Project Report on

FRANCHISING IN THE FOOD AND BEVERAGE INDUSTRY IN INDIA

SUBMITTED BY

Kunal Ailani & Nadeem Ansari

MMS

MARKETING

2009-2011

UNDER THE GUIDANCE OF

Prof. Hatim Kanpurwala

BES’s Institute Of Management Studies & Research

Nesbit Road, Mazgaon,

Mumbai - 400010
 ACKNOWLEDGEMENT

This project on ‘FRANCHISING IN FOOD AND BEVERAGE INDUSTRY’ is the result of

co-operation, hard work and good wishes of many people. I, the student of BES’s Institute of
Management Studies and Research, would like to thank my project guide Prof Hatim
Kanpurwala for giving me the opportunity to work on this project.

I owe my debt to Mr. Jayendra Kulkarni, GM Sales and Marketing dept in Mars
Hospitality Group for giving his valuable advice and insights on this project.
 INTRODUCTION

Today, international franchising in India is one of the most exciting areas in the franchise
industry, as globetrotters are more likely to do their shopping in franchised stores. Global
franchise organizations like Pizza Hut, Marks and Spencer, McDonald's, Subway, HP, Holiday
Inn, Dominos, Gold's Gym, Kodak, Kentucky Fried Chicken, and so on are bullish on the
potential of franchising in India and have started their operations here. And it is not just foreign
brands that are eying for its attention. Indian apparel brands like Park Avenue, Color Plus,
Provogue; food chains like Nirulas, Sagar Ratna; Mars restaurants and numerous other brands
across product categories are all just waiting to serve them. With the arrival of MNCs, the Indian
market has woken up to the concept of franchising as a way of doing business. Though the
concept of franchising has existed in India since many years, it is only now that the average
Indian entrepreneur and companies have woken up to the possibility of using it as the fastest
route to growth. What makes franchising so attractive to companies is the obvious fact that it is
the fastest and cheapest way to get your product across to millions of people and into new
uncharted territories. But more importantly, in a country like India where cultural diversities
make retailing a big challenge, franchising is allowing the companies to truly think global and
act local. As a result of having franchise outlets, a brand owner based in North India does not
have to worry whether he will be unable to identify with his potential customers in the South. He
knows that his face in the South is his franchisee, which is a local and understands that particular
market. Hence, he does not have to worry about lack of identification at the retail level. Nor does
he need to invest in the costly process of setting up his own outlet, finding the right people,
managing large number of culturally diverse stores on a daily basis and so on. On the franchisee
side, today's businessman is no longer willing to sit idle and just live off his real estate rent. He is
looking for something that can assure him income and at the same time give him social
credibility. This makes franchising an extremely attractive proposition to him. So today, instead
of just leasing out his property, he is actively looking for companies that are willing to take him
on as a franchisee. Besides, education and retail franchising is also making its mark in service
industries like consultancy, housekeeping, travel etc.
 What is Franchising?

Franchising is a contractual bond between a Franchisor who has developed a brand and a
business format through usually long experience of selling a product or a service and the
Franchises who usually provides the capital and the entrepreneurship at the retail outlet level.

As the fastest route for business expansion and branding, Franchising thus offers an excellent
business model particularly for service organizations waiting to extend their networks and reach
to the consumer.

Franchising offers an excellent opportunity for you to be in business for yourself.

Financially, the franchisee will pay the franchisor an initial franchise fee and the costs of shop
fitting (where necessary) together with the costs of equipment required to run the business. Once
established, the franchisee will normally pay the Franchisor a further monthly payment based on
his turnover. This is known as royalty or monthly management fees.

The concept:

Franchising as a concept was pioneered way back in the 1840s in Germany, when certain major
ale brewers granted franchises to certain taverns to exclusively sell their ale. However, it was in
1851 in US that Isaac Singer of the Singer Sewing Machines introduced what is generally known
as Business Format Franchising today. Singer introduced one of the most sophisticated written
franchise contracts, which is still considered the basis of modern franchise agreements.

Franchising is a business model that aims to replicate a successful business format across a
number of local networks of entrepreneurs. What is most efficient is, it allows a successful
businessman to expand his business enterprise to different markets without very high investment.
Imagine the amount of funds McDonald’s would require if it were to finance all its outlets
around the world? Also it would require the best geniuses in the world to understand all the
diverse markets. The businessman (referred to in franchising world as ‘franchisor’) gets access to
the local entrepreneur’s (referred to as ‘franchisee’ capital and market knowledge. For example
McDonald’s Mumbai franchisee has good market knowledge about the potential customer base
and thus can help McDonald design its offering and deliver it better. In return the franchisee uses
the franchiser’s brand to attract its customer and deliver product to them using the proven
business format of the franchiser. Thus it seems to be a win-win relationship for both of them.

Franchising is not a new concept in India. Raymond has used it extensively to reach the market
place – so has Titan more recently. The recent entry of a host of multinationals has seen
franchising gain prevalence. More and more companies seem inclined to go in for the mantra:

“Let someone do your business for you “

Ritesh Vohra, CEO, FIRST FRANCHISING PVT.LTD .

“Franchising in India is growing at close to 25 % annually. Our research shows that there are
now over 1000 active franchisors and almost 40,000 franchisees operating in the country. The
annual turnover being generated by these players is over Rs.10, 0000 crores and the sector
employs close to 300,000 people directly. In the last few years there has been a significant
change in the overall structure of the sector with large Indian corporate and International master
franchises joining the fray in big numbers.”

Pramod Khera CEO & MD, APTECH LTD.

“The franchise market in Indian is in its infancy stage and growing exponentially. While
industries like fast food and computer education have embraced franchising as the preferred
mode of geographical distribution, there are many other industries which have still not tapped the
potential. Retail is the latest industry which is aggressively exploring the franchise route for
expansion and many more industries should follow suit. At the same time, the legal frame – work
for franchising in India is still weak.”
Franchise Market.

Franchising in all developed countries is an extremely popular business model for reaching the
consumer .In the US alone Franchising accounts for nearly USD 1 trillion in retail sales and
constitutes nearly 50 % of the total retail trade with over 3,20,000 franchised retail outlets.

With growing saturation in the domestic markets, developed countries Franchisors in the US,
Canada and Western Europe are looking out for opportunities to Franchise their business in Asia,
South America, Central America and Mexico where Franchising is still at a nascent stage
therefore providing fertile ground for rapid growth.

In India Franchising as a business model has been known for decades staring with the famous
Bata Shoe stores. However in the last decade the growth of this sector has been particularly
repaid led by the expansion in food services, computer education and health care industries
besides many others. Franchising is thus a fast growing sector of the economy with substantial
employment generation potential.

Who is a Franchisor?

The right to the franchise is sold by the franchisor to the franchisee for an initial sum of money,
often called the up-front entry fee, or franchisee fee. Thus, Franchisor is a Corporation that
grants a franchise to an individual or group.

