for single-brand stores welcoming anyone in the world to innovate in Indian retail market with 100% ownership, but imposed the requirement that the single brand retailer source 30 percent of its goods from India. Indian government continues the hold on retail reforms for multi-brand stores.[8]

In June 2012, IKEA announced it had applied for permission to invest $1.9 billion in India and set up 25 retail stores.[9] An analyst from Fitch Group stated that the 30 percent requirement was likely to significantly delay if not prevent most single brand majors from Europe, USA and Japan from opening stores and creating associated jobs in India.[10](subscription required)

On 14 September 2012, the government of India announced the opening of FDI in multi-brand retail, subject to approvals by individual states.[11] This decision wa welcomed by economists[who?] and the markets, but caused protests and an upheaval in India's central government's political coalition structure. On 20 September 2012, the Government of India formally notified the FDI reforms for single and multi brand retail, thereby making it effective under Indian law.[12][13][14]

On 7 December 2012, the Federal Government of India allowed 51% FDI in multi-brand retail in India. The government managed to get the approval of multi-brand retail in the parliament despite heavy uproar from the opposition[which?]. Some states will allow foreign supermarkets like Walmart, Tesco and Carrefour to open while other states will not.[15] Background Most Indian shopping takes place in open markets or millions of small, independent grocery and retail shops. Shoppers typically stand outside the retail shop, ask for what they want, and can not pick or examine a product from the shelf. Access to the shelf or product storage area is limited. Once the shopper requests the food staple or household product they are looking for, the shopkeeper goes to the container or shelf or to the back of the store, brings it out and offers it for sale to the shopper. Often the shopkeeper may substitute the product, claiming that it is similar or equivalent to the product the consumer is asking for. The product typically has no price label in these small retail shops; although some products do have a manufactured suggested retail price (MSRP) pre-printed on the packaging. The shopkeeper prices the food staple and household products arbitrarily, and two consumers may pay different prices for the same product on the

same day. Price is sometimes negotiated between the shopper and shopkeeper. The shoppers do not have time to examine the product label, and do not have a choice to make an informed decision between competitive products. India's retail and logistics industry, organized and unorganized in combination, employs about 40 million Indians (3.3% of Indian population).[17] The typical Indian retail shops are very small. Over 14 million outlets operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size. India has about 11 shop outlets for every 1000 people. Vast majority of the unorganized retail shops in India employ family members, do not have the scale to procure or transport products at high volume wholesale level, have limited to no quality control or fakeversus-authentic product screening technology and have no training on safe and hygienic storage, packaging or logistics. The unorganized retail shops source their products from a chain of middlemen who mark up the product as it moves from farmer or producer to the consumer. The unorganized retail shops typically offer no after-sales support or service. Finally, most transactions at unorganized retail shops are done with cash, with all sales being final. Until the 1990s, regulations prevented innovation and entrepreneurship in Indian retailing. Some retails faced complying with over thirty regulations such as "signboard licenses" and "antihoarding measures" before they could open doors. There are taxes for moving goods to states, from states, and even within states in some cases. Farmers and producers had to go through middlemen monopolies. The logistics and infrastructure was very poor, with losses exceeding 30 percent. Through the 1990s, India introduced widespread free market reforms, including some related to retail. Between 2000 to 2010, consumers in select Indian cities have gradually begun to experience the quality, choice, convenience and benefits of organized retail industry. Growth Growth over 1997-2010 India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale. Then, it required government approval. The approval requirement was relaxed, and automatic permission

was granted in 2006. Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign direct investment, representing a very small 1.5% of total investment flow into India. Single brand retailing attracted 94 proposals between 2006 and 2010, of which 57 were approved and implemented. For a country of 1.2 billion people, this is a very small number. Some claim one of the primary restraint inhibiting better participation was that India required single brand retailers to limit their ownership in Indian outlets to 51%. China in contrast allows 100% ownership by foreign companies in both single brand and multi-brand retail presence. Indian retail has experienced limited growth, and its spoilage of food harvest is amongst the highest in the world, because of very limited integrated cold-chain and other infrastructure. India has only 5386 stand-alone cold storages, having a total capacity of 23.6 million metric tons. However, 80 percent of this storage is used only for potatoes. The remaining infrastructure capacity is less than 1% of the annual farm output of India, and grossly inadequate during peak harvest seasons. This leads to about 30% losses in certain perishable agricultural output in India, on average, every year. Indian laws already allow foreign direct investment in cold-chain infrastructure to the extent of 100 percent. There has been no interest in foreign direct investment in cold storage infrastructure build out. Experts claim that cold storage infrastructure will become economically viable only when there is strong and contractually binding demand from organized retail. The risk of cold storing perishable food, without an assured way to move and sell it, puts the economic viability of expensive cold storage in doubt. In the absence of organized retail competition and with a ban on foreign direct investment in multi-brand retailers, foreign direct investments are unlikely to begin in cold storage and farm logistics infrastructure. Until 2010, intermediaries and middlemen in India have dominated the value chain. Due to a number of intermediaries involved in the traditional Indian retail chain, norms are flouted and pricing lacks transparency. Small Indian farmers realize only 1/3rd of the total price paid by the final Indian consumer, as against 2/3rd by farmers in nations with a higher share of organized retail. The 60%+ margins for middlemen and traditional retail shops have limited growth and prevented innovation in Indian retail industry.

India has had years of debate and discussions on the risks and prudence of allowing innovation and competition within its retail industry. Numerous economists repeatedly recommended to the Government of India that legal restrictions on organized retail must be removed, and the retail industry in India must be opened to competition. For example, in an invited address to the Indian parliament in December 2010, Jagdish Bhagwati, Professor of Economics and Law at the Columbia University analysed the relationship between growth and poverty reduction, then urged the Indian parliament to extend economic reforms by freeing up of the retail sector, further liberalization of trade in all sectors, and introducing labor market reforms. Such reforms Professor Bhagwati argued will accelerate economic growth and make a sustainable difference in the life of India's poorest., A 2007 report noted that an increasing number of people in India are turning to the services sector for employment due to the relative low compensation offered by the traditional agriculture and manufacturing sectors. The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent. The Retail Business in India is currently at the point of inflection. As of 2008, rapid change with investments to the tune of US $ 25 billion were being planned by several Indian and multinational companies in the next 5 years. It is a huge industry in terms of size and according to India Brand Equity Foundation (IBEF), it is valued at about US$ 395.96 billion. Organised retail is expected to garner about 16-18 percent of the total retail market (US $ 65-75 billion) in the next 5 years. India has topped the A.T. Kearneys annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian economy has registered a growth of 8% for 2007. The predictions for 2008 is 7.9%. The enormous growth of the retail industry has created a huge demand for real estate. Property developers are creating retail real estate at an aggressive pace and by 2010, 300 malls are estimated to be operational in the country. Growth after 2011 Before 2011, India had prevented innovation and organized competition in its consumer retail industry. Several studies claim that the lack of infrastructure and competitive retail industry is a

key cause of India's persistently high inflation. Furthermore, because of unorganized retail, in a nation where malnutrition remains a serious problem, food waste is rife. Well over 30% of food staples and perishable goods produced in India spoils because poor infrastructure and small retail outlets prevent hygienic storage and movement of the goods from the farmer to the consumer., One report estimates the 2011 Indian retail market as generating sales of about $470 billion a year, of which a minuscule $27 billion comes from organized retail such as supermarkets, chain stores with centralized operations and shops in malls. The opening of retail industry to free market competition, some claim will enable rapid growth in retail sector of Indian economy. Others believe the growth of Indian retail industry will take time, with organized retail possibly needing a decade to grow to a 25% share. A 25% market share, given the expected growth of Indian retail industry through 2021, is estimated to be over $250 billion a year: a revenue equal to the 2009 revenue share from Japan for the world's 250 largest retailers., The Economist forecasts that Indian retail will nearly double in economic value, expanding by about $400 billion by 2020. The projected increase alone is equivalent to the current retail market size of France. In 2011, food accounted for 70% of Indian retail, but was under-represented by organized retail. A.T. Kearney estimates India's organized retail had a 31% share in clothing and apparel, while the home supplies retail was growing between 20% to 30% per year. These data correspond to retail prospects prior to November announcement of the retail reform. The Indian market offers endless possibilities for investors. It might be true that India has the largest number of shops per inhabitant. However we (locatus) have detailed figures for Belgium, the Netherlands and Luxemburg. In Belgium, the number of outlets is approximately 8 per 1,000 and in the Netherlands it is 6. So the Indian number must be far higher. Notable Indian retailers Future Group Mahindra Group

Reliance Industries Aditya Birla Group Bharti Enterprises, including joint venture with Walmart Fabindia: Textiles, Home furnishings, handloom apparel, jewellery The Bombay Store: Indian Artifacts, Home furnishings, jewellery Shoppers Stop, Crossword, Hyper City, Inorbit Mall Challenges. A McKinsey study claims retail productivity in India is very low compared to international peer measures. For example, the labor productivity in Indian retail was just 6% of the labor productivity in United States in 2010. India's labor productivity in food retailing is about 5% compared to Brazil's 14%; while India's labor productivity in non-food retailing is about 8% compared to Poland's 25%. Total retail employment in India, both organized and unorganized, account for about 6% of Indian labor work force currently - most of which is unorganized. This about a third of levels in United States and Europe; and about half of levels in other emerging economies. A complete expansion of retail sector to levels and productivity similar to other emerging economies and developed economies such as the United States would create over 50 million jobs in India. Training and development of labor and management for higher retail productivity is expected to be a challenge.

