Franchise Market - India

June 2014
2
Executive Summary
Market
India has emerged as a viable franchising destination for major brands owing to the increasing
disposable income of the people who are keen at shelling out more for luxury brands
Education, food and beverage and retail constitute the top sectors for earning revenues in the
Indian franchising arena
Among market entry strategies, unit franchising is hailed as being the most opted route for entry
Drivers &
Challenges
Competition
Drivers
 Growth in disposable income and
consumer spending
 Development of malls and supermarkets
 Access to internet
 Introduction of FDI in retail
 Improvement in transportation
infrastructure
 Increasing availability of credit
 Change in consumer outlook
Challenges
 Shortage of skilled manpower
 Real estate issues
Major Players
Player 1 Player 2 Player 3
Player 4 Player 5 Player 6
E-newsletter as the latest promotional technique
Business model addressing rural-urban divide
E-franchisees
Entrepreneur Cafe
Trends
FRANCHISE MARKET IN INDIA 2014.PPT
3
•Macro-Economic Indicators
•Introduction
•Market Overview
•Types of Franchising
•Benefits & Key Success Factors
•Market Entry Routes
•Franchise Model in Key Sectors
•Drivers & Challenges
•Government Participation
•Trends
•Franchise Opportunities
•Competitive Landscape
•Strategic Recommendations
•Appendix
FRANCHISE MARKET IN INDIA 2014.PPT
4
Economic Indicators (1/3)
d1
a1
11
12
13
14
15
Q4
b4
a4
Q3
b3
a3
Q2
c2
b2
a2
Q1
c1
b1
INR tn
c4
c3
d2
2012-13 2010-11 2013-14 2011-12
GDP at Factor Cost: Quarterly
Inflation Rate: Monthly
q
0.0
0.2
0.4
0.6
0.8
1.0 r
t
s
%
Jul 2013 - Aug 2013
p
q
Nov 2013 - Dec 2013 Oct 2013 - Nov 2013 Sep 2013 - Oct 2013 Aug 2013 - Sep 2013
FRANCHISE MARKET IN INDIA 2014.PPT
5
Though at an initial stage, yet franchising in India has
progressed and is posting healthy growth over past 4 years
Franchise Market – Indian Overview
Franchise Market – Growth
•A growing urban class aided by rising disposable income has strengthened India’s position as a viable
franchising destination in the global platform
•Greater demand for goods have translated into generation of greater demand for franchises which is growing
at an impressive growth rate of x1% annually
•Further, owing to the less hassles in setting up an entrepreneurial venture an increasing number of people are
opting for franchise route to expand and enter Indian market
•Education, food and beverage, and retail sector constitute the top sectors from the Indian franchising
perspective
FRANCHISE MARKET IN INDIA 2014.PPT
0
INR bn
2014e
x8
2015e 2017e
x5
2018e
x6
x4
x7
2016e
x3
2013
x2
6
SAMPLE
Franchising – India Snapshot (1/4)
Franchise Market – Indian Overview
y1
s1
y2
s2
y3
y4
s4
s3
y6
y5
s6 s5
2013
FRANCHISE MARKET IN INDIA 2014.PPT
7
SAMPLE
An analysis of geographical segmentation details about
where franchising has caught up well
Franchising – Geographical Segmentation (2013)
N
O
R
T
H
Has posted good growth owing
to the presence of HNI (high
net worth individuals) with key
hubs including New Delhi,
Noida and Gurgaon
S
O
U
T
H
Has gained focus of
international franchisors with
Bengaluru being recognized as
the IT capital of India and
having enough population with
considerable purchasing power
E
A
S
T
Slightly less developed
compared to North or West,
but is fast catching up with
Kolkata leading from the front
W
E
S
T
Is hailed as a prime region for
transactions as Mumbai is
named as the business capital
of India, with Pune and other
regions not lagging far behind
0
North
Unit %
t1
t2 West
t4
t3
East
South
FRANCHISE MARKET IN INDIA 2014.PPT
8
SAMPLE
Entry Routes – Segmentation
Segmentation of
different entry
strategies based
on the ones
adopted in high
probability by
the investors for
their expansion
or market entry
Text
Franchise Market – Entry Routes (2013)
p4
p5
p6
p3 p1
p2
FRANCHISE MARKET IN INDIA 2014.PPT
9
SAMPLE
Education Franchising – Types
Sectors (2/7)
• There are multifarious opportunities in education
franchising including pre-school franchise, play
school, day-care franchise, child care, learning
center, training institute, grooming center, IT