In simple words, he is the owner of the franchised system; He owns the know-how of the concept
and the brand name. He grants franchises to third parties. The franchisor is answerable to his
franchisee for ongoing matters like training, management and marketing support.

“You are five times more likely to succeed as a franchisee than if you start a comparable
venture from scratch on your own.”
Who is the Franchisee?

Person or group (the small-business owner) to whom a corporation grants an exclusive right to
the use of its name in a certain territory, usually in exchange for an initial fee plus monthly
royalty payments to the franchiser (the corporation).

The franchisee is the individual who decides to start his own business going into partnership with
a specified brand. Through this formula, he can start a reputable commercial activity with proven
results with no need of previous knowledge, thereby eliminating to a great extent the strong
commercial and financial risk involved in an isolated business. He receives from the franchisor
the zone of exclusiveness, the know-how acquired by the latter in all aspects of the business and
also counts with his permanent assistance during the life of the contract.
EMERGENCE OF FRANCHISING

The term franchisee comes from the French verb “affranchiar” which means to ‘to tree’.

The American Industrial Revolution began the mass production of consumer goods, which
created the opportunity for these companies to produce manufactured goods at lower costs, fuel
consumer demand and to sell and distribute the products efficiently and cost effectively. Many
methods of sale and distribution were tried before franchising, including direct factory sales,
sales through non-branded locations such as pharmacies, direct mail and traveling salesmen.
While all proved to be insufficient to satisfy the needs of the company, local salesmen were the
most effective. By selecting franchisees, and providing them with exclusive territories, the goods
manufacturers were able to effectively bring their products to market.

Franchising emerged as a force to be reckoned within the post war 1950's, taking advantage of
pent-up consumer demand.

No one can doubt that the evolution of franchising has also been a genuine revolution of ideas,
business concepts and the entire economic process. The evolution of modern franchising, created
by the innovative companies and the pioneers that have led them, is an exciting tale in itself. The
future, energized by still unimagined new concepts, new business techniques and international
expansion, promises to add still more dynamic chapters to the continuing and growing adventure
of franchising.
CLASSIFICATION OF FRANCHISEES

Depending on the rights granted, franchisee’s can be classified into:

 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.

F r a n c h is o r

U n it F r a n c h is e e U n it F r a n c h is e e

 Master Franchisee

He is generally granted the right to a substantial territory. He will then grant unit franchises
throughout the territory. The Master Franchisee needs to have sufficient drive and resource to
fully exploit the territory and control the unit franchisees territory.

F r a n c h is o r

M a s t e r F r a n c h is e e

U n it F r a n c h is e e U n it F r a n c h is e e
  Regional Franchisee

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.

F r a n c h is o r

R e g io n a l F r a n c h is e e R e g io n a l F r a n c h is e e

U n it F r a n c h is e e U n it F r a n c h is e e U n it F r a n c h is e e U n it F r a n c h is e e

 Multiple Franchises

Some unit franchisees operate on several units. These are referred to as multiple franchises
and usually have a large number of individual unit franchise arrangements – one for each
unit.

 Developers

Large Corporations sometimes, prefer to exploit their territory by opening outlets

themselves. These are known as developers. They have a single developer agreement,
which allows them to open many units. These are pilot operations so that they become fully
familiar with the business at an operational level and can localize it so as to improve its
chances of success.
 WHY FRANCHISING?

Franchising is one of the world’s fastest growing and most lucrative industries. 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 country’s balance of payments.
Thus, not surprisingly, awareness of the benefits of this business formula is growing at an
international level.
 The main reasons for selecting Franchising - as a mode of Business are:

Funding:

The basis for franchised expansion is use of franchisee’s funding to permit rapid outlet or
branch growth. This acts as a form of cash injection for growth, while ongoing fees can finance
growth of a management infrastructure, which can take the network to even greater heights.
Thus a company can expand faster with a franchise system because each new territory's
business launch is self-funded.

Economies:
Because franchisees usually take on the responsibility for most of the direct overheads, such as
premises, rental/rates, vehicle finance and maintenance, telecommunications costs, insurance,
local promotional activity, stationery, postage and accountancy etc… the parent company is
less financially pressured and can expand more economically.

Branding and Profile:

The franchisor’s corporate profile is more easily raised across wide areas because franchises
will operate under his brand in their own area. Because they know their areas and have the
local contacts, they will be better placed to exploit the area's potential and bring the franchisors
name to a wider audience, eventually taking him to national awareness. Franchises are
responsible for raising the corporate flag in their areas, and if the network grows nationwide,
the franchisor’s brand grows with it.

Controls:
Since franchisees own their stock whether van-based or premises-based, this stock becomes
their personal responsibility. The result is improved stock control and movements - and less
likelihood of losses or wastage, as well as much better stock movement to where and when it is
needed.
Quality:
Associated with this is the fact that standardised training, operation manuals and field support
can improve the prospects of quality control throughout the system. At local level, instead of
line-management, the franchisor will have highly motivated and highly trained people making
sure that their service or products reach a wider clientele without any depreciation of quality. On
the contrary, franchisees will be more likely to focus on enhancing quality.

Decentralization:
The burden of over -centralized administration can also be reduced. For instead of trying to do
business with a large and widespread customer base, the head office can delegate most of the
front-line administration to franchisees - for example, invoicing customers and credit control at a
localized level.

Human Resources
Linked to this is the advantage that expansion can therefore take place with a relatively small
number of central staff. Apart from avoiding the strife, personnel complications and bureaucracy
that often accompany extensive line management, it is also possible for the franchisor to spend
less on HR personnel.

Customer service
As the business owner, the franchisee feels a strong degree of personal responsibility towards
customers, typically resulting in improved customer relations, usually at a very personal level.
Customers like to do business with accessible and responsible owners well placed to ensure that
good customer service is delivered - in turn encouraging customer loyalty and repeat business.
 WORKING OF FRANCHISING

Once a franchisor is established and franchisees have joined the network, both parties are "joined
at the hip", as it were, with the franchisor's success depending on the success of his franchisees,
and vice versa. Indeed, the old saying that "a chain is only as strong as its weakest link" applies.
In addition to building the brand and the network, the franchisor's ongoing responsibilities
include product development, market research, the initiation of joint purchasing programmes that
enable franchisees to purchase goods and services at preferential prices, training and quality
control.

Raw Material Raw Material

Product/ Service Know- How Product Sale/ Service Delivery

Royalty
FRANCHISEE CUSTOMER
FRANCHISOR
Training
Payments

FEEDBACK & Control

The Franchising Model. Feedback

Franchisees are responsible for local brand building and front line service delivery. Regular visits
by the franchisor's staff are designed to ensure that every member of the band plays the same
tune. In response to the networks brand personality and influenced by its advertising message,
consumers have formed certain expectations and it is in the interest of everyone that these are
met. This forces the franchisor to exercise control over the product offering and service delivery
of each store.