In November 2011, the Indian government announced relaxation of some rules and the opening of retail market to competition. India retail reforms

Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand Indian retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets, to sell multiple products from different brands directly to Indian consumers.. The government of Manmohan Singh, prime minister, announced on 24 November 2011 the following:

India will allow foreign groups to own up to 51 per cent in "multi-brand retailers", as supermarkets are known in India, in the most radical pro-liberalisation reform passed by an Indian cabinet in years;

single brand retailers, such as Apple and Ikea, can own 100 percent of their Indian stores, up from the previous cap of 51 percent;

both multi-brand and single brand stores in India will have to source nearly a third of their goods from small and medium-sized Indian suppliers;

all multi-brand and single brand stores in India must confine their operations to 53-odd cities with a population over one million, out of some 7935 towns and cities in India. It is expected that these stores will now have full access to over 200 million urban consumers in India;

multi-brand retailers must have a minimum investment of US$100 million with at least half of the amount invested in back end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing to considerably reduce the post harvest losses and bring remunerative prices to farmers;

the opening of retail competition will be within India's federal structure of government. In other words, the policy is an enabling legal framework for India. The states of India have the prerogative to accept it and implement it, or they can decide to not implement it if they so choose. Actual implementation of policy will be within the parameters of state laws and regulations.

The opening of retail industry to global competition is expected to spur a retail rush to India. It has the potential to transform not only the retailing landscape but also the nation's ailing infrastructure., A Wall Street Journal article claims that fresh investments in Indian organized retail will generate 10 million new jobs between 20122014, and about five to six million of them in logistics alone; even though the retail market is being opened to just 53 cities out of about 8000 towns and cities in India. Indian retail reforms on hold. According to Bloomberg, on 3 December 2011, the Chief Minister of the Indian state of West Bengal, Mamata Banerjee, who is against the policy and whose Trinamool Congress brings 19 votes to the ruling Congress party-led coalition, claimed that Indias government may put the FDI retail reforms on hold until it reaches consensus within the ruling coalition. Reuters reports that this risked a possible dilution of the policy rather than a change of heart., India Today claimed that the resistance to Indian retail reforms is primarily because it has been badly sold, even though it can help fix the exploitation of Indian farmers by the decades-old "arhtiya" and "mandi" monopoly system. India Today claims the policy is good for the small Indian farmer and the Indian consumer. Pratap Mehta, president of the Centre for Policy Research, claimed any U-turn or postponement of retail reforms will cause an immense loss of face to the Congress-led central government of Manmohan Singh. The mom-and-pop farmers of India support these reforms. The consumers of India want the reforms. The government has already annoyed those who oppose change and innovation in retail. By putting retail reforms on hold, the government will additionally alienate much larger segment of India's population supporting FDI. So they will now have the worst of both worlds, claims Mehta. Deepak Parekh, Ashok Ganguly and other economic policy leaders of India, on 4 December 2011, called placing investment and innovation in retail on hold for the sake of vested interests as unfair and detrimental to vast majority in India. They urged farmers, consumers and the common people to raise their voice against this false drama of apprehension against investment

and modernising trade in organised retailing. They called upon Indians to come out and strongly support progressive measures and reforms with the same spirit and gusto with which we take the liberties to criticize policies or issues we do not appreciate. Several newspapers claimed on 6 December 2011 that India parliament is expected to shelve retail reforms while the ruling Congress party seeks consensus from the opposition and the Congress party's own coalition partners. Suspension of retail reforms on 7 December 2011 would be, the reports claimed, an embarrassing defeat for the Indian government, suggesting it is weak and ineffective in implementing its ideas.] Anand Sharma, India's Commerce and Industry Minister, after a meeting of all political parties on 7 December 2011 said, "The decision to allow foreign direct investment in retail is suspended till consensus is reached with all stakeholders."] On 19 Feb, 2013 Tamil Nadu became the first state in the country to stoutly resist MNC invasion into the domestic retail sector. In Chennai, Tamil Nadu CMDA authorities placed a seal on the massive warehouse spreading across 7 acres that had reportedly been built for one of the worlds leading multinational retail giants, Wal-mart.] Single-brand retail reforms approved. On January 11, 2012, India approved increased competition and innovation in single-brand retail. The reform seeks to attract investments in operations and marketing, improve the availability of goods for the consumer, encourage increased sourcing of goods from India, and enhance competitiveness of Indian enterprises through access to global designs, technologies and management practices. In this announcement, India requires single-brand retailer, with greater than 51% foreign ownership, to source at least 30% of the value of products from Indian small industries, village and cottage industries, artisans and craftsmen. Mikael Ohlsson, chief executive of IKEA, announced IKEA is postponing its plan to open stores in India. He claimed that IKEA's decision reflects Indias requirements that single-brand retailers such as IKEA source 30 percent of their goods from local small and medium-sized companies. This was an obstacle to IKEA's investment in India, and that it will take IKEA some time to source goods and develop reliable supply chains inside India. Ikea announced that it plans to

double what it sources from India already for its global product range, to over $1 billion a year, within three years. IKEA in the near term, plans to focus expansion instead in China and Russia, where such restrictions do not exist. On 19 Feb, 2013 Tamil Nadu became the first state in the country to stoutly resist MNC invasion into the domestic retail sector. In Chennai, Tamil Nadu CMDA authorities placed a seal on the massive warehouse spreading across 7 acres that had reportedly been built for one of the worlds leading multinational retail giants, Wal-mart. INDIAN BAKERY INDUSTRY The Indian bakery industry is dominated by the small-scale sector with an estimated 50,000 small and medium-size producers, along with 15 units in the organized sector. Apart from the nature of the industry, which gravitates to the markets and caters to the local tastes, the industry is widely dispersed also due to the reservation policies (relating to the small scale industries) of the government. Biscuits and bread which are considered to be the major bakery product and they account for 82% of all bakery production. The unorganized sector accounts for about half of the total biscuit production estimated at 1.5 million tonnes. It also accounts for 85% of the total bread production and around 90% of the other bakery products estimated at 0.6 million tonnes. The last includes pastries, cakes, buns, rusks and others. Biscuits are estimated to enjoy around 37% share by volume and 75% by share by value of the bakery industry. The organized sector caters to the medium and premium segments, which are relatively less price-sensitive. The organized sector is unable to compete at the lower price range due to the excise advantage enjoyed by the informal sector. The organized segment in biscuits has witnessed a steady growth of about 7.5%, conforming broadly to the growth rate of GDP. Biscuits constitute about 7% of the Rs 478 billion FMCG markets in India. During 2003-04 biscuits market grew at double digit (about 11%) compared to a growth of 1.4% for the FMCG industry as a whole, and 4.4% average growth over last five years (1999-2003). In India the annual per capita consumption of branded confectionery is still under 100 gms. Hard-boiled candy is reserved for the small-scale sector. There are about 5,000 units catering to

the local markets. The big players have used a mix of franchise arrangements (with small units) and product formulations to get out of the reservation mode. The total contribution of the sugar boiled confectionery market in the organized sector, comprise plain, hard-boiled candies, toffees, clairs and gums is around Rs. 20 billion. Add to this the unorganized sector and the market for all types of confectionery is Rs. 50 billion. However, in terms of value the organized sector commands 60% of the market share. With the exit of MNCs and other established organized players from very low priced (25 paise) category, the unorganized sector has grown very fast. MNCs and high-powered advertising support substitute products like chewing and bubble gums. With Rs. 3,250 million market shares, the gum and mint market is growing at a rate 10 to 15% annually. Fruit and mint Industry Scenario According to report by Research and Markets, the bakery industry has achieved third position in generating revenue among the processed food sector. The market size for the industry is pegged at US$ 4.7 billion in 2010 and is expected reach US$7.6 billion by 2015. It also mentions that the shining star of the sector remains the biscuits industry, which is expected to outperform the growth of the sector overall. The per capita consumption of bakery products in India, as it stands today, is one to two kg per annum, which is comparatively lower than the advanced countries where consumption is between 10 and 50 kg per annum. The growth rate of bakery products has been tremendous in both urban and rural areas. The sector has indicated promising growth prospects and has been making rapid progress, adds the report. rolls being marketed by companies with sound strategies are going ahead rapidly. Innovations and R&D

Health and wellness as a trend is seen playing out in bakery like in most categories, with players bringing out healthier product options. Britannia's Nutrichoice has introduced its range of ragi, oats and 5 grain biscuits. In breads also, the whole wheat/brown bread segment is seeing an upswing. At the other end, players are also focussing on the indulgence segment with Cadburys

Oreo and Sunfeast's Dark Fantasy Chocolate filled biscuits entering the shelves, said Subramanian of Tata Strategic.

Rathi of Devashree said that manufacturers nowadays were looking for development in the mechanisms for bakery products as well as good ingredients.


While talking about new trends in the industry, Subramanian of Tata Strategic said that the broader food trends were also playing out here which included unbranded to branded, rural adoption, premiumisation, health & wellness and convenience. These trends have manifested themselves in the various new launches/introductions that we have seen in the past few years by leading players be it Britannia's Nutrichoice range, smaller packs of Good Day, ITC dark fantasy, Parle's Happy Happy and Parle-G Gold, he said.

Chef Mahajan states, Indians have always had a sweet tooth. With more travel and exposure to the worldwide market, people have now started appreciating good quality products, good quality ingredients, exquisite finishing and are willing to pay the extra buck. Growth rate of cake shops is directly related to the spending power. People are less hesitant on spending money, leading to the possibility of higher prices, leading to the possibility of better products.

According to Rathi of Devashree, convenience food is the need of the hour, as there is increase in number of middle class people and husband and wife both are working, so they opt for ready to eat food available in the market.

