Franchise Business seekers in Ahmedabad & the Gujarat region can look forward to the franchise expo at ahmedabad at the grand bhagwati on the 8th & 9th Jan 2010.
Companies seeking franchisees/business partners in ahmedabad and looking to expand their business in the gujarat region can seek this opportunity to interact with more than 5000 serious franchise buyers expected to visit the expo.
Entrepreneurs could look forward to companies in the food, education, retail, services, home based opportunities, low investment option, master franchisees, international franchisees and all kinds of businesses that would be displayed at the event during the 2 days.
You could also catch up with the franchise experts /franchise consultants (www.sparkleminds.com) who would help you choose a business of your choice or help you expand your business through franchising.
Visit us at the franchise expo amdavad for complete franchise solutions.
Thursday, December 24, 2009
Naturals Unisex Salons: Franchising their way to 450 Outlets In India
Salon chain Naturals Beauty India presence by 2013 by opening 450 outlets
Leading salon chain Naturals Beauty India is all set to have pan-India presence by 2013 by opening 450 outlets at an investment of Rs 50 crore, according to a top company official.
“Our aim is to be the number one salon chain in India by 2013. To reach that target, we will grow by having 120 salons by 2012. We will take it up to 200 salons by December 2011 and to 450 outlets by 2013″, Naturals Beauty Salon India founder-director CK Kumaravel told reporters after launching the company’s 50th outlet in Tamil Nadu in Chennai last night.
Ninety per cent of these outlets would be franchise based and the balance company owned outlets, he said.
The company would initially invest Rs 30 crore to set up the outlets and another Rs 20 crore by 2011-12.
Initially, the company would open one outlet each in Pune, Ahmedabad and Surat over the next few weeks, he said, adding that all stores across the country would range in size from 1,200 square feet to 1,500 square feet.
The company presently has outlets in other cities like Hyderabad, Bangalore, Mangalore Kochi, Calicut and Trivandrum.
On revenue targets, company’s chief Financial Officer J Gurumurthi said that they reported a turnover of Rs 22 crore in 2008-09 and would reach Rs 40 crore by the end of 2009-2010.
The industry has been witnessing a growth with organized players like Lakme Beauty Salons,Kaya Skin Clinics and many other players in the segment aiming a pie of their share in the multi million industry.
Leading salon chain Naturals Beauty India is all set to have pan-India presence by 2013 by opening 450 outlets at an investment of Rs 50 crore, according to a top company official.
“Our aim is to be the number one salon chain in India by 2013. To reach that target, we will grow by having 120 salons by 2012. We will take it up to 200 salons by December 2011 and to 450 outlets by 2013″, Naturals Beauty Salon India founder-director CK Kumaravel told reporters after launching the company’s 50th outlet in Tamil Nadu in Chennai last night.
Ninety per cent of these outlets would be franchise based and the balance company owned outlets, he said.
The company would initially invest Rs 30 crore to set up the outlets and another Rs 20 crore by 2011-12.
Initially, the company would open one outlet each in Pune, Ahmedabad and Surat over the next few weeks, he said, adding that all stores across the country would range in size from 1,200 square feet to 1,500 square feet.
The company presently has outlets in other cities like Hyderabad, Bangalore, Mangalore Kochi, Calicut and Trivandrum.
On revenue targets, company’s chief Financial Officer J Gurumurthi said that they reported a turnover of Rs 22 crore in 2008-09 and would reach Rs 40 crore by the end of 2009-2010.
The industry has been witnessing a growth with organized players like Lakme Beauty Salons,Kaya Skin Clinics and many other players in the segment aiming a pie of their share in the multi million industry.
Subway Franchise
The Story Of Subway And How Their Franchise Organisation Has Become One The Worlds Major Growing Franchises.
The famous brand Subway is an international restaurant franchise that sells sandwiches and salads. The creators of this franchise were Fred De Luca and Peter Buck who formed the restaurant in 1965. Subway is not the commercial name of the franchise it is Doctor’s Associates Inc or DAI. The business is truly international and is the world’s quickest growing franchise, with Franchises now higher than 27,000 in 85 different countries. The 1st franchise was begun in 1974 in Wallingford, Connecticut, USA.
The Franchises have positioned themselves as a healthier option restaurant, which adds enormous market attraction in today’s health conscious society but much of the Franchises expansion is down to its rare business model. Unlike most Franchises, the parent business does not run any restaurants. The Franchise Opportunity is given to regional Franchises to run the various stores and Subway holds the contract to be their development agent for that area. The development agent, Subway, is then responsible for developing these existing and new locations, studying the stores on a monthly basis and overall support for the various Franchises in whatever struggles that may occur. The break down of percentages for the Franchise For Sale choices are broken down like this, 8% of sales at each site go to royalties, 4.5% of sales go into a holding called the Subway Franchisee Advertising Fund Trust or SFAFT, which is lead by a board of directors voted in by the franchisees. The Franchise Opportunity comprises of the leasing of equipment, help with the franchise cost for minorities and for existing owners the Franchise For Sale choice comprises of remodelling, relocation and expansion loans.