THE FRANCHISING ENVIRONMENT:

Customer
Market Market

Product

Franchisee

System
Brand Know- how Brand

Franchisor

Thus the franchisor provides the system know how while the franchisee delivers the final
product or the service to the customer at the same time ensuring that brand building exercise
is operational in the market.
FRANCHISING – ADVANTAGES & DISADVANTAGES

Advantages

As practiced in retailing, franchising offers franchisees the advantage of starting up a new

business quickly based on a proven trademark and formula of doing business, as opposed to
having to build a new business and brand from scratch (often in the face of aggressive
competition from franchise operators). A well run franchise would offer a turnkey business: from
site selection to lease negotiation, training, mentoring and ongoing support as well as statutory
requirements and troubleshooting.

After their brand and formula are carefully designed and properly executed, franchisors are able
to expand rapidly across countries and continents, and can earn profits commensurate with their
contribution to those societies. Additionally, the franchisor may choose to leverage the franchise
to build a distribution network.

Franchisors often offer franchisees significant training, which is not available for free to
individuals starting up their own business.

Disadvantages

For franchisees, the main disadvantage of franchising is a loss of control. While they gain the use
of a system, trademarks, assistance, training, and marketing, the franchisee is required to follow
the system and get approval for changes from the franchisor. For these reasons, franchisees and
entrepreneurs are very different.

It can be expensive. Because of standards set by the franchisor, the franchisee often has no
choice as to signage, shop fitting, uniforms etc. and may not be allowed to source less expensive
alternatives. Added to that is the franchise fee and ongoing royalties and advertising
contributions. The franchisee may also be contractually bound to spend money on upgrading or
alterations as demanded by the franchisor from time to time.
In response to the soaring popularity of franchising, an increasing number of communities are
taking steps to limit these chain businesses and reduce displacement of independent businesses
through limits on "formula businesses."

Another problem is that the franchisor/franchisee relationship can easily cause conflict if either
side is incompetent (or not acting in good faith). For example, an incompetent franchisee can
easily damage the public's goodwill towards the franchisor's brand by providing inferior goods
and services, and an incompetent franchisor can destroy its franchisees by failing to promote the
brand properly or by squeezing them too aggressively for profits.

To the franchisor:

Advantages:

 Small central organization can earn profit without large capital investment.

 Growth with less capital investment.

 Minimum of risk capital

 Exploits the local knowledge of the franchisees

 Less staff problems

 Local management is motivated

 Wider distribution

 Handle accounts on national basis

Disadvantages:

 Franchisee may feel independent and not require franchisor quickly

 Franchisor has to ensure that standards are maintained throughout the chain

 Franchisor has to educate and motivate franchisee to accept its suggestions

 A lack of trust may arise.

 Creation of possible future competitors

 Difficulty in selection of suitable persons

 Difficulty in getting cooperation

 Conflicts if franchisee has many businesses

 Problems of communication

 Non disclosure of gross income

TO THE FRANCHISEE:

Advantages:

 Gets basic training

 Owns his own business

 Benefit of a name and reputation

 Needs less capital compared to without franchising

 Receives assistance in site selection, planning, training, purchase of equipment etc.

 Benefits from franchisor’s advertising and promotion

 Benefits of the bulk purchasing

  Can tap the specialization of the franchisor

 Risk is reduced

 Franchisor assists if there are problems in the course of business

 Benefit from franchisor’s patents, trade marks and trade secrets

 Can get market information

 No competition in territories assigned

Disadvantages:

 Controls over the quality of the service or goods

 Payment of franchise fees

 Difficulty in assessing quality of the franchisor

 Restriction on assignments

 Dependency on the franchisor

 Franchisor’s policy may affect the profitability

 Franchisor may make a mistake

 Brand image may become less reputable

 FRANCHISING IN INDIA

India is at the threshold of a revolution in franchising which contributes to around 20% of the
world GDP. Though franchising in India did not rake off, as it did globally, still it is more
popularized through domestic franchising thanks to IT and Education. Internationally franchising
started with international companies, especially US stepping in emerging markets.

Best Opportunities
India is a “Sleeping giant” when it comes to franchising. The sheer size of the market, a growing
middle class with disposable income, a more informed value seeking consumer, and the booming
retail sector will see franchised business grow off the charts in the next decade and beyond.

Why Franchising is required In India

With Indian consumers transforming into global customers, they now demand better facilities,
international standards of service and experience besides top brands and quality. Hence, it is
becoming difficult for stand alone starters to stay in business. On the other hand companies find
it difficult to penetrate the local markets, considering the sheer size of Indian market. The
demographic and social profile changes within few kilometers and the great language, cultural
and traditional differences make it more difficult for the entrepreneurs to gauge the local
markets. Thus, it became mandatory for the companies to look for different opportunities

Growth Potential

In a vast country like India with over 1 billion population and rapidly changing life styles and
growing awareness in the consuming class wanting continuous improvement in the quality of
products and services the scope for growth of Franchising is Phenomenal. Going forward this
growth is inevitable not only through Foreign Franchisors coming into the country but more so
through the growth of a large number of Indian, Franchise Systems like Aptech, Nirulas, NIIT,
Barista, Raymond, Colour Plus and a host of other emerging Franchise business in the area of
health care, entertainment, beauty parlous, education, business services and the like.

Considering that there is no dearth of entrepreneurial talent in the country and that there are
scores of India Franchisors looking out for suitable Franchisees this sector is set to explode to a
level of over 2500 Franchise systems in the next 4/5 years with over 1, 00,000 Franchisees
operating all over the country with its corresponding positive impact on employment generation.

The industries cited as the top prospects for successful franchise opportunities in India
include:

 Food and beverage

 Education
 Apparel
 Entertainment
 Courier Services
 Stationery and gift shops
 Health and beauty
 Fitness and nutrition

Many of the world's largest and well-known franchise companies, such as UPS India,
McDonald's, Yum Brands, Baskin Robbins and Subway already have a visible presence in India.
Other US companies, from diverse industry sectors, are now gaining a foothold too.

With India's retail sector growing at more than eight percent a year, The Dollar Store is
actively seeking franchisees. This retail chain, based in Florida, USA, sells low-priced general
merchandise products and services. India is just one of the geographical areas targeted for the
company's multi-million dollar overseas business expansion.
And there are some surprising entries to franchising in India too, which at first glance, might not
seem like a logical fit with traditional Indian culture and consumers.

Contours Express launched its first Indian center in Bangalore, with a second location in
Mumbai. The company has 700 fitness centres for women in the U.S and additional locations
across 24 countries, and plans to have at least 1000 Contours clubs operating around the world.

Pizza Corner aims to open 36 stores in India, and is extending efforts to expand in Sri Lanka,
Nepal and Singapore.