Factors for Growth

Recently, a lot of bakers have gotten into three dimensional cakes and theme cakes. Cutting off from the regularity, bakers are now looking at experimenting with many more ingredients like rice treats, and inculcating them into cake designs. Some bakers even make use of wooden planks for support. There is also something as sugar crystal sculptures, where they try and use them as per the theme of the cake, according to chef Mahajan.

The biscuit category is expected to continue its growth trajectory of 15% going ahead. Growth in bread would be relatively slower, informs Subramanian of Tata Strategic.

Challenges, Opportunities

The challenges would be category-specific. The biscuits category has seen rapid growth in the last few years. Implementation of packaging standardisation norms appears to be the big challenge. Volatility in input costs is expected to remain and this would add to the woes. In bread, profitability has remained the focal point for some time. Players have been looking to increase share of value-added products while focussing on operational efficiencies linked to daily distribution. The challenge for cakes would be to expand the consumption of packaged cakes. In fact, this challenge is also a significant opportunity for this particular segment. With the right enablers from product and supply chain, this is a category waiting to explode, adds Subramanian.

Chef Mahajan feels, The cake business is not a very high revenue-generating business. With commercial property rates so high, it is very difficult to sustain and have profitable retail outlets.

It is also very expensive in cities like Mumbai to expand the production unit due to the same reason.

Rathi is of the opinion that quality of flour and supply chain were key challenges for the bakery industry. Bakery manufacturers have to deal with quality of flour and other ingredients. Whereas opportunities are immense in this industry as disposable income has increased among the people. Regulatory Aspect Speaking on regulatory aspects, Subramanian of Tata Strategic said, FSSA is an important regulation for bakery. While FSSA is a step in the right direction, greater clarity on the execution mechanism would need to be built. The implications of the packaging norms being proposed by the ministry of consumer affairs Brief detail of Leading Bakeries in India The concept of organized bakeries in India was introduced by the British. With the passage of time, a number of bakeries sprung up in India. These bakeries were either traditional sweet sellers or specialized bakery. Today, the Indian food product market is flooded with a number of bakeries catering high nutritious value breads, cakes, sweets and confectioneries to the customers. The bakery companies of India have a very wide portfolio of bakery products. Some of them have dedicated retail outlets for serving their customers. The Leading Bakeries in India use finest quality of milk, milk products, sweeteners, flour and other ingredients to manufacture mouth watering bakery products. Most of these Leading Bakeries in India strictly conforms to international standards for quality and manufacturing practices. The Indian bread and bakery market had a decent growth in 2006. It registered more growth rate in comparison to the period from 2002 to 2005. The sales rose by 3.1% in 2006 to 3.27 billion. The consumption of whole meal or brown bread is on the rise amongst Indians.

Names of some of the Leading Bakeries in India

Bisk Farm Elite Foods Sam Enterprises Private Limited Prakhya Groups Samay Foods Private Limited Prabhat Udyog Feroze Foods and Flavours Products offered by the Leading Bakeries in India Cakes Pastries White breads Cheese breads Garlic breads Ginger breads Brown breads High fiber breads Buns Burgers Pizzas Patties Sweets

Candies Chocolates Biscuits Cookies Tarts Crackers Pies

HISTORY of franchising :

Most business historians date the beginning of franchising as a concept to the Middle Ages, when feudal lords initiated the practice of selling to others the rights to collect taxes and operate markets on their behalf. However, this makes the earliest examples of franchising a political activity rather than a business activity. The first examples of franchising as a way of doing business are found in mid-nineteenth century Germany, where brewers set up contracts with tavern owners to sell their beer exclusively in the taverns. The Father of Franchising

Franchising dates back to at least the 1850s; ISAAC SINGER, who made improvements to an existing model of a sewing machine, wanted to increase the distribution of his sewing machines. In 1851, a young successful company SINGER in the U.S. found it unprofitable to provide after sales service for its products to its distant outlets and far flung customers. To be able to do so without sing its own sales force, the company hit upon a novel idea that became the trailblazer for fanchising. They attracted independent individuals by offering them protected territories with exclusive rights to sell and service their products. For this they drew a legal contract that can be termed as the first franchise agreement between a company and the inestors. This model ran successfully and soo the company was able to establish a big network of franchised dealers. This successful model was developed by Isaac Singer and so he is popularly known as the Father of Franchising. INTRODUCTION Starting up a new venture can be a risky affair. You can painstakingly explore and research your market, time the set up to perfection, open your business where demand is high, outdo the competition, offer the best range of products and services available, advertise in the right places and still your business can fail. In fact global Small Business Statistics indicate that one half of new businesses close within the first 3 years of trading. When describing exactly what a franchise is, the important thought is the right to do business in a prescribed manner. Recently, franchising has been enjoying more acceptability vis--vis an independent business. There are inherent benefits in the franchising system, which make them more competitive in the market place. Apart, from these inbuilt benefits in franchising you can be your own boss, you're operating under a trademark that has instant brand recognition, and the failure rate for franchises

is much lower than it is for independent businesses. Before we analyse all these factors let us first understand what exactly is franchising. What is Franchising? Though we are familiar with the term franchising, only a few of us are fully aware of what the term exactly implies. The dictionary defines the word franchising rather simply as an authorisation granted by a company to someone to sell or distribute its goods or services in a certain area. Literally speaking its exact definition is rights of privilege granted. Franchising in general means granting of certain rights by one party (the franchisor) to another (the franchisee) in return for a sum of money. The franchisee then obtains the authority to exercises those rights under the guidance of the franchisor. The above definition is a very general in its nature and encompasses many different forms of licensing arrangements. The International Franchise Association (IFA) defines franchising as a continuing relationship in which the franchisor provides licensed privilege to do business, plus assistance in organizing, training, merchandising and management in return for a consideration from the franchisee. What is a Franchise? A legal agreement that allows one organisation with a product, idea, name or trademark to grant certain rights and information about operating a business to an independent business owner. In return, the business owner (franchisee) pays a fee and/or royalties to the owner. Who is a Franchisor? He is the owner of the franchised system. It owns the know-how of the concept and the brand name. It grants franchises to third parties. Who is the Franchisee? He is the one who has been granted the right by the franchisor to carry on the business using the franchisors know-how and the brand name. Now, depending on the rights granted, franchisees can be classified into: 1. Unit Franchisee this is the simplest and most common form of franchising. This franchisee is granted the right to operate one unit or outlet of the franchised business. 2. Master Franchisee He is generally granted the right to a substantial territory. It will then grant unit franchises to unit franchisees throughout the territory. The Master Franchisee needs to have sufficient drive and resource to fully exploit the territory and control the unit franchisees

territory. International franchisors usually appoint national master franchisees to exploit the market of a particular country. 3. Regional Franchise In a geographically large area a franchisor, or a Master Franchisee may decide that it is commercially appropriate to further divide the territory up with separate regions and grant a Master Franchise for each separate region. These franchises are known as regional franchises or sometimes area franchises. 4. Multiple Franchises Some unit franchisees operate not just one unit, but several. These are referred to as multiple franchises and usually have a large number of individual unit franchise arrangements one for each unit. What is Franchise fee? It is an upfront entry fee, paid by the franchisee to the franchisor, usually payable upon the signing of the contract (franchise agreement) for the right to use the franchisors name, logo and business system. Often, the franchise fee is also the consideration paid for the initial training, site selection, operations manuals and other help given by the franchisor to the franchise before opening the business. What is Royalty? It is a continuing payment that has to be made by the franchisee to the franchisor and is payable on a periodic basis, which can be, weekly, monthly, or on any other. Royalty payments can be either fixed amounts or could be based on percentage of gross sales or any other such consideration that may be agreed upon by both the franchisor and the franchisee in the franchise agreement.

Basic Elements of Franchising (in a nutshell) Thus, we can sum up the basic elements of franchising as under: 1. An entrepreneur (franchisor) has developed a system of doing business, which works and decides to grant to another entrepreneur (franchisee) the right to use the system. 2. The two entrepreneurs are legally and financially independent enterprises.

3. The granting of the right to use the franchise system involves the right of the franchisee to use the franchisors intellectual and industrial property, know-how, business and technical methods, procedural system and other intellectual property rights. 4. The franchisee in exchange undertakes to follow the methods elaborated by the franchisor and to pay an entrance fee and royalties. 5. 6. The franchisor retains the right of control over the performance of the franchise. The franchisor undertakes to provide the franchisee with training and on-going assistance.

Business Format Franchising As compared to other types of franchising the most popular and widely used is the business format of franchising. It can be defined as the contractual license granted by one person (the franchisor) to another (the franchisee) which:

Permits or requires the franchisee to carry on a particular business using the franchisors know-how and most importantly, the prescribed business format, under the franchisors brand as an independent business, thereby ensuring that the franchisee gets a proven method of operating a business. Permits the franchisee to also use the franchisors products and services, trade name, trade mark, etc. Allows the franchisor to exercise continuing control over the manner in which the franchisee carries on the franchised business; Obliges the franchisor to provide the franchisee with ongoing support in carrying on the franchised business.

As a commercial matter, the agreement inevitably requires the franchisee periodically during the period of the franchise to pay to the franchisor sums of money in consideration for the franchise and / or goods and / or services provided by the franchisor to the franchisee.

There are also some other modes of franchising such as manufacturing franchising, product or trade name franchising, etc.