institutes, animation school, retail school, coaching
classes, educational institute, aviation academy,
language center, recruitment service, and customer
services
•Business opportunities are blooming with
the concept of franchising especially in
education sector
•Education is hailed as the second largest
household expenditure segment after food
in India
•This makes it a more attractive sector where
more than 390 franchisee owners operate
•Informal and supplementary education
forms the lion’s share of education
franchising
Education Sector – Overview Education Sector – Market Size & Growth
Education Franchising – Scope for Growth
0
INR tr
2014e
q3
2013e
q6
q5
q4
2012
q2
q1
2015e 2011
q7
q8
FRANCHISE MARKET IN INDIA 2014.PPT
10
SAMPLE
Drivers and Challenges
• India’s affinity to receive quality education to fulfill
the aspirations of its youth is considered to be the
most significant growth driver for this sector
• Gap identified between the number of potentially
employable people and the number of educational
institutes available in the country poses as a big
opportunity for the service providers to capitalize on
• Pre-schools are considered to be yet another domain
wherein franchising seems to play a significant role
• Present scenario poses enough opportunities for
education franchising as parents are ready to shell
out considerable amount to provide quality
education to their kids
• Growing number of working women also poses as a
driver as families with two working parents generally
send their kids to coaching and pre-schools for
education as they cannot devote time to them
Drivers
• The sector is burdened with the high real estate
prices since it requires setting up of a classroom
• Presence of stiff competition wherein cropping up of
too many institutes can be termed as a challenge for
any start-up
• Success of any educational franchise is dependent on
the manpower resources wherein if proper qualified
staff do not render teaching, then name and market
reputation of both the franchisor and the franchisee
is at risk
• Educational institutes are hailed as being hindered
by lack of advertising, although service providers are
working on it intensively by promoting through
newspapers, radio and television
• Another significant challenge faced by them is the
maintenance of standard between the parent
institute and the authorized institute
Challenges
FRANCHISE MARKET IN INDIA 2014.PPT
11
Drivers & Challenges – Summary
Drivers
Growth in disposable income and
consumer spending
Development of malls and
supermarkets
Access to internet
Introduction of FDI in retail
Improvement in transportation
infrastructure
Increasing availability of credit
Change in consumer outlook
Challenges
Shortage of skilled manpower
Real estate issues
FRANCHISE MARKET IN INDIA 2014.PPT
12
Government Regulation – Summary
Regulation
Franchising laws in India
Indian Franchise
Association
Franchising Association
of India
FRANCHISE MARKET IN INDIA 2014.PPT
13
Trends – Summary
Entrepreneur cafe
E-newsletter as the latest
promotional technique
E-franchisees
Business model addressing rural-
urban divide
Key
Trends
FRANCHISE MARKET IN INDIA 2014.PPT
14
SAMPLE
Franchise Opportunities
Automobile (1/2)
Investment Franchise Franchise Descriptions
Upto INR 0.5 mn T1 • T5
INR 0.5 – 1.5 mn
T2 • T6
T3 • T7
INR 1.5 – 3.0 mn
T4 • T8
FRANCHISE MARKET IN INDIA 2014.PPT
15
SAMPLE
Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3)
Competitive Benchmarking (2/5)
j5
j4
j6
%
Company 2
j1
j3
Company 3 Company 1
j2
Net Margin Operating Margin
• Company 1 recorded operating margin of -%, higher than that of Company 2 which recorded operating margin of
negative -% and Company 3 which recorded operating margin of negative -%
• Company 1 recorded the highest net margin of -%, higher than Company 2 which recorded a net margin of negative -%
and Company 3 which recorded a net margin of -%
FRANCHISE MARKET IN INDIA 2014.PPT
16
Public : Domestic Company – Company 1
Key People
Products and Services
City A
Company Information Offices and Centres – India
Corporate Address
Block ABC
City XYZ
Tel No.