According to statistics from the Franchising Association of India, franchises currently account
for only two percent of retail revenues in India compared to almost 50 percent in the US.
However, that two percent is growing at a fast pace, and the implications point to astounding
market potential.

The success rate for individual franchise business owners in the US is 92 percent, and since
franchise businesses are based on proven systems, the success rate for Indian franchises should
be comparable.

Franchising has a bright future in India due to the convergence of many factors:

 The average Indian income is steadily rising and individuals have more purchasing
power.
 Telecommunications and transportation infrastructure improvements facilitate the
exchange of information and goods.
 Increasing levels of consumer spending, with greater recognition of brand value.
 Internet access is opening the world to India, making its population more aware of global
trends and brands.
 And conversely, the Internet is making it easier for international companies to gain an
understanding of India's; culture, geography and politics.
Future Trends for Indian Franchising

Indian franchises have been dominated by IT and education based franchises. We see this trend
being over taken in years to come by retail franchise opportunities. We also understand that India
is a price sensitive market, so the franchise opportunities that sell best, are ones that are well
price, value for money investment, opportunities, where the investor can achieve goods returns
on investment.

The growing number of people seriously considering a new business venture will be attracts to
the franchises model. In an average small business 80% are out of business in their first 5 years;
in franchising global statistics tell us that 90% are still in business after 10 years, so the franchise
format is in essence a risk reducing strategy for a new business owner.

We will see many companies seriously looking at the franchise route for expansion, Franchising
offers solutions to the high property costs in urban India, and it also enables accelerated
recognition of the franchise brand across country.

Franchising is all about quality partners. FIHL one of Asia’s largest integrated franchise Solution
Company providing the whole gambit of franchise assistance from showcasing franchise
opportunities to an investor in making the right decision, providing quality information to ensure
informed decisions.
FRANCHISING IN INDIA - SOME FACTS

Some key facts that point to the growth of the franchising sector in India are as follows:

 There are over 1000 active franchisors in the country.

 There are over 40,000 franchisees (across sectors) in India today.

 The total investments put in by these franchisees in setting up their individual

franchised businesses are Over Rs. 5,000 crores

 The total annual turnover achieved by franchised businesses in India is in the region of
Rs. 8000-10000 crores

 The total manpower directly employed by these franchised businesses is around

300,000.
  "Over 40,000 franchisees exist in India. The annual turnover of these franchisees
is between Rs.8,000-10,000 crore"-FAI

 It is estimated that in franchising, every new franchisee will create new jobs; India
can expect franchising to be a major source of new employment.

All these facts & figures point clearly to the extent to which franchising has been accepted in
India as a way of doing business,

Why franchising in food and beverages?

Food & beverage, the next sunrise industry:

The Indian food market is approximately Rs 2,50,000 crore ($69.4 billion), of which value-added
food products comprise Rs 80,000 crore ($22.2 billion).

With food production expected to double by 2020, large investments are already going into food
and food processing technologies, skills and equipment. Given the changing industry dynamics,
it is paramount for F&B News to highlight news, issues and events in the sector, some of which
are briefly discussed below.

The food processing industry is witnessing a 20% annual growth rate and, consequently, the
demand for processed foods and beverages in the country is constantly on the rise. There are 300
million upper-and-middle-class consumers of processed and packaged food in the country, and
another 200 million are expected to shift by 2010.

According to Ficci study (2007) Food and Beverages Industry in the county has shown positive
growth trends throughout. The survey stated that the improvement has been reflected both in
volume terms and in terms of value for most of the products. The overall food and beverage
industry has achieved a growth rate of about 8.5% in terms of value during 2008-09.

India's growing middle class segment will continue to hold the key to growth in the food market
in India. The profile of the middle class is changing; life styles are changing steadily over time.
The results of large-scale socio-economic changes have spurred growing demand for ready-to-
eat Indian-style foods.

The next sunrise industry for India is going to be food. In terms of total output addition, food has
surpassed IT and Pharmacy industry.

North India is one of the most important markets for food and beverage industry. It has become
an important hub for ready-to-eat foods, snacks, namkeens, processed fruits, juices, milk and
milk products, branded products. The Northern India has established a strong position because of
the changing lifestyles and the incentives provided by state governments
Northern region has become the destination of companies to start manufacturing food and
beverage products and form retail chains because of the growing market and incentives provided
by the respective governments.

The food and beverages sector is witnessing large-scale transformation, innovation and
launching of new products and brands, huge awareness campaign about the products and brands,
advertisement spending, distribution of free samples to make strong presence in the market.
FOOD AND BEVERAGE SECTOR

F&B franchising has never been able to take off in the country because of a variety of factors.
Firstly, typical food franchises are fairly high on investments that put them out of the investment
capabilities of ordinary franchisees. Secondly, a large number of franchisees lack the skills & the
attitude to manage a food business (which is very different from the retail or education business).
And lastly, logistics & supply chain mechanisms in India are still developing and any food chain
aiming to develop a national presence will have to consider heavy investments into setting up its
own logistics infrastructure.
Despite the above hurdles, there are a number of homegrown & foreign brands that are
developing their networks, although very few of them are taking the franchise route. These
include Pizza Hut, McDonalds, Domino's Pizza, Hot Breads, Barista, Nirulas, Sagar Ratna, Pizza
Corner etc. It is notable that even the few brands that are trying the franchise route prefer to take
up management contracts so that the overall control of the outlet remains with the franchisor.

However, there is no doubt that there are still a lot a unfulfilled need gaps in the Indian F&B
sector (as the success of coffee pubs has amply demonstrated). What is needed is a franchise
model that takes into account the needs of the Indian market and also addresses all the problems
mentioned above.

The national as well as international players have recognized the scope of franchising in India
and have now plunged into it very deeply.

This can be easily proved by the following examples of companies which are following
franchising as a mode of business operations.

Companies which are into Franchising in India:

Blue Foods to serve US coffee:

Blue Foods has acquired franchisee rights for The Coffee Bean & Tea Leaf, the US-based
beverage chain. The company had set up the first outlet in Select City Walk mall in Delhi in
2006. Other joints later were opened in premium locations such as the Oberoi Mall in Mumbai,
GVK Mall in Hyderabad, Great India Place in Noida and the international airports in Delhi,
Mumbai, Calcutta and Chennai. Presently, Coffee Bean outlets are operational in three outlets in
Mumbai, two outlets in Hyderabad (domestic and international departure) and at Select City
Walk in New Delhi. For its other brands, Blue Foods is now eyeing the New Delhi, Bangalore
and Kolkata markets for expansion
Sunil Kapur, managing director of Blue Foods, said, “We expect to grow 12 per cent on a year-
on-year basis. We are eyeing a turnover of Rs 30 lakh per month in each of the outlets. Right
from the raw beans to the powder, all will be imported from the US.”