Direct Franchising

Under this system, the franchisor grants franchises to individual franchisees in the foreign country through the execution of an international contract. The main problems associated with this type of franchising is the difficulty of franchisors to control the performance of the franchisees as these are located in another country, the assistance to be provided to the franchisee during the operation of the contract. The question of intellectual and industrial property rights in the foreign country also needs to be considered. Taxation is another issue which receives due consideration. Furthermore, how the franchise arrangement is structured and the existence of treaties between the countries involved may have considerable influence on taxation. A very important question is clearly that of the choice of law and jurisdiction. There is a tendency for franchisors to want their own domestic law to apply to the agreement, even if the franchise is exploited in another country. Another vital point to be kept in mind is the law relating to transfer of technology that may be applicable. Keeping the above problems in mind, it is observed that direct franchising is not used extensively internationally.

Subsidiary or Branch Office

Franchising through a subsidiary or a branch office are two methods which are often treated together, although there are differences which derive from the fact that a subsidiary, albeit controlled by the franchisor, is a separate legal entity whereas a branch office is not. Whatever be the difference, an advantage of this approach is that the franchisor is present in the foreign

country as a corporate body. The contract will in this case be a domestic contract and thus subject to local legislation. The problems associated with this type are similar to direct franchising. In addition, the franchisor will be required to send his personnel to the foreign country for the start up operations thus involving work permit and residence formalities.

Area Development Agreements

Such agreements traditionally involved an arrangement whereby the developer is given the right to open a multiple number of outlets to a predetermined schedule and within a given area. These arrangements in the past have been used mostly in domestic franchising, but are now being used increasingly in international franchising. Items that are to be considered here include the number and density of the outlets to be opened, detailed development schedule and the consequence of non-complying of the schedule. In such arrangements, the developer will need to have substantial financial resources so as to be able to open the required number of outlets.

Master Franchise Agreements

In the international scenario, this is widely used. In respect to such agreements, the franchisor grants a person in another country, the sub-franchisor, the exclusive right within a certain territory to open franchise outlets itself and/or to grant franchises to sub-franchisees. In this case, there are two agreements involved: an international agreement between the franchisor and the sub-franchisor (the master franchise agreement) and a national franchise agreement between the sub-franchisor and each of the sub-franchisees (the sub-franchise agreement). The franchisor transmits all its rights and duties to the sub-franchisor, who will be in charge of the enforcement of the sub-franchise agreement and of the general development and working of the network in that country. All the franchisor will be able to do is to sue the subfranchisor in case of breach of obligation to enforce the sub-franchise agreement as laid down in the master franchise agreement. The advantages of this system are that the sub-franchisor is familiar with the local habits, tastes, culture and laws of its country and that it will know ways about the local bureaucracy for necessary permits as and when necessary. The disadvantages include that the financial returns of

the franchisor will be reduced by the amount due to the sub-franchisor and also that the franchisor will have to rely on the sub-franchisor for the performance of the franchise system.

Joint Ventures

In the case of joint ventures, the franchisor and a local partner create a joint venture. This venture then enters into a master franchise agreement with the franchisor, and proceeds to open franchise outlets and to grant sub-franchises just as a normal sub-franchisor would do. An arrangement such as this will have to consider legislation on joint ventures in addition to all the other legalities that are involved. Problems may also arise with the fact that the double link may create conflicts of interest for the franchisor. The advantages accruing from this arrangement may include that it could be a way to solve the problem of financing franchise operations in countries where financial means are scarce.

Miscellaneous forms

There is no limit to the refinement that can be made to the above modes of franchising. New forms of franchising, or combinations of different forms of franchising, appear at regular intervals.

The four Rs of Franchising

Corporate history is replete with instances of outstanding franchising success and also many failures. Learning from them, franchising can succeed if the franchisee has a right combination of the four Rs prescribed. These are:



The franchisee should be very realistic in assessment of his business strengths and weaknesses. Certain key areas where realism is a must while deciding to go into franchising includes questions like are you prepared for the financial insecurity, are you capable of developing a frame of mind when you can smile and be cordial even when the customer is totally wrong. More important is the need for realism in evaluating the products and services offered by the franchisor.



Many franchisees, during the early periods of their business when resources constraints are common, tend to sometimes overlook sending in the royalty cheques to the franchisor. Franchisors keep feeling and rightly so that their royalty is as much a key business expenditure of the franchisee as payment for purchases or payroll is and any delay in handling this area would lead to unfortunate consequences of a long term nature. Therefore, while planning resources on a periodic basis, consider the payments that are to be made to franchisor. Another area where most franchisees have problems is to manage their resources while living within the franchising system. The franchising agreement, in most cases, clearly indicates systems, procedures and methods of managing the resources. The franchisee will do well to either be mentally prepared to accept the resource management terms of the franchisor or make it clear at the beginning that he needs the requisite leeway to manage his own resources.



Research on the franchisor is a must for the success. Various published sources also provide fairly detailed information on most of the franchises that are on offer but to what extent that will suffice for the Indian conditions needs serious examination. Whatever be the methodology, the prospective franchisee will do well to build comprehensive information on the franchisor, the products or service of offer, competing and substitute products and services before he makes any move committing his financial resources on a long term basis.



Resolve to be part of the franchising system. The problem starts when a person gets into franchising only because he has an entrepreneurial instinct but the instant he becomes a franchisee, the true entrepreneur in him starts resenting the shackles that are imposed by the franchising system. The options are clear either stay within the system and fully learn the nuances of the business and prosper or try ones fledging entrepreneurial talent and get into trouble.

Advantages & Disadvantages of Franchising

Advantages to the Franchisee: -

He is the proprietor of his own business and owns the tangible assets of the franchised outlet. He gains from the franchisor the entire business concept with full training, assistance in every aspect of setting up and running the business, and access to necessary materials and supplies. Franchisees have access to regional and national promotions / advertising campaigns. He gets an access to global standards and international technology in products and services, without loss of control. There is minimum risk as it is a tried and tested formula of the franchisor.

Disadvantages to the Franchisee: -

He is not an independent entrepreneur. He has to follow the franchisors instructions. The lower risk is offset by the lower reward for the success.

Advantages to the Franchisor: -

Franchising allow for intensive and rapid expansion of a regional or national business system.

With minimum capital outlay franchising accelerates the networks growth and probably its profitably. It basically works on the OPM (Other Peoples Money) principle. The risk that the franchisor would have had to otherwise bare alone gets spread across the franchisees. Self-employed franchisees are generally more motivated than salaried managers and are more likely to give better results for less expenditure of capital on behalf of the franchisor. Also this reduces the requirement of appointing and maintaining the additional staff that the franchisor would have had to in case of a non franchised business. The franchisor is free from the day to day unit operations since direct managing responsibilities become the franchisees obligation. Franchising gives him an assured earnings stream to fund continuous R & D investment.

Disadvantages to the Franchisor: -

It has to control and co-ordinate a network of semi-independent entrepreneurs to ensure favorable image of the franchise. Decreased margins due to the share of the franchisees. The franchisor-franchisee relationship is based on trust. The franchisor has relatively less control over the business.

Some General Issues on Franchising

Why is franchising growing?

Franchising is one of the worlds fastest growing and most lucrative industries. Franchise businesses will be turning over an estimated $ 2 trillion (which is roughly equal to twenty times the size of Indias current GDP). Franchising permits businesses to grow more rapidly than any other method. By increasing the efficiency by which goods and services are distributed, it brings impressive gains to any economy. On a cultural level, franchising is one of the few developments that generate employment, earnings and entrepreneurship at the same time. It disseminates ownership rights and decision-making power to thousands of small-unit operators. For developing countries, or countries shifting to a market economy, franchising has the effect of creating relationships between one economy and another. It promotes sharing of technologies, trademarks, marketing, intellectual property and even architectural designs. Franchising is a particularly good developmental tool in any part of the world where financial resources are short and the need to simulate individual initiative is acute. There are no tariff barriers to be dealt with. It puts little strain on the receiving countrys balance of payments. Thus, not surprisingly, awareness of the benefits of this business formula is growing at an international level.

How is franchising relevant to India?

Franchising affords India an opportunity to build its commercial infrastructure and develop its domestically oriented businesses in an efficient, profitable and pan-national manner. It also offers India the opportunity to import and develop foreign concepts in a way, which ensures that the equity of the business remains in India, so avoiding the politically undesirable situation whereby successful domestic businesses are owned by foreign corporations.

The key attractions of franchising in India are as follows:


Lower Capital Requirements

Franchising is an excellent way for both Indian and foreign corporations to expand their businesses and make their brand names known in India without having to risk large sums of money by way of direct investment. The franchisees finance the expansion of the business in India. In return they have the opportunity to make substantial income and capital profits.


Geographical extent of the country

Franchising can enable a company to take advantage of the vast Indian market of over 1000 million people and growing at a rate of 1.9% p.a. There is an ever-growing demand of goods and services such as fast food and beverages, clothing, electronic goods, computer hardware and software and professional services. The infrastructure is poor, however, and operating a corporately owned distribution system that fully exploits the geographical expanse of the country is extremely difficult and inefficient. Empowering participants in the distribution system by granting them an equity interest in it (i.e. by granting a franchise) can substantially improve the efficiency in the distribution system.


Cultural Empathy

Franchising well suits the entrepreneurial side of Indian culture. Indian business people are fiercely proprietary and feel a need to have ownership and control over their business operations which they can pass on to future generations. However, at the same time they are keen to benefit from the goodwill and technology that can be provided by the franchisor. Franchising allows them to reconcile these conflicting ambitions.


Harnessing local market knowledge

A company needs a great deal of knowledge of the different regional markets in India. What holds good for Punjab may not be relevant for Kerela. Franchising provides a sure and easy way of accessing the right level of relevant local market knowledge. Also in case of international franchisors Indian master franchisees offer them direct access to substantial market knowledge and a considered and sophisticated approach to its exploitation.

Franchising in India so far?