123456
Fax No.
1234567
Website http://www.abc123com/
Year of Incorporation
20--
Category Products/Services
Product 1 P1,p2,p3
Name Designation
ABC abc
XYZ xyz
MNO mno
FRANCHISE MARKET IN INDIA 2014.PPT
17
SAMPLE
Financial Snapshot Key Ratios
Financial Summary
• The company incurred a net profit of INR A mn in FY 20--, as
compared to net profit of INR B mn in FY 20--
• The company reported total Income of INR X mn in FY 20--,
registering an increase of r % over FY 20--
• The company earned an operating margin of d1 % in FY 20-- an
decrease of k % points over FY 20--
• The company reported debt to equity ratio of g in FY 20--, an
increase of r % over FY 20--
Financial Summary
Indicators Value (DD/MM/YYYY)
Market Capitalization (INR)
a
Total Enterprise Value (INR)
b
EPS (INR)
c
PE Ratio (Absolute) d
Particulars
y-o-y change
(20-----)
20-- 20-- 20-- 20--
Profitability Ratios
Operating Margin a1 a a2 a3 a4
Net Margin b1 b b2 b3 b4
Profit Before Tax Margin c1 c c2 c3 c4
Return on Equity d1 d d2 d3 d4
Return on Capital Employed e1 e e2 e3 e4
Return on Working Capital f1 f f2 f3 f4
Return on Assets g1 g g2 g3 g4
Return on Fixed Assets h1 h h2 h3 h4
Cost Ratios
Operating costs (% of Sales) i1 i i2 i3 i4
Administration costs (% of
Sales)
j1 j j2 j3 j4
Interest costs (% of Sales) k1 k k2 k3 k4
Liquidity Ratios
Current Ratio l1 l l2 l3 l4
Cash Ratio m1 m m2 m3 m4
Leverage Ratios
Debt to Equity Ratio n1 n n2 n3 n4
Debt to Capital Ratio 01 o o2 o3 o4
Interest Coverage Ratio p1 p p2 p3 p4
Efficiency Ratios
Fixed Asset Turnover q1 q q2 q3 q4
Asset Turnover r1 r r2 r3 r4
Current Asset Turnover s1 s s2 s3 s4
Working Capital Turnover t1 t t2 t3 t4
Capital Employed Turnover u1 u u2 u3 u4
Improved Decline
Net Income Revenue
0
20--
x4
20--
x3
20--
x2
20--
x1
FRANCHISE MARKET IN INDIA 2014.PPT
Public : Domestic Company – Company 1
18
Key Recent Developments
Key Business Segments Key Geographic Segments
Description News
Overview • It sells product A under the brand name of ‘abg’ & ‘def’
Production facilities • In India the company has k manufacturing hubs and j marketing offices
Shareholding pattern
• Promoters of the company hold j % of the share while k % is held by general public
Clients
• Clients are spread across ghj countries spanning across t continents
Investments
• The company wants to invest INR K mn in a company through a joint venture in Country 2
producing product a and product b
• So far the company invested INR 0.C mn in company A in country A
0
20--
c
d
20--
b
a
20-- 20--
y1
0
c1
a1
20-- 20--
b1
20--
India
FRANCHISE MARKET IN INDIA 2014.PPT
Public : Domestic Company – Company 1
19
SAMPLE
Investment Details
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
Date of Operation
Franchise
Requirements
Rights
Supports Offered
FRANCHISE MARKET IN INDIA 2014.PPT
Public : Domestic Company – Company 1
20
SAMPLE
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
T
O
W
S
FRANCHISE MARKET IN INDIA 2014.PPT
Public : Domestic Company – Company 1
21
Key People
Products and Services
City A
Company Information Offices and Centres – India
Corporate Address
Block ABC
City XYZ
Tel No.