Blue Foods operates on a royalty basis. The company spends around Rs 1.5-2 crore on each
outlet, having a carpet area of 1,500 to 2,000 sq ft. This coffee chain will also serve snacks,
sandwiches and salads as part of its breakfast menu.

Blue Foods goes solo in metros and big cities. In Tier-II cities, the company follows the sub-
franchisee model. Apart from malls, it will also set up standalone coffee shops. There are more
than 390 Coffee Bean joints world over. The outlets offer a variety of freshly roasted coffee and
speciality tea along with baked goodies and blended ice drinks.

Coffee retailing is expected to grow over 30 per cent in the next two years. Organised coffee
retail is estimated at more than $150 million. Coffee retail chains such as Barista, Costa Coffee,
Cafe Coffee Day and Barnie’s are thus expanding their presence in the country.

Subway:

SUBWAY restaurants offer a delicious variety of foot long and 6-inch sandwiches, salads and
wraps that are made with a wide assortment of meats, cheeses, vegetables and toppings. All
SUBWAY sandwiches are made on freshly baked bread and are prepared right before your eyes,
just the way you like it.

It has been reported that Subway International had at least 200 Indian franchisees at the end of
2008.. But the company that has spent two years getting its cold chain in order is not deterred by
the current number of outlets.

They have the traditional, non-traditional and even satellite variations. Also a Subway franchisee
can even operate in a 200 square foot area, but more importantly, he does not need to have a
hospitality background, as they will be trained by Subway. This offers for a lot of flexibility.
In all Subway International has 16,000 outlets worldwide, of which only a 1,200 odd are outside
North America.

At present, Subway has identified 10 regions in India in which it wants to establish its presence.
They include the NCR, Goa and Maharashtra, Karnataka and Tamil Nadu, Uttar Pradesh,
Haryana, Jammu and Kashmir and Gujarat. The company has intentionally left the North Eastern
region out of its present plans. Of the 200, Mumbai city is expected to have 35.

Subway has made its name as a healthy alternative to fast food. To many consumers battling the
bulge, the choice seems clear - Subway offers more healthy choices than its burger-based
competitors

Costa coffee:

The coffee from the UK is now being served here. After 28 outlets in Delhi since 2005, Costa
Coffee had arrived in Mumbai with its first café in Andheri followed by more till date. “Café
Coffee Day and Barista already have a strong presence among the school and college crowd. But
we’re looking at a slightly older audience; those who are frequent travellers abroad and know
about our brand,” says Shivi Arora, marketing manager, Costa India.

UK-based coffee shop chain Costa Coffee is embarking on an expansion drive in India, which
will see its master franchise Ravi Jaipuria Group company Devyani  International Ltd invest Rs
150 crore to set up 300 outlets in the next five years.

"In the next five years, we will have 300 outlets across the country which will see an investment
of about Rs 150 crore," said President and CEO Virag Joshi.
It has already achieved cash break-even within the first year of its operations

Devyani International, the master franchisee for Costa Coffee in India, opened the first Costa
outlet in Delhi in September 2005.

The company will also set up a commissary in Mumbai at an investment of Rs 2.5-3 crore to
supply food to the outlets which will be opened in the western region Costa UK is in the process
of identifying coffee plantations in India to supply coffee beans for its operations not just in India
but also in markets like Middle East.

The company will also set up a roastery in India once it identifies the plantations. Roasted coffee
beans are imported currently from UK.

Monginis

It has been in India for several years now and it survived through only franchising.

Manufacturing cakes, pastries, savories, cookies, chocolates. Mr Mongini, an Italian, started a

bakery and catering services nearly a hundred years ago. By 1971, the idea of having a
nationwide franchise network and reaching out to customers in their neighborhoods was born.
Monginis showed how the brand can be leveraged to convert events into media time space while
supporting causes worthy of a responsible corporate citizen.

Monginis was found in the year 1971.it has 12 company owned India outlets and over 500 cake
shops in India. It has around 40 franchised cake shops abroad.
McDonald's

With a view to penetrate deeper into India's growing food and beverages segment, fast food
chain McDonald's considered adopting franchise model in its Indian operations .

Currently, in its North India operations the McDonald's has 61 outlets, run by a 50:50 joint
venture between McDonald's International and Connaught Plaza Restaurants.

McDonald’s India plans to open 40 new restaurants by 2010. “As part of our expansion plans, we
will open 40 new outlets across east and north India over the next two years,” said Vikram
Bakshi, joint venture partner and managing director (north and east India), McDonald’s India.

Further, the company plans Rs 1.5 billion investment on expansion plan up to 2010. According
to Bakshi, the focus of the expansion in the aforesaid period will be National Capital Region
(NCR) of Delhi and Kolkata.

Currently, McDonald’s operates 170 outlets across India.

"McDonalds in India currently runs a total of 170 quick service restaurants. Between the two
franchisees, we will be spending around Rs 400-500 crore (Rs 4-5 billion) over the next three
years to open 120 outlets," Hardcastle Restaurants, managing director, Amit Jatia, told PTI.

While Delhi-based Connaught Plaza Restaurant operates 90-odd restaurants in the north and east
of India, Mumbai-based Hardcastle Restaurants runs 78 outlets in the south and west.

McDonalds serves 180-200 million people every year across India, which boils down to five lakh
customers per day, he said.

The quick-service restaurant, which still has not broken-even in India, expects to start making
profits in the next couple of years.

"We have always said we never make money. McDonalds took 14-years to break-even in
Australia . In the UK, it took 12-years. We have been in India since 1996 and should break-even
in a couple of years," Jatia said.
Domino’s

The World Leader in Pizza Delivery

Founded in 1960, Domino's Pizza is the recognized world leader in pizza delivery operating a
network of company-owned and franchise-owned stores in the United States and international
markets. Domino's Pizza's Vision illustrates a company of exceptional people on a mission to be
the best Pizza Delivery Company in the world.

Domino's started out small with the legendary Tom Monaghan who bought his first pizza store
and called it Dominick's.It was re-christened Domino's Pizza in 1965. However, in 1978, the
200th Domino's store opened, and things really began to cook. By 1983 there were 1000
Domino's stores, rising to 5000 in 1989. Today, there are more than 8,500 stores in the United
States and 55 international markets

Domino’s India

It was incorporated in New Delhi on March 16th 1995 as a private company under the name
Dominos India Private Ltd. We were converted to a Public Limited Company on September 14,
1996, following which our company name was changed to Dominos Pizza India Ltd”.
Subsequently, on September 24, 2009, the name of our company was further changed to its
present name Jubilant FoodWorks Limited.

Jubilant FoodWorks Limited is the master franchisee of Dominos Pizza Overseas Franhising,
Netherland, for India, Nepal, Bangladesh and Sri Lanka. First Domino's Pizza store was opened
in India in January 1996, at New Delhi.