Franchising in India is at its early stage and neither business people nor the courts have had much exposure to it. Soft drinks and hotel franchises arrived in India in the 1960s, but in the 1970s and 1980s, the government expelled foreign brands from India. Some international franchises have recently come back to India and are doing well. Hotel businesses like Best Western Group and the Quality Inn Group have established themselves. Also, Walt Disney has been successful in having its label in all sorts of goods for children, whether they are clothing, toys, and school equipments. Fast food chains like McDonalds, Slice

of Italy, Dominos, and Taco Bell have also come in. Pepsi and Coke have re-captured the soft drinks market.

Let us have a look at some key facts that point to the growth of the franchising sector in India: There are over 600 active franchisors in the country There are over 40,000 franchisees (across sectors) in India today. The total investment put in by these franchisees in setting up their individual franchised businesses is over Rs 5,000 crore. The total annual turnover achieved by franchised businesses in India is in the region of Rs 8,000-10,000 crore. The total manpower directly employed by these franchised businesses is around 300,000. Industry classification reveals that IT education sector dominates the Indian franchise sector with a sizeable share of 40 per cent. Number of outlets: A majority (68 per cent) of franchise operations are small with 50 or less outlets. Only three per cent franchisors have more than 500 outlets, while 22 per cent have outlets numbering 51-100. The fact that most operators are comparatively small is a probability because most of the franchisors are still comparatively new. Annual turnover from franchising Turnover from franchising is still not very large. Only two per cent of franchisors have a turnover of more than Rs 500 crore from their franchising operations. About five per cent have a franchise turnover ranging Rs 100-500 crore; Four per cent have a turnover ranging Rs 50-100 crore; 11 per cent have a turnover ranging Rs 20-50 crore and 24 per cent have a turnover ranging Rs 5-20 crore. However, more than half (54 per cent) has a turnover less than Rs 5 crore.

These facts and figures highlight the extent to which franchising as a way of doing business has been accepted in India. Also, there are increasing numbers of businesses that are exploring the franchising route to business expansion.

Scope of Franchising in India

Ms. Shah an NRI arrived, on New Years Eve. She was so happy to know that the Indian economy had grown in the last quarter at 8.4%. She decided to go to the US to pursue her dream of running her own business late back in 1970, an era plagued by regulation and bureaucracy. Her business of selling Indian garments in the New York, US had been tremendous successful. Now, in 2004, she was amazed to see the change in the Indian capital. She used the Hertz RentA-Car service for airport pick-up. She decided to stay at Orchid (a franchised hotel chain). For instant rejuvenation she dropped at Shehnaz Hussain Beauty Parlour. She was overjoyed when she came to know about the local Subway operating with the same American standards in India. She appreciated the food, as it tasted exactly the same as she had at the Times Square Junction, New York. She was glad that the Ritu Beri designed clothes are available in Delhi, and they are franchising at an international level. She knew that the clothes designed by her were a rage in the US and she couldnt afford to miss this golden opportunity. What one would notice is that all these companies have expanded gradually and made their presence by franchising. Franchising, as a way of expansion in India was little known till the 1990s. Today, franchising has forayed into all industries from Food and Fuel to Lodging and Child Care. In India, the industry is a little over ten million ($). There is limitless potential, as this industry is at a very nascent stage. Ordinary start-ups face a problem with finding the right location, evaluating an opportunity and also in most of the times lack experience as to how a similar business is managed. They risk their initial investment. 90% of start-ups fail in the first year itself. Of those that survive another 90% fail in the next two years. In a franchised business, over 90% succeed. This success rate usually lures entrepreneurs with no experience but with a surplus capital and a will to succeed towards franchising.


India is a geographical diverse country. Franchising in India is at a very nascent stage. However, this industry has clocked the growth rate of 25-30%, the second fastest growing industry. In the US, 45% of the sales come from franchised businesses; India is still to reach that stage, where franchised businesses are as widespread as the local grocer. The way things are going it looks like franchising, as a dynamic and ever changing industry will firmly establish itself in a few years to come. It is not difficult to spot malls. Organised retailing though only at 2% of the retailing, will take off in a very big way. The Indian middle class has been slowly expanding; it now buys consumer appliances, thanks to the economy growth of over 8, the stock market crossing 6,000, forex reserves surpassing 100 Billion USD, and the increase

in disposable income. Today, over 33 million Indians can afford the best services and products and over 310 million Indians buy consumer appliances. India offers lot of potential for the franchising community. Apart from Indians being very entrepreneurial, franchising as a way of doing business has been well accepted. Today, we can find international names like Gold Gym, Subway, Hilton, etc. The service sector which will open up in 2006 according to the WTO guidelines will bring in more opportunities for the Indian entrepreneur and a larger market for the franchisor. With Goldman Sachs predicting that India will be the third largest economy in 2025 and S&P upgrading Indias credit standard, and an extremely stable government, the franchising community has a lot to cheer.

Let us look at some major Indian franchisors but before that let us have a look at what Mr. Gian Mario Migliaccio has to say about the Indian franchising industry.

How helps the franchisors market their opportunity online Gian Mario Migliaccio: 38 years old; Co-Founder of Made In It, the Italian parent company of InfoFranchise, the first Franchise Website available worldwide. The initial web site was born in Europe in 1999. First in Spain, Italy and then France, Greece, the UK and another dozen of International countries soon followed. His background is with Advertising Agencies. His first agency was started in Italy when he was 20 years old and then all other endeavors were developed in the same field, during 95 when the Internet Boom was at in its first stages in Europe. By 1998 Made In It turned its focus to the Internet and officially became a Web Company.

What does your company do to help franchisors?

InfoFranchise, a registered trademark all over the world, specializes in recruiting. It is exactly in the heart of the market. It helps potential franchisees looking for the right brand and the Franchisor looking for the right partner. InfoFranchise is not a consulting company, but is the way to expand the franchise business. In Italy or in other European countries, InfoFranchise produces thousands of leads monthly. InfoFranchise is becoming the fastest and most valuable outlet for any Franchisor. As done throughout the world, in India we will apply our experience and expertise.

What additional benefits would an Indian franchisor get by partnering with you? will be the Indian Franchise Website, but it doesnt stop there. InfoFranchise is a connection link from India to the world and vice-versa. Our goals are to promote the best Indian franchise concepts through the web and show the India Experience throughout the world network. India is a great area for franchise concepts. Now Indian brands can act on expanding their experiences overseas, and InfoFranchise will help them as they go worldwide!

Can franchising work for everyone?

Franchising is a wonderful idea. It is one of the best ways to create your own-business with low risk. But low is not zero. The franchisee needs to be sure before signing the contract. The problem is the same all over the world: dont sign a colorized brochure. Sign the value of know-how. Ask a lawyer, consulting agency and/or even ask the other franchisees in the chain directly is good advice. The other important thing is being a positive person: the franchisee is not an employee, they are the company and they have the responsibility to create success. This is 24/7 job. The possibility for success is inside everyone. Find it.

Can you list some of the pros & cons of marketing through internet in a developing country like in India where the reach of internet is extremely low in the smaller towns?

India does have two sides it seems. Part of the world knows that India may be the best place for the IT Engineers, Programming developers or for innovative technologies. Then there is the other half of India that is not so up to date. This situation is not so different in China or Russia and is very similar to Old Europe after the second World War. The economy is in need of creating a Booming India and the Internet is just the way to accelerate that boom. Now about 20% of the Indian population can navigate Internet well. With just a look you can see that this percentage is not so different from the entire European region.

How do you see India as a growing market for franchising?

India is a great market with enormous potential. The one thing that sets it apart: The Culture. In India the culture is so different from Europe or the USA, it is necessary to know the market, the culture and the history. Adapting the concept before starting in India is the only way to make it as an overseas brand. The Indian concept can also use the International experience to create and expand a great concept in one of the largest and fastest growing markets in the world.

What do you recommend to someone considering franchising his or her business?

Everything is franchise-able, but it definitely depends on the franchisors experience. Only the franchisors who create a great positive experience can gain success. Franchising Association of India (FAI)

About FAI The Franchising Association of India is a Membership Organisation (it is a non profit organisation) of Franchisors, Franchisees, Vendors, Consultants, Financial Institutions and Students and others. Their services are dedicated to provide a one-stop shopping experience for franchising business and with membership of the prestigious World Franchise Council , they have an ongoing access to knowledge of the World accepted best practice related to Franchising in different areas of business activity. In recognition of the increasing role of franchising in the market place and the very beneficial positive contributions of franchising to the Indian economy, the franchisor and franchisee members of the FAI believe that franchising must reflect the highest principles and standards of fair business practices. THE FUTURE OF FRANCHISING

Franchising is an entrepreneurial alliance. Much like a commercial business partnership wherein the franchisor provides the brand name, manufacturing / service delivery process and access to the system and the franchisee provides the capital and forms the front end of the delivery system. Franchising is based on sound principles of excellent and consistent quality that is associated with a brand name.

Currently, In India not many innovative franchise concepts are available. In this subcontinent people prefer to save some cash rather than go for quality service. This is because people fear to take the risk of deviating from the conventional idea of the concept of business and adopt franchising as a method of business. Franchising, today contributes roughly about 1% of the total retailing activity in India. This is no doubt a very grim picture for the franchising community. When carefully observed behind this gloomy image India has a very big opportunity. With the internationalisation of franchising and emergence of new technology, it is a dynamic method of doing business. It is in keeping with the liberal philosophy according to which without freedom, the human spirit languishes and the economy stagnates. With the issue of global governance, there seems to be a growing trend of drinking water being supplied as a commodity with a profit motive. Though the issue of global governance and water is debatable at the same can be conceived as commoditisation of water, the possibility cannot be denied that the future may involve corporatisation of water and provide opportunities of franchising! As Asian and world economies, grow with the ever increasing populations and move toward free market economies, new franchise concepts will come on the scene and the solid, well-managed existing Franchise companies will continue to grow.