123456
Fax No.
1234567
Website http://www.abc123com/
Year of Incorporation
20--
Category Products/Services
Product 1 P1,p2,p3
Name Designation
ABC abc
XYZ xyz
MNO mno
FRANCHISE MARKET IN INDIA 2014.PPT
Private : Domestic Company – Company 2
22
SAMPLE
Shareholders of the Company Ownership Structure
Name No. of Shares held
n1 m1
n2 m2
n3 m3
n4 m4
n5 m5
n6 m6
n7 m7
Total
p2
p1
p3 p4
FRANCHISE MARKET IN INDIA 2014.PPT
Private : Domestic Company – Company 2
23
SAMPLE
Financial Snapshot Key Ratios
Financial Summary
• Company earned a net loss of INR - mn in FY 2013, as
compared to net loss of INR - mn in FY 2012
• It reported total income of INR - mn in FY 2013,
registering an increase of -% over FY 2012
• Earned an operating margin of -% in FY 2013, a decrease
of - percentage points over FY 2012
• The company reported a current ratio of - in FY 2013, a
decrease of -% over FY 2012
Net Profit/Loss
Total Income
-200
-150
-100
-50
0
50
0
INR mn
INR mn
2013
h2
h1
2012
g2
g1
2011
f2
f1
2010
e2
e1
FRANCHISE MARKET IN INDIA 2014.PPT
Particulars
y-o-y change
(20-----)
20-- 20-- 20-- 20--
Profitability Ratios
Operating Margin a1 a a2 a3 a4
Net Margin b1 b b2 b3 b4
Profit Before Tax Margin c1 c c2 c3 c4
Return on Equity d1 d d2 d3 d4
Return on Capital Employed e1 e e2 e3 e4
Return on Working Capital f1 f f2 f3 f4
Return on Assets g1 g g2 g3 g4
Return on Fixed Assets h1 h h2 h3 h4
Cost Ratios
Operating costs (% of Sales) i1 i i2 i3 i4
Administration costs (% of
Sales)
j1 j j2 j3 j4
Interest costs (% of Sales) k1 k k2 k3 k4
Liquidity Ratios
Current Ratio l1 l l2 l3 l4
Cash Ratio m1 m m2 m3 m4
Leverage Ratios
Debt to Equity Ratio n1 n n2 n3 n4
Debt to Capital Ratio 01 o o2 o3 o4
Interest Coverage Ratio p1 p p2 p3 p4
Efficiency Ratios
Fixed Asset Turnover q1 q q2 q3 q4
Asset Turnover r1 r r2 r3 r4
Current Asset Turnover s1 s s2 s3 s4
Working Capital Turnover t1 t t2 t3 t4
Capital Employed Turnover u1 u u2 u3 u4
Improved Decline
Private : Domestic Company – Company 2
24
SAMPLE
Key Recent Developments
Description News
Overview
• Is a wholly owned subsidiary of the concern g
• It is working at establishing a standardized network of h
• Is considered to be positioned to be the largest corporate player in the I market
Services
•It addresses diurnal t1, t2 needs
•It offers a complete range of services such as consultation with t4, t5, t6
 Consultations are provided in diverse fields such as t7, t8, t9
 Boasts of having laboratory that are equipped to handle investigations related to t9, t10, t11
 Moreover, it also processes t12
FRANCHISE MARKET IN INDIA 2014.PPT
Private : Domestic Company – Company 2
25
SAMPLE
Investment Details
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
Date of Operation
Franchise
Requirements
Rights
Supports Offered
FRANCHISE MARKET IN INDIA 2014.PPT
Private : Domestic Company – Company 2
26
SAMPLE
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
• Text
T
O
W
S
FRANCHISE MARKET IN INDIA 2014.PPT
Private : Domestic Company – Company 2
27
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