Over the period since 1996, Domino's Pizza India has remained focused on delivering great
tasting Pizzas and sides, superior quality, exceptional customer service and value for money
offerings. We have endeavored to establish a reputation for being a home delivery specialist
capable of delivering its pizzas within 30 minutes or else FREE to its community of loyal
consumers from all its stores around the country.

Dominos Pizza India had a network of 298 stores, in 65 cities, in 22 states and union territories
(as on 31st Jan 2010). According to the India Retail Report 2009, we were the largest Pizza chain
in India and the fastest growing multinational fast food chain between 2006-2007 and 2008-2009
in terms of number of stores.

Domino's Pizza constantly strives to develop products that suit the tastes of its consumers and
hence delighting them. Domino's believes strongly in the strategy of 'Think global and act local’.

Jumboking Foods Pvt. Ltd

This Fast Food Retail Chain runs through franchising model which has a agreement term of
Initial Terms 9 years, which is to be renewed every 3rd year of operation. It presently has 45
Franchisee Units Outside Country.It plans to operate internationally in future. This Business was
Established in 2001 and Franchising Commenced in 2004.

The Jumbo King brand was founded by Dheeraj Gupta, a Hotel Management Graduate with a
Masters degree in Financial Management. Dheeraj not only put up his own single product stores
but also convinced others to invest in the brand through the franchise model. The vision has
grown to encompass many cities and states, and Dheeraj believes that vada pav has as much
universal appeal as the burger.

Franchise Information
Jumboking operates as a fast food retail chain on franchise basis nationally. Investment in the
correct technology, engaging partners like Johnson Diversey and inducting experienced
professionals in the team from the food and marketing sector, Jumbo King is making a sincere
attempt to upgrade the unorganised fast food industry.

Master Franchises
Jumboking is presently looking for master franchisees who can invest into 8 to 10 outlets at a
time.The company has a fully automated central kitchen and a modern bakery providing world-
class quality products. Thus you are in the restaurant business without the headaches of
manufacturing.
The company has very good purchasing power, which enables it to source raw materials at prices
much lower than any individual restaurant. The company helps the franchisee in recruiting well-
trained staff and provides continuous training to help them implement the quality, service and
cleanliness standards. The highlight of the franchising model is that any franchisee adhering to
the company’s standards can build multiple stores and increase his income many times over.
Case study on Mars Hospitality Group.

The brand

Mars Restaurants is the flagship company of The Mars Group. It is promoted by the Narang
family and operates a number of restaurants in India including Jazz by the Bay, its first
restaurant. Other brands include:

 Boutique hotels (Gordon House Hotels)

 Airline catering units (Skygourmet)
 Fine dining restaurants (Not just Jazz by the Bay, Tendulkar's, All Stir Fry, Dabawalla)
 Fast food or quick service brands (The Pizzeria and Pasta Bar, Roti, China Joe, Dosa
Diner, Just Around the Corner)
 Cake shop brands (Birdy's Bakery and Patisserie, Cake Khazana, The Big Cuppa)
 Sports bars (Sachin's and Score Sports Bar)
 Night club (Polly Esther's)

How franchising works at Mars?

Mars does not totally operate through franchising route. Some of its outlets are company owned
while the others are franchised.

In Mumbai, all the restaurants except for Birdys are company owned.

Birdys is the only brand that operates through the franchising route in Mumbai.

Birdys adopts the vanilla strategy for franchising.

The franchisee first brings in a good location for the set up of Birdys and if the place is approved
by Mars then deposits 12%-15%of the entire cost structure with Mars restaurants.

Also the franchisee pays a royalty of around 15-20% of the total sales.

They are currently present in Pune where all its brands are operated through the franchising
mode. Right from Pizzeria, China Joe to All Stir Fry all of them are franchised to local
franchisees.

They also have a food court in Pune which has all their brands under one shelter.

In Bangalore also they have a food court containing all brands at the same place and also
Sachin’s- restaurant which is also franchised.

What kind of support does Mars offer to its franchisees?

Mars offers support in various forms to its franchisees. It makes sure that the franchisee is
comfortable with the brand and Mars because it believes that by keeping its franchisee happy it
can surely do well in that area.

Mars helps the franchisor in the following ways:

Finance: the franchisee has to initially deposit only 12% to 15% and can then make the
remaining payments later.

Marketing: Mars does the marketing of all its brands, thus the franchisee is spared of promoting
the brand.

Budgets: it also helps them in making budgets for the brands and also suggests areas where costs
can be minimized.

Wastages: it also takes back all that is wasted and left over.
Future plans:

An expansion plan charted out by Horwarth Franchise Services, the overseas menu of Mars reads
like this. Mars will look at setting up 29 restaurants across UK, USA, Dubai and Singapore in a
span of the next one-and-a-half years. Dosa Diner and Roti are the only brands that will be
promoted abroad. Each restaurant will span across 2,500 odd square feet with two separate
service areas but a common kitchen to optimise space usage and backroom operations.

Also in the pipeline is an expansion of Skygourmet, the airline catering unit, which is currently
supplying upto 10,000 meals a day to Kingfisher Airlines, Jet Airways and Air India Express.

Mars Group is now looking to format its fast food brands as food courts in malls and technology
parks. Citing the experience the group had in Pune, Narang says, "We found that this format
works much better than having standalone outlets so we are consolidating all brands under one
umbrella. A venture at a single location with common production facilities translates to lesser
overheads, lesser staff, lower rents and common management."

The next stop is a deal with a developer to put all brands out in the form of 100 food courts in the
next ten years (and 28 in the next three years) across malls and technology parks.

Other plans:

Mars plans to expand itself in cities like Chennai, Kolkata, Bangalore Delhi and Gurgaon.

In Delhi and Gurgaon it plans to set up all brands through franchising route.

The work is due to complete by the end of December.

They plan to adopt a same strategy of central commissary like in Mumbai.

Thus looking at the scope and trends in franchising in food and retailing one can easily say
that investing in it would be a very intelligent thought.

KEY CONCERNS FOR THE INDIAN FRANCISING IN FOOD AND

BEVERAGE SECTOR

Going by the present scenario, it is clear that franchising has been accepted well within the
Indian business environment. At the moment the sector is still in its nascent stage in India.
However the past five years have seen tremendous growth in its popularity. As more and more
sectors come forward to adopt the concept, franchising is bound to become a key force driving
the economy.

However, there are a number of concerns facing Franchising in India, which if left unchecked
might impede the growth of this format in India. These include:

 HERD MENTALITY

There is a clearly identifiable herd mentality amongst Indian franchisors as well as franchisees.
At the height of IT Education boom, there were hundreds of franchisors and thousands of
franchisees investing in this sector. The results are for everyone to see. Similarly, when the dot
com phenomenon happened, all varieties of e-commerce companies, cyber cafes and the like
were available for franchisees. Here again, most of the franchisees did not evaluate the business
opportunity closely enough and went in with the hype resulting in business losses.