About Monginis: The Story of the Rising Cake Monginis is a major Indian pastry, cake and general bakery chain, based in 11 Indian cities like Mumbai, Kolkata, Hyderabad and Cairo, the Capital of Egypt. The Monginis brand name originated over 100 years ago, when 2 Italian brothers set up a catering firm in south Mumbai. Monginis catering service including cakes, pastries and savories were in great demand. To the last detail, complete with a wedding cake it was Monginis that breathed life and fun into the European wedding in Mumbai. After it was bought over by the Khorakiwalas in 1960s, the brand has remarkably grown to become the national leader in cakes. In 1971, for the first time in India, a plan of having an exclusive franchise cake shop was conceptualized. Mr. H.T. Khorakiwala, the founder president of national association if bakery industry, who spear headed the operations, realized that to grow it was necessary to focus on production standards and distribution. The retail management was best left to the shop owners who were in a better position to offer personalized services to the customer. The success of the first franchise cake shop sparked off a getting up of a chain of franchise cake shops all across India, which is nearing the 500 mark. Monginis has emerged as one of the largest food store in India. At the sprawling 150,000 sq. feet combined manufacturing facilities in Mumbai and its twin city Thane. The organization today owns the state of art manufacturing facilities to produce a whole range of cakes and bakery products both Owen fresh and supplied daily to all cake shops.

COMPANY PROFILE: Basic Information

Company Name:

M/s. Monginis Foods Pvt. Ltd. Manufacturer

Business Type: Product/Service Cakes, Gateaux, Breads, Burgers, Savouries

(We Buy):




No. Opposite



Estate Jagjivandas


Dadar East, Mumbai-400014 Brands: Monginis, Pita Wich

Company Website URL:

Ownership & Capital

Year Established:


Ownership Type:



Business Owner

FACTORY INFORMATION Factory Size: 30,000-50,000 square meters

Factory Location:






Andheri(West), Mumbai - 400 053

QA/QC: No. of Production Lines: No. of R&D Staff: No. of QC Staff:

In House 8 5 - 10 People 5 - 10 People


Core Vision Values Quality Privacy Policy Terms and Conditions

Core Vision Every organization operates itself with a vision in their mind so that the activities of each and every person involved with the organization leads to same direction. The core vision of Monginis is as follows: 1. To help people celebrate their happiness and make those moments memorable in their lives. 2. All Monginis products and services shall be offered with the same love, care and

affection as if; they were meant for the most beloved person (or a family member).Creating value-for-money products without compromising on quality in terms of taste or appearance. 3. Good intentions in dealing with one another amongst the stakeholders (shareholders, suppliers, employees, franchisees, dealers and consumers) breed (or yield) good products and services. 4. Our vision is to become a national cake company with one thousand Monginis cake shops through forty manufacturing franchisee units spread over the metro cities of India.

Values Monginis follows a simple "doughnut principle" whereby the customer remains that valued creamy centre around whose satisfaction all activity revolves. 1. We shall make products, keeping in mind the feelings of the end consumer in mind, be it son, daughter, father, mother and make the products with the same love and affection as it were made for a family member. We strongly believe that good intentions breed good products. 2. Value for money: We shall offer consistently value for money products. 3. Fairness: We shall be fair in all dealings with the stake holders (shareholders, suppliers, employees, franchisees, dealers, consumers). 4. Monginis shall constantly strive to build strong relationships based on

understanding each other and mutual cooperation; 5. We shall value and respect the contribution of all Monginites from workers to senior level managers, suppliers, service providers, franchisees and dealers. 6. Excellence: We shall constantly innovate and maintain excellence in our day-to- day work and in the quality of the goods and services we provide.

Privacy Policy Monginis Foods Pvt. Ltd. does not sell, trade, or rent our personal information. 1. When Monginis Foods Pvt. Ltd. uses other agents, contractors, corporations or business partners to perform services on its behalf or as part of a joint promotion, Monginis Foods Pvt. Ltd. will ensure that this entity protects the user's personal information in a manner, which is consistent with the aforementioned statement. 2. Monginis Foods Pvt. Ltd. may provide aggregate statistics about their customers, sales, traffic patterns and elated site information to reputable agents. 3. Contractors, corporations or business partners, but these statistics will include no personally identifying information. 4. An industry standard for encryption over the Internet, to protect the Data. When we type in sensitive information such as credit card details, it will be automatically converted into codes before being securely dispatched over the Internet. 5. If we make an online booking with Monginis Foods Pvt. Ltd., they will record our personal details. Our data may be used for the following purposes: accounting, billing and audit, credit or other payment card verification, security, administrative and legal purposes, systems testing, maintenance and development, customer relations and to help them in any future dealings with us, for example by identifying our requirements and preferences.


ISO 22000: 2005 Food safety management system certified organization.

Monginis Foods Pvt. Ltd is now an ISO 22000: 2005 food safety management system certified organization. We were certified by SAI GLOBAL, and the registration covers production and supply of cakes, pastries, cookies, chocolates and savories. Monginis Foods Pvt. Ltd has a well devised food safety policy which penetrates to the root level and ensures food safety and security to the customers. Monginis was awarded HACCP certification in 2005.

Terms and Conditions

1. Product price mentioned is inclusive of delivery charges, local taxes and transaction fees. Hence, no additional charges are applicable to the product. 2. Orders are accepted from around the world, for deliveries only in select cities of India. 3. Lead time for deliveries is 3 working days. 4. All deliveries will be executed between 12 noon - 6 pm. 5. Unavailability of the recipient, for any reason will be treated as cake delivered. 6. There will not be any refund of money in case of incorrect recipient's shipping address / telephone number. 7. On account of unforeseen circumstances like floods / natural calamity / etc. The delivery service may be withdrawn. 8. We deliver cakes only in our defined cities shown in the store locator. 9. All cakes are delivered in boxes, along with a gift card for personalized messages

History: Early in the 20th century, two Italian brothers of the Monginis family ran a catering service in Mumbai's Fort precinct, one of which was popular with the city's European residents at the time. In 1958, Monginis Catering was bought up by the Khorakiwala family, and became Monginis Foods Limited. In 1971, the company adopted the franchise model of business, with a stated emphasis on localized production for local tastes. It also models itself on the "food boutique" concept, focusing on quality, presentation and service. It has thereby expanded its brand and reach across the country, hitting a total worth of about 950 million rupees by 2012. Products: Monginis sells itself as "The Cake Shop", producing ready-made as well as order-made cakes for catering or carry-out. Individual cake slices are also kept in Monginis stores for dinein customers. The chain sells both Indian and Western savouries, including samosas, puffs, cutlets anddoughnuts. Apart from these, snack foods and breads are also sold at Monginis shops. Monginis has a product line for diabetics, and offers themed products during Diwali, Christmas,Easter, EID and other festivals. Where as the Egyptian brand has called itself Monginis Bakery, producing chocolates, cakes, pastries, oritental sweets like Baqlawas Kunafas, Eid Kaaks and Mooled Nabi Sweets. Fast food Snacks include more than 50 items like Burgers,Pizzas,Patties,Cornato(bread cone with garlic chicken),Cornizza(veg version), Hotdog & so on. Monginis produce more than 30 different gateaux primarily in round, square and heart shape both in egg and eggless category. Monginis has cakes in regular, premium and super premium segments in which Black forest, truffle Dutch premium Shimmer and premium Zanzibar are most popular cake family among customers. Availability Monginis has made a name for itself in site delivery and accessorized carry-out catering, with telephone and internet ordering options. It counts 558 exclusive franchises in total, and at

least one production center each, in 38 cities. These include some of the biggest metropolis, such as Mumbai, Kolkata and Hyderabad. 215 of these are in Mumbai, where the company is headquartered at a 42,000-square-foot (3,900 m2)office/factory complex. Besides Mumbai the company has a considerable presence in the city of Kolkata (130 shops), Pune (60 shops), Goa(34 shops) and Surat (27 shops). Monginis also supplies less perishable products to over 10,000 locations. Monginis outlets Cake Shops, are conveniently located, with a friendly ambience and helpful staff, whose motto is the complete satisfaction of the customers sweet wishes. Great ethics and services, have ensured that Monginis has spread its wings across exclusive 521 outlets, using 1,25,000 sq. ft. of retail space, 20000 non exclusive dealers selling the brand, and a daily footfall of 75000 customers, in addition to the large organized retailers like Big Bazaar, More, Spencers, Dmart, Star Bazaar, Reliance. The prompt and efficient delivery service has been one of Monginis fortes and hallmarks. In a market environment where emphasis by many supplier s of goods and services is only on core products and sub contracting of related ones, for Monginis, the timely and proper delivery of the clients choices in perfect condition, has always been very much a vital part of the complete process aimed at blameless customer satisfaction. Some adjectives clients apply to Monginis products are dainty and delectable, scrumptious and savoury, thrilling and tantalizing, awesome and elevating, succulent and smooth, stimulating and satisfying, a class of its own.