The Franchise Opportunity comes with mandatory requirements. Each franchisee must attend a two week training course, this course teaches business concepts, methods of operation and basic management skills. The time for the training is split between the classroom and on site within a neighbouring Subway restaurant for work experience. After the training course each possible franchisee must pass a thorough exam in order to become possible for a Franchise Opportunity with Subway. As the Subway Franchise For Sale propositions are international there are training places in the UK, USA, Australia, China, Canada, Germany, Korea, India, Lebanon and Russia, and as the Franchises are developing everywhere so will the training places. Other courses on hand are for managers, multi owners of franchises, field consultants and development agents.
Like any franchise nothing is guaranteed, an amount of effort and hard work will be required to build your 1st franchise and especially if you decide to own multiple Franchises. The initial investment is quite good and owning a Subway franchise will give you a high income if you pick the appropriate location.
The speed at which the franchise is developing is remarkable and newest figures show that Franchises are opening at about 1,000 per year internationally, this is a clear signal that this business model will continue to build and lead the market for a lot of years to come. Subway Franchises can be found across the world and with the appropriate person at the appropriate location a Franchise Opportunity is there for you.
The famous brand Subway is an international restaurant franchise that sells sandwiches and salads. The creators of this franchise were Fred De Luca and Peter Buck who formed the restaurant in 1965. Subway is not the commercial name of the franchise it is Doctor’s Associates Inc or DAI. The business is truly international and is the world’s quickest growing franchise, with Franchises now higher than 27,000 in 85 different countries. The 1st franchise was begun in 1974 in Wallingford, Connecticut, USA.
The Franchises have positioned themselves as a healthier option restaurant, which adds enormous market attraction in today’s health conscious society but much of the Franchises expansion is down to its rare business model. Unlike most Franchises, the parent business does not run any restaurants. The Franchise Opportunity is given to regional Franchises to run the various stores and Subway holds the contract to be their development agent for that area. The development agent, Subway, is then responsible for developing these existing and new locations, studying the stores on a monthly basis and overall support for the various Franchises in whatever struggles that may occur. The break down of percentages for the Franchise For Sale choices are broken down like this, 8% of sales at each site go to royalties, 4.5% of sales go into a holding called the Subway Franchisee Advertising Fund Trust or SFAFT, which is lead by a board of directors voted in by the franchisees. The Franchise Opportunity comprises of the leasing of equipment, help with the franchise cost for minorities and for existing owners the Franchise For Sale choice comprises of remodelling, relocation and expansion loans.
The Franchise Opportunity comes with mandatory requirements. Each franchisee must attend a two week training course, this course teaches business concepts, methods of operation and basic management skills. The time for the training is split between the classroom and on site within a neighbouring Subway restaurant for work experience. After the training course each possible franchisee must pass a thorough exam in order to become possible for a Franchise Opportunity with Subway. As the Subway Franchise For Sale propositions are international there are training places in the UK, USA, Australia, China, Canada, Germany, Korea, India, Lebanon and Russia, and as the Franchises are developing everywhere so will the training places. Other courses on hand are for managers, multi owners of franchises, field consultants and development agents.
Like any franchise nothing is guaranteed, an amount of effort and hard work will be required to build your 1st franchise and especially if you decide to own multiple Franchises. The initial investment is quite good and owning a Subway franchise will give you a high income if you pick the appropriate location.
The speed at which the franchise is developing is remarkable and newest figures show that Franchises are opening at about 1,000 per year internationally, this is a clear signal that this business model will continue to build and lead the market for a lot of years to come. Subway Franchises can be found across the world and with the appropriate person at the appropriate location a Franchise Opportunity is there for you.
Wednesday, December 9, 2009
Franchise Business In India:Pathway to Success & Wealth
Rajat Mathur, 36,
CookieMan Franchisee Mumbai
had always wanted to strike out on his own. So, when he left the i-flex Solutions office in Mumbai as its senior banking analyst for the last time, he did not regret it. An alumnus of the IIT-Mumbai and IIM-Lucknow, he had worked at Times Bank and ICICI Bank before i-flex.
You would walk into Orbit Mall on the Malad-Goregaon Road in Mumbai to the aroma of freshly baked cookies. The bouquet will lead you past the Good Earth store on your left, and round the corner to the Cookie Man shop. And there, presiding over chocolate and honey-almond cookies, you would meet Mathur again. Counting the cash, checking the cookies, and serving them straight out of the oven at the back to the crowds thronging the counter. “I always wanted to do something on my own as I think that’s where the real fun is. You can never get that in a nine-to-five job.” Mathur’s entrepreneurial spirit is alive and well.