 WRONG PRECEDENTS
FRANCHISORS:
The above-mentioned herd mentality has lead to many wrong precedents in the still nascent
Indian Franchising sector. There have been cases where franchisors have used franchising as a
get-rich-quick scheme and have left hundreds of franchisees in the lurch by defrauding them.
There have also been cases where the intention of the franchisor might not have been fraudulent
but their project business plans failed to emerge again leaving franchisees high & dry.

In a large number of not so dramatic cases, franchisors have failed to provide the promised
support to their franchisees. Reasons include inadequate franchisee support systems,
unmanageable growth and a lack of appreciation of commitments.

FRANCHISEES

It is not as if all the wrongs have been committed by the franchisors only. In fact, franchisees also have to
take a substantial share of the blame. There have been innumerable instances where franchisees have
failed to adhere to the systems and processes recommended by the franchisors. There are also cases where
franchisees have taken the know how from the franchisors and have started operations on their own under
a different brand name. A common problem with franchisees is the lack of adherence to payment
commitments.

 A TENSE RELATIONSHIP

Because of all above, the franchisor-franchisee relationship has taken a turn towards becoming a
tense one, where there is a lack of trust from both ends.

This is an unfortunate scenario where both franchisors as well as franchisees end up being losers.

 FINANCING FOR FRANCHISES

To organize financing for franchises is a difficult task with the domestic banks and financial institutions.
Most of the lending institutions refuse to finance components like franchise fees, and other soft costs like
training fees, advertising expenses etc. This is a major problem area as in most service industry
franchises, these components could account for as much as 75% of total project cost.

 UNSTRUCTURED REAL ESTATE MARKETS

The real estate markets in India are completely unstructured and unrealistic. The supply side in
terms of quality properties is limited whereas the demand is growing by the day. Because of this
and antiquated tenancy laws the key property markets in the country are managed on the whims
and fancies of a few landlords and longtime tenants.

These make franchising as an option unviable for start-up entrepreneurs as only the property
costs can make the project unviable.

SO WHAT SHOULD THE FRANCHISORS AND FRANCHISEES TAKE CARE OF?

The number of franchisees stands at roughly 40,000 with annual turnovers from franchising
ranging anywhere between Rs 8,000 crore to Rs 10,000 crore. Investment in the business is
roughly Rs 5,000 crore, and over 3,00,000 people are directly employed in the franchising
business.

Marketers do not consider this hectic pace of growth. India is so large and diverse that
franchising is the only viable alternative for retail operations that want to expand their reach
quickly and cost-effectively. In spite of this, India's potential is nowhere near global levels —
yet. While a franchise business opens every 20 minutes in the world, the comparable time-span
in India is 20 to 24 hours. Like low P/E ratios in the stock market, marketers see these low
figures for India as big potential.
Franchising needs to take into consideration certain critical factors:

 STABALISE BUSINESS FIRST:

Franchising is not just about growth but of transferring know-how profitably to the franchisee.
That is why, as Dipankar Haldar, associate director, KSA-Technopak, a retail consultancy, points
out, “Companies must ensure that they have defined operating policies, processes and procedures
to enable the transfer and replication of the operating know-how loss free.”

This is a point the growth-hungry retail chain Nanz. Nanz, ignored a food and grocery chain set
up with German collaboration in the mid-nineties, launched itself into franchising mode with 23
outlets in three years. This happened, even as the company-owned outlet in Delhi was struggling
with real estate problems and excessive pilferage and before procurement and management
information systems were in place.

 VALUE-ADDITION BRINGS HIGHER COMMITMENT :

Franchising is different from ordinary dealerships and exclusive outlets in the sense that there is
some value -addition taking place at the franchisee’s level. Says Zafar Khan, chief consultant,
Clones & Clones Franchising Developers, “There has to be some value-addition that the
franchisee makes to the business — otherwise he’ll become a distributor.”
Why is value-addition at the franchisee end important? Because the franchisee makes large
investments in terms of money, time and effort, and a degree of involvement in the business is
needed to motivate him. That is the key to the success of any franchising operation — from
Aptech to McDonald’s to Pepsi’s bottling franchisees.

 MONEY POWER ISN’T EVERYTHING

Franchising is partly a risk because it means that the franchisee becomes the custodian of the
brand in his area of operation. If it is a given that the franchising business is, in essence, a semi-
joint venture, then maintaining the delicate balance between independence and control is
important. How do companies achieve this? Obviously by choosing their franchisees with care
and having formal systems in place to monitor them.

This was an issue that Aptech faced. People bringing in huge investments are tempting, but that
alone does not assure a long-lasting and mutually-beneficial partnership.

Half the battle can be won if franchisors headhunt by pedigree. A franchising chain is as strong
as its weakest link. So marketers must begin by evaluating if markets have a sufficient number of
franchisees capable of managing the business as efficiently as its own units.

 BRAND ESTABLISHMENT :

Once a brand is well-established it finds a lot of entrepreneurs who would like to associate with
it, but the challenge is finding a franchisee that fits the franchisor’s needs. With Vintage Cards,
retailers of the Hallmark greeting cards brand which has established a successful franchisee-
driven operation in India, it was no different.
But it had to close a couple of outlets in Delhi after it found that franchisees were not up to
standard. For instance, some franchisees used to switch on the air conditioner in the showroom
only when a customer walked in.

 STANDARDISATION OF PROCESSES AND STANDARDS:

At present Hallmark has a 12-member team to keep a tab on franchisee development. The
company also has an elaborate information-gathering process, which includes six to eight page
forms and several location visits. Detail, detail, detail: As Hallmark’s experiences show, it’s
important to ensure standardization. Achieving this is less a case of glamorous strategy and more
close attention to detail. For example, McDonald’s has all its specs documented — down to the
size of its fries.

 ADAPTABILITY:

In case of Indian market a common standard for all franchises as in case of McDonald’s codified
standards may not, however, work in all businesses. Occasionally, companies may need to
innovate to match the character of the market.

For instance, Vintage Cards and Creations has built up a network of 364 franchisees since it
entered the franchisee mode of business in 1996. To establish its franchisee model in India, the
company did look at markets like the US where Hallmark has 6,000 outlets.

But as Rajesh Vaishnav, managing director, Vintage Cards and Creations, discovered, the US
model cannot be directly replicated in India because the customer profile in the two countries is
vastly different. For instance, the average age of a customer at Hallmark outlets in the US is 55
years; in India, the average age is 18 to 24 years. “We had to Indianise the entire concept and
make\the store appealing to this younger set,” says Vaishnav.

In a business like greeting cards, the management of stocks at each franchisee outlet is complex.
At any point of time, a Hallmark store has to carry 2,000 designs of cards under 270 categories
— birthdays, anniversaries and so on. And the company maintains 10,000 to 12,000 designs to
cater to its varied franchisees. For instance, a store in Panchgani will stock birthday wishes for
parents and “Miss you” cards, rather than cards for husbands and wives because the area has
many residential schools. Vintage maps the profile of visitors and off-take of each category of
cards which provides an idea of what’s selling and what’s not.