About MONGINIS Franchise Once upon a time, as they say in fairy tales, more than a century ago, Monginis was a spacious boulangerie right in the heart of the Fort area of Bombay, as the city used to be then called. Signor Mongini and his brother, expatriates of Italian descent, were the presiding deities at this boulangerie premiere with glass frontage and display stands patronized by the European expats

as well as the more westernized among the locals citizens. Old timers still swear by the pastry sold at Monginis situated at the spot where the Akbarallys Flora Fountain Department Store now stands. Come Independence and Monginis continued to prosper. But as the sixties dawned, the Monginis brothers decided to close shop and return home. This dovetailed perfectly with the enterprising Khorakiwala Familys business plans. Sensing a new and profitable opportunity, they bought the Monginis bakery and brand, lock, stock and barrel. Within a decade, the Mongini expansion plan based on the franchising business model was evolved and fine-tuned. A nationwide network of Monginis shops began to emerge gradually. Today, Monginis own a sprawling headquarters and state-of-the-art manufacturing facilities in a North-western Mumbai suburb where an ever-expanding range of cakes and bakery products, both packaged and ovenfresh, roll of the conveyor belt and are whisked away to the many Monginis shops awaiting fresh supplies of Celebration Cakes, Cookies, Specialty Breads, Chocolates, Snack Foods and Savouries. The true \"celebration specialists\" Monginis have morphed into, we now are also into Party Decorations, from buntings to disposable plates and party return gifts. And, as you can see from our website, we have free party ideas on offer online. As the saying goes, all this is only the icing on the Celebration Cake. Single Unit Investment for MONGINIS Franchise Expected Franchise: Investment for

5,00,001 - 10,00,000

Investments Includes:

Franchise Fee Equipments Furniture and Fixtures Advertising Marketing /

Capital Investment required:

Expected Payback Period:

Expected ROI:

Any other Investment needed: Master Franchise Investment for MONGINIS Franchise Expected Franchise: Investment for

2,00,001 - 5,00,000

Franchise Fee:

Investments Includes:

Furniture and Fixtures Advertising Marketing /

Capital Investment required:

Important Points for MONGINIS Franchise

Franchise Program:


Training Program available for the franchisee Software/Hardware Support included in the Franchise Fees

Franchise Training Venue:

Franchise Site

Franchise Regions:





Northern Eastern Western

Area/Site Preference:


Minimum needed:



200 - 400




Agreement: Franchise Agreement is renewable

Other Important Points

Minimum Guarantee given Facility provided Master Available Site Select Help given Franchise

Monginis - "Business Model" Monginis exclusive cake shop business operates on a franchisee model. It franchises out not only the retailing but manufacturing also. It strongly believes in inherent human entrepreneurship and strives to bring it out by training and by giving a lot of freedom in working so as to create entrepreneurs. The entrepreneur franchisees then work in a team with the brand striking a perfect win-win situation for both.

A Monginis Manufacturing Franchisee virtually owns the entire Monginis business of the city he has been appointed for. He is responsible for the procurement of raw materials, manufacturing, logistics and local marketing. He has to work hard to develop a set of reliable local vendors, get competent and skilled people to handle manufacturing, create a robust logistics and appoint strong retail franchisees to take care of the critical last mile. He has to invest not only in plant and machinery but in training manpower, efficient transportation of the products, creating and sustaining retail footfalls and all the market development activities.

A Monginis Retail Franchisee owns and operates a Monginis Cake Shop. To begin with he has to receive a proper training in store management. He has to properly receive and store the products. He then sells the products by using his best of the selling abilities. He has to constantly strive to offer the best shopping experience to the Monginis customers so that they not only keep coming back again and again but spread a positive word of mouth for the brand and get additional footfalls also. SWOT Analysis of Monginis: Strengths of Monginis 1) 2) 3) 4) 5) Monginis Foods Pvt. Ltd. has been there for a long time almost for 4 to 5 decades. It has good coverage; it has around 500 retail stores all over India. Has acquired a name in the world of bakery, food processing and packaged foods industry. It has recently started offering home delivery and online booking and delivering system. Prices of their products are quiet reasonable as compared to its competitors.

Weakness of monginis 1) 2) Monginis has fewer varieties in the range of cakes as compared to its competitors. There have been cases of lack of consistency in quality because of Monginis being a

franchise business. 3) Monginis is not promoting its products aggressively.


Being a franchise business it has limited control over the location of the store. Hence some

of its stores are not strategically located.

Opportunities of monginis 1) There is an opportunity for Monginis to make its presence felt in the malls which now-a-

days becoming a strategic location for such kind of products. 2) 3) Getting more varieties in their product range by proper market research. More services can be added to boost sales further and make the brand name stronger in the

mind of the customers. 4) 5) 6) Promoting the online system properly by targeting corporates, NRIs, etc. Getting in more customization options would be good for the customers. Using the tag line What are you celebrating today? more effectively.

Threats of monginis 1) 2) Monginis has threat from its competitors such as Birdys, Hang Out, Merwans, etc. Cadburys and McDonalds are also a threat to it because they are also positioning their

products on the lines of celebration. 3) Mithai Mate is a latest venture in the world of online gifting of sweets which is also a

competitor to Monginis. 4) The franchise system of business can lead to sometimes misuse of the brand name. It can

also hamper the quality of the product and also the service offered by the employees at the store.

Marketing Strategies

Ushering in the summer, Monginis Foods Ltd. is planning to roll out a slew of marketing and promotional initiatives to promote its existing as well as new products. As a part of marketing strategy, Monginis is planning to enhance its brand visibility at their outlets by setting up special Monginis lollipops but this attempt proved to be a failure. In addition the company is also planning to focus on school promotions to promote its existing range of bar cakes and slice cakes in the Indian market place. Monginis is targeting 600 schools to reach out to children. The promotion campaign will involve 3 steps. One, schools will be enrolled and approached. Second, schools will be given an opportunity to visit Monginis bakery for an entire day. Third, Monginis will host drawing contests and quiz contests. Monginis has launched Monginis Brownies priced at Rs.5 at all Monginis cake shops. They have also come up with Monginis Khari in a mid-sized pack priced Rs.20. They are also planning to introduce new exotic varieties in fresh cream cakes targeted at Sec A&B priced between Rs. 100 and Rs.300 soon. In order to position Monginis as a strong cake brand which offers benefits of being soft and fresh, the company had come up with a television commercial in the year 2006-07. On a regular basis, it advertises through the print media. According to Mr. Jagdeep Kapoor, MD, Samita Marketing Consultants Pvt. Ltd.; the brand marketing strategy consultants for Monginis, the objective is to build Monginis brand with a clear target of 1000 franchise cake shops.

Recently, Monginis started digital marketing and are getting a good response. Monginis have become very active in the cyber world by online advertising through reputed portals like yahoo, rediff, sify, etc. and even by using social networking sites like Facebook, Orkut, etc. On mobiles, they have started an SMS push on relevant occasions and even started forwarding SMS birthday wishes to their loyal set of consumers on their birthdays.

Marketing Mix of Monginis 1. Product: Monginis has wide range of products; their main product being fresh cakes for all occasions. Monginis also has chocolates, pastry and cake and chocolates combo in their product line. It also sells packaged cakes which are available at their stores and also at other retail stores. Monginis also has different kind of breads and a variety of snacks for dine-in customers in veg and nonveg variety. It has also started home deliveries and online booking and gifting system. PRODUCTS Personalised Birthday Cakes/Pastries and more:

Monginis Products At A Glance Monginis sells itself as "The Cake Shop ", producing ready-made as well as order-made cakes for catering and carry-out. Individual cake slices are also kept in Monginis stores for dine-in customers. Be it chocolate cakes or cakes in general, Monginis has mastered the art of making cakes over a period of time. A specialist in making cakes begins right from selecting right quality ingredients in precise quantities, blending them together to the best of knowledge and baking to the level of perfection. The soft and moist sponge so made is then sumptuously layered and coated with cream flavored with dark chocolate or milk chocolate or with various fruit flavours. The chain sells both Indian and Western savouries including samosas, cutlets, puffs and doughnuts. Apart from these, snack foods and breads are also sold at Monginis shops. Monginis has a product line for diabetics, and offers themed products during Diwali, Christmas, Easter, EID and other festivals. Fast food Snacks include more than 50 items like Burgers, Pizzas, Patties, Cornato (bread cone with garlic chicken), Cornizza (veg version), Hotdog & so on. Monginis produce more than 30 different gateaux primarily in round, square and heart shape both in egg and eggless category. Monginis has cakes in regular, premium and super premium segments in which Black forest, truffle Dutch premium Shimmer and premium Zanzibar are most popular cake family among customers.

2. Price Price of Monginis cakes is reasonable as compared to its competitors. The prices of cakes vary on their size. On an average a half kg cake would cost something around 200 and it goes up to a 1000 depending on the size and the flavor.

3. Place Monginis cake shop is present in 12 major cities in India. It has around 500 retail outlets or franchise all over India. All the cities have a production unit from which the goods are supplied daily. Goods which are unsold are taken back by the company and are given away in charity if in consumable condition or else destroyed. Manufacturing Franchisee Network CITY Mumbai Kolkata Pune Hyderabad Rajkot Nasik Goa Baroda Ahmadabad Surat Orissa Year of Establishment 1972 1991 1995 1996 1998 1999 2000 2000 2003 2004 2005 No. of Cake Shops 165 115 48 7 10 10 29 24 19 14 5

Now Monginis, after launching its 4th successful Bake Shop in Hyderabad is all set to open the same in other cities. In the Bake Shop, customers will be able to view freshly baked products coming out of the oven and cakes decorated in their presence.

4. Promotion: Monginis has used media such as TV, print, web, hoardings, etc. to advertise its products. It regularly comes out with offers on festive occasions. Recently to promote its cakes and chocolates it came out with a range of a special cakes and chocolates for all those SSC (Xth Standard) students who passed out this year. It has also planned for chocolate baskets for the boys and girls. The successful boys can be gifted with a blue coloured basket filled with assorted chocolates and decorated with a Doll (Boy). And, similarly the girls can be gifted with a pink coloured basket filled with assorted chocolates and decorated with a Doll (Girl).

Monginis Clients Few of Our valuable and prestigious clients:

1. Indian Railways 2. Titan industries 3. Wipro 4. Tata Group 5. GTL 6. Pantaloon Retail India Ltd. 7. TCS 8. Alkem Laboratories 9. Tata Teleservices 10. Aditya Birla Group 11. Patni Computers 12. WNS

13. Glenmark Pharmaceuticals 14. Kores India Ltd. 15. MGL 16. CGSL Citi Group Services Ltd. 17. Big 92.5 FM 18. Erica Pharmaceuticals 19. Saifee Hospital 20. Mahindra inter trade 21. SAMSUNG electronics 22. LG ELECTRONICS 23. ICICI prudential life insurance 24. Life style international


Birdys Brownie Point Ribbons and Balloons The Bakery Line is one of the most upcoming businesses today because of the reason that children are born every minute and people will not stop celebrating their birthdays. Monginis, a very well-known brand in this business has gone as far away from the time it first started its operations. There is intense competition among leading cake shops of the town. Some of the competitors which Monginis has are Birdys, Brownie Point, Ribbons and Balloons, Denish Cake shop etc. BirdyS Birdys is Indias gourment chain of Bakery and Pastries shops with 18 franchised outlets, at present,spread across the city.The fast growing neighborhood hangout chain of cake shops create one appetizing idea after another from traditional to exotic recipes. Stuffed wholesome breads, savouries, European style chocolates, gateauxs and tea time favourites are just a few of irresistible products available. The outlets are catered to from a state-of-the-art production facility where premium ingredients of highest quality are prepared by experienced teams.

Brownie Point Brownie point was started by Manish Khanna after returning from the US. He is one of the first to come up with a concept of serving Confectionery, Cakes & Deserts. Shaped cakes like Children's Shaped Cakes, Wedding Cakes, Desserts Cakes, Desserts, Brownies, Cheese Cakes, Picture Cakes Mousses etc, less than 1 roof. Catering to a lot of Bollywood Royalty like, John Abraham, Ajay Devgan, Akshay Kumar & Family, Hritik Roshan, Dimple Kapadia, Poonam Dhillon, Sajid- Wajid, Nausheen Ali Sardar etc. Brownie Point is the ultimate resource for all of

your party, wedding and event planning needs. Find Special Desserts, Cakes, Mousses, Pie, Quiche, Puffs, Burgers, Sandwiches, Croissants, Rolls and more.

Ribbons and Balloons Ribbons and Balloons is another famous chain of cake shops making exotic and premium cakes, gateauxs and other bakery products. The flavours and variety of cakes are totally different from those of Monginis. Some of the products of Ribbons and Balloons are Chocolate Mousse, White bread, Brown bread, Garlic bread, English crunch cookies, Veg and Non-veg Croissant etc. They have their franchises at some of the posh areas of the city like Bandra, Powai, Santacruz and others. FRANCHISE OPPORTUNITIES What is franchising? Why Franchising? Reasons to select a Monginis Franchise. Monginis seeks Franchisees Requirements for acquiring a new Monginis Franchisee Application Form Manufacturing Franchisee Network

What is Franchising? Franchise is a time tested method of manufacturing and selling goods and services by a contractual license which can be categorized into Permitting the Franchisee to manufacture and market the goods under and established brand, expertise and goodwill of the Franchisor with

complete operational guidance. Permit the Franchisee shop to sell the products and run the business under obligation to run it in accordance with the Franchisor's system

Why Franchising? In India's emerging boom market, there are hundreds of successful product and services and an equal number of unsuccessful ones. community. Apart from of doing business has been well accepted. Now Monginis offers you a franchise to operate the market with time tested and repeatedly proven management concepts and marketing techniques. In the U.S.A. it has been estimated that over 80% of new business fail in the first five years because they operate on a basis of trial and error method. However, every 17 minutes, a franchise business opens in the United States. More than 540,000 franchises currently operate throughout the United States, generating nearly 60% of all retail sales. Franchise system offers financial independence and the chance to own an independent business. It is a system where you are in a business for yourself, but not all by yourself. You have the support and backing of a much larger and successful organization behind you. A Monginis franchise enables you to purchase the experience, reputation, brand awareness, training expertise and marketing support of the franchisor. India offers lot of potential for the franchising entrepreneurial, franchising as a way Indians being very

Why should one select a Monginis Franchise? On selecting a Monginis franchisee one becomes the immediate beneficiary of trademark and goodwill associated with them and acquired over more than 35 years. Guidelines on various aspects for starting a Franchisee manufacturing unit including site selection, estimation of project cost, infrastructural requirements, related government formalities, parameters for assessing the potential of business in the area etc.

Minimum risk in the selection of right machinery and equipments with proper installation and start up. Assistance and time to time guidance in the stage wise completion of franchise unit. Popularity of brand ensures short lead time and good sales response from day one. Complete guidance regarding opening of franchise shops, like selection of location, shop infrastructure, internal decor, training of dealer salespersons etc. Access to new formulations, product recipe, specifications, expansion programs, operational manuals etc. Initial training provided at the Monginis Headquarters in the areas of Finance, Taxation, Systems Sales skills of your Field Staff Shop sales skills and shop management Training in Production Processes on the shop floor. Training on the job extends even after unit starts operations, with key company persons remaining there to weed out the teething problems and assist you in ensuring quality standard. Requirements for acquiring a new Franchisee Any person who wants to start a new business or acquire a new franchisee has to know very well every minute detail about the particular firm or company. In todays competitive and advanced world there are chances that a new entrant may face many difficulties to survive in the market or he may even have to quit the market. A person invests his money with a view to earn profits from the work he performs. Similarly for acquiring a Monginis Franchisee there are some basic requirements which a person needs to follow. So far as cakes market is concerned, it is still growing, and there is a lot of potential for further growth also. So far as chocolate market is concerned, Monginis are into boutique chocolate segment. As far as bakery products are concerned, they always keep their focus on cakes.

To become Monginis franchisee one should own a shop at high visibility/high traffic (pedestrian traffic) location. An aspiring franchisee has to pay one time security of Rs one lakh which is refundable and non-interest bearing, one time franchisee fee of Rs 25,000, architects fee of Rs 25,000, cost of the interiors including counters, air conditioners, computer, etc. A franchisee has to pay a consolidated amount of Rs 8 to 10 lakhs which is not much, when compared with the renowned brands of the stature of Monginis. But, when it comes to investment of time and dedication, they are very demanding. They ask for 100 per cent time and dedication of the franchisee, because they know makes or breaks the business. Monginis have specifications laid down for doing the interiors of the shops. The counters and equipments are supplied by the company approved vendors. The company has appointed an architect, who is responsible for maintaining the look and feel of the shops and for faultless execution; we have a panel of interior contractors for sure that the level of involvement of the franchisee

Monginis plans 50 outlets by end this year After a recent store launch in Indore, Mumbai based leading bakery chain; Monginis now plans to open 50 more outlets across the country by end of the year 2010. The company also plans to double its retail distribution from the current retail network of 15,000 stores across the country. Elaborating on the Monginis' expansion plan, Zoher Khorakiwala, CMD of Monginis Pvt. Ltd, said, After Indore, the cities where we are planning to roll out our exclusive cake shops are Kanpur, Lucknow,Raipur, Chennai and Bangalore We are currently looking out for suitable franchising partners for these locations and it will take some time for us to decide on Monginis manufacturing franchisee. For opening new stores, on an average, Monginis is looking at the locations with the minimum carpet area of 200 sq ft. Apart from opening more stores; our strategic business unit (SBU) is setting ambitious plans for the retail distribution expansion. Today, our packaged products are being retailed in the retail outlets of limited number of cities and we wish to increase our distribution in the retail network of all the metro cities and other developing towns. The retail expansion plan involves appointing more number of distributors and retailers, he added.

In addition to traditional and modern trade channels, the company is also active on on-line trade. Recently, it has launched an e-commerce site,, where customers can easily place their orders. Going by the changing convenience driven shopping habits among customers, we feel that the online business is very important, said Khorakiwala. Monginis marked a turnover of Rs 214 crore in the last fiscal and has set a target to achieve five percent of this turnover in the next two years only through its online business. Further, through its retail expansion, company expects to grow at the rate of over 20 percent year-on-year. Besides, the cake major is also ready to extend its portfolio into ready-to-eat (RTE) foods segment.

Monginis to enter ready to eat' segment: A New Division Extending its franchise beyond cakes, the Mumbai-based Monginis Foods is planning to enter the ready to eat segment'. With its network of 500-plus stores across the country, the Rs 240crore cakes major are ready to extend its portfolio into new categories. While the ready-to-eat segment may be crowded at the moment with big players such as ITC, there can still be room for one more player. Monginis intends introducing mainstream products in this segment and will set up a new manufacturing unit for the same. Almost two decades ago, Monginis had dabbled in ready-to-eat segment but did not fare well then. We will require a separate plant with different technology for entering the segment as it is unlike the cakes segment,'' Mr. Khorakiwala said. A separate division is expected to be floated within the company for the new segment. We will be extending the brand name of Monginis to the ready-to-eat segment and there will be a range of heat and serve products such as vegetable kormas and paneer. Considering that we already have our stores, it will easier to introduce these products as there are ready footfalls in such outlets,'' said Mr. Khorakiwala.

Besides, it Web site also offers both inter-city and intra-city deliveries and doubles up as an additional distribution channel for the company. Monginis is also planning to expand its operations to new markets in the African continent in countries such as Tanzania and Kenya. We intend setting up manufacturing units in these countries in partnership with local partners as we have to make products to suit the palette of these countries, he said.