Jaya Patodia 34
Lakme Beauty Salon, Delhi
She invested Rs 25 lakh initially and now has a monthly income of Rs 50,000-60,000. Her average monthly turnover is Rs 3.5 lakh
“I have a Swiss watch store in Khan Market, but that was not giving me good returns. The turnaround happened when a friend, who owned a Lakme franchise, told me about it.”Franchisee Checklist
While Mathur cut loose, a lot of others wanting to do so have not. With responsibilities and dependents, they don’t dare to leave the warmth of a regular income and plunge into the financial turbulence a new business could bring. But today, the ‘fresher’ can go in with the safety tube of franchising. That’s what Mathur did. T.K.S. Kumar, a franchisee of Whirlpool Service Centre in Chennai for a decade now, says: “I wanted to realise my long-cherished dream of becoming an employment giver from an employment seeker.” But P. Ramarao, president, Australian Foods, which owns Cookie Man, warns: “It’s not for people who aren’t passionate.”
WHAT IS A FRANCHISE?
During the Great Depression, Colonel Harland Sanders started selling fried chicken in the little town of Corbin, Kentucky, on the road to Florida. He is said to have used 11 herbs and spices in a secret recipe that gave the chicken its distinctive taste. Sanders’ fare gained fame and Corbin was a routine stop en route to Florida till a new highway bypassed it. That’s when the colonel shut shop and tried selling his chicken to restaurant owners. In 1952, Pete Harman of South Salt Lake, Utah, signed an agreement to sell Sanders’ chicken and pay him five cents for each piece sold. The eatery was called Kentucky Fried Chicken. It was the world’s first franchise. While Sanders was sharing proprietory knowledge and reputation with Harman for a fee, the latter was running the business on Sanders’ behalf. And that is the essence of a franchise even today.
WHY A FRANCHISE?
The simple answer is to mitigate risk. “The franchiser can expand its reach by investing almost no money and capital, while the franchisee is almost sure of success as he is working in a tested area,” says C.Y. Pal, president, Franchising Association of India, an industry body. A US Department of Commerce study conducted during 1971 to 1997 showed that less than five per cent of franchises closed down each year. In contrast, a study by the US Small Business Administration found that from 1978 to 1998, 62 per cent of non-franchised businesses could not make it past the sixth year. But remember that a franchise will never give the returns that a successful own business will. For example, Biocon CEO Kiran Mazumdar-Shaw, who started her business with Rs 10,000 in 1978, is now the richest woman in India with a net worth of about Rs 2,000 crore. Some franchises could give you annual returns of 70 per cent, but most will be in the 20-40 per cent range.
Good franchisers will help you get your business rolling and to keep it that way. Vivek Kaicker, 44, runs a US$ Dollar Store franchise in Delhi. “I had a retail business, but I liked this concept and thought it would increase footfall,” he says.
Retail giant Wal-Mart, with a turnover of $316 billion, announced that it would franchise its Indian operations to Sunil Mittal’s Bharti Enterprises. The latter would own and run Wal-Mart retail stores in India. Wal-Mart would also set up a joint venture with Bharti for the supply chain. Thus, systems honed over 46 years would be Bharti’s from Day One. Overnight, Bharti, whose retail plans had earlier been dwarfed by the Rs 3,200-crore investment announced by Mukesh Ambani’s Reliance Retail, was being billed as the company that would battle for supremacy in organised Indian retail. That’s the kind of fillip the right franchise can give. The model is versatile enough to work for Mittal, as well as Mathur. And it can work for you.
WHY IS THIS A GOOD TIME?
As a share of GDP, franchising accounts for 12 per cent in the US, but not even one per cent in India. The comparison gives an idea of where it could go. Industry estimates indicate franchising has grown to a Rs 8,000-crore sector now, from Rs 4,578 in 2004. Pal says there are over 750 franchisers in India today. Throw in the foreign franchisers, and the opportunity grows even bigger. It is attracting local talent in sectors such as food, lifestyle, retail, business services, healthcare, communication, education, entertainment and travel, among others. India is now the world’s largest franchise market after North America and is growing at about 30 per cent a year, says Tony White, managing director, White Connections, which advises franchise companies.
A big opportunity is in the Rs 40,000-crore organised retail sector, of which less than a fifth is franchised. It is expected to grow at 30 per cent a year for the next five years. But it may not be for everyone. “Retail often involves high costs as prime real estate, decoration and furnishing,” says Gaurav Marya, president, Franchise India Holdings, an integrated franchise solutions company. A cheaper option is a service franchise. Instead of the local guy, more people are getting specialists to, say, find a match, or clean a water tank. For a money-spinner education franchise, “in most cases all you need is a room and the course material”, Marya adds. “Eating out constitutes 11 per cent of the wallet of Indians; mom and pop stores are being replaced by organised F&B outlets,” says Ajay Bansal, director (business development), Yum International, which owns Kentucky Fried Chicken. But growth is concentrated more in the takeaways and value eateries than fine diners (see 26 Hot Franchises: An Invitation to Join the Fast-growing Fraternity, page 24).
WHICH FRANCHISE?
While buying a franchise, you have to consider several issues.
Abilities. This is the time for brutal self-assessment. Rule of thumb: stay off what does not interest you. If you are indifferent to food, stay off restaurants. If kids exasperate you, avoid play schools. But don’t lose heart. Your passion for travelling may make you one of the best equipped to