THE ROAD AHEAD- THE FUTURE OF FRANCHISING IN INDIA

The art of franchising lies in a delicate balance between two

"Franchising is making its
partners. While one gives in his goodwill, the other uses his
impact felt in India by
skills to tap the local market. If the concept works, it often
boosting the retailing
delivers returns unheard of in other sectors. This is what
business. Retailing in India,
hundreds of new firms hope to achieve in the next decade. If
though on a small scale, is
one can watch out for the pitfalls, then franchising should be
steadily growing, though at
the next big bet for Indian entrepreneurs.
present concentrated in 6-8
For small, traditional retail stores, franchising provides a means major cities of India. It
to compete with larger stores. In large urban areas, small needs to touch the lives of
retailers have few traditional options. Previously, small entities rural people... this is where
had to specialize, associate with other retailers or close. Franchising, with its ability
Franchising offers them a safe and promising new option. to reach hitherto
Due to the large Indian market and the brisk growth expected, unexplored markets, will
India is an important market for US franchising companies. make an impact," says
Since January 2001, twelve US franchising companies have Ashok Jain.
indicated interest in finding master franchisees in India, a good
indication of the interest India is generating.

"India has massive potential; that is why it is a major focus

of our expansion," says Rex Mehta, Founder and President, Dollar store Inc, which is opening
stores in India this year through master franchisee agreements, starting with South India.
"The most lucrative retail franchises would be food services, (a la McDonalds),"says Bikash
Kumar of Retail Management Consulting.
Under apparel a wide product range is important. Restricted portfolios mean restricted sales.
Single product brands may not be able to sustain a franchised operation.

In a consumer's market, Branding and Marketing assume prime importance when it comes to
retail. Though top of mind recall is critical, the best ad at the end of the day is a good product.
It is estimated that in franchising, every new franchisee will create new jobs; India can expect
franchising to be a major source of new employment.

The power of a Brand, is a delicate instrument and can be used or misused by one in charge of it.
For brands, while Franchising seemingly is an attractive gateway to expand, it also involves the
grave risk of brand dilution and perhaps even damage. Just how much of a gamble can be taken
is what companies are now trying to balance out and analyze. As retailing evolves, a
commensurate growth of franchising is only fair to be expected.

CONCLUSION

Looking at all the problems faced in the current scenario, following are some of the key issues
that need to be resolved for the sustained growth of franchising in the country:

 Working Group / Regulatory Authority on Franchising

There is clearly a need for a working group on Franchising, which can identify the correct
priorities for the growth of the sector in the country. Such a group should preferably be set up
under general industry bodies like FICCI and Franchising Association of India. The group should
have a mandate to identify the correct priorities for the sector as well as lobby for them with the
relevant government authorities.

The same group should at later stage form a Regulatory Authority which would be responsible
for regulating the Franchising sector in the country.
  Need for Disclosure Norms

In most countries where Franchising is developed and accepted, there are well-developed
disclosure norms for franchisors in place. These include:

 Mandatory registration of franchise offers with the relevant government departments /

regulatory authority.

 Mandatory disclosure of information on franchisors along with the franchise offer.

The information to be disclosed via this UFOC (Uniform Franchise Offering Circular)
could include –
Background of the franchisor, its financial status, operating history, number of units operational,
number of units closed down along with reasons for closure etc.

 Cooling-off period.
In many countries the franchisee is given a mandatory cooling-off period which has to lapse
before the franchisee can sign the final franchise agreement. This is to ensure that the franchisee
does not take a decision in the heat-of-the-moment but rather thinks before he signs on the dotted
line.
These are some of the disclosure norms prevalent overseas. There needs to be an effort made
towards identifying what would suit Indian business conditions and then implementing the same
with a Regulatory Authority in place.

 Need for Franchise Laws

Along with the setting up of disclosure norms and the regulatory authority, what is also required
is a set of Franchise Laws developed for the sector. Currently, Franchising in India is regulated
by the Contract Law and a number of other business laws but there is no specific law to take care
of specific issues arising out of Franchising. This is badly needed to regulate the growth of the
sector.

 Understand & Honor Commitments

Last but not the least, it is important that both franchisors as well as franchisees need to
recognize the fact that understanding and honoring their commitments to each other is the only
way the relationship would remain long-term. If any one out of the two parties loses sight of this
fundamental factor, the relationship is bound to fail.

As simple as it may sound, this is one of the key factors that will determine the fate of
Franchising in India.

Whether this boom of franchising in India will continue or go bust…… Only Time can tell !!!

MY LEARNINGS FROM THIS PROJECT

 Franchise market in Indian is in its infancy stage and growing exponentially at close to 25 %
annually
 Franchising not only increases the efficiency by which goods and services are distributed,
being different for different markets but also generates employment, earnings and
entrepreneurship at the same time.
 Franchising has a bright future in India due to the convergence of many factors:

 The average Indian income is steadily rising and individuals have more purchasing
power.
 Telecommunications and transportation infrastructure improvements facilitate the
exchange of information and goods.
 Increasing levels of consumer spending, with greater recognition of brand value.
 Internet access is opening the world to India, making its population more aware of global
trends and brands.
  And conversely, the Internet is making it easier for international companies to gain an
understanding of India's; culture, geography and politics.

 As far as Food and Beverage industry is concerned The food processing industry is
witnessing a 20% annual growth rate and, consequently, and so is the demand for processed
foods and beverages in the country
 However there exist many problems in the franchising route for food and beverage industry.
These include fairly high on investments, lack of skills & the attitude to manage a food
business and logistics & supply chain mechanisms
 Apart from the above mentioned problems the legal frame work for franchising in India is
still weak
 Despite of many hurdles, there are a number of homegrown & foreign brands that are taking
the franchise route and have proved to be great successes
 If taken care of the above mentioned problems, Franchising in the food and beverage
industry is the next big thing

BIBLIOGRAPHY

Following are the secondary sources of information referred to for the purpose of data collection

BOOKS & MAGAZINES:

 FRANCHISING – S. Siva Ramu

 Several Issues of Business today, A & M & Business World.

 Book on Mars Restaurants.

WEBSITES:
 www.marsrestaurants.com
 http://www.mars-world.com
 www.wikipedia.com
 www.franchise.net.au
 www.firstfranchising.com
 www.Retailyatra.com
 www.franchiseindia.com
 www.mcdonaldsindia.com
 http://www.franchisebusiness.in/c/Jumboking-Foods-Pvt

 http://www.franchisebusiness.in/c/

 http://www.travelbizmonitor.com

 http://www.dominos.co.in/about_

 http://www.indiaretailing.com

 http://business.rediff.com/

 http://www.franchisedirect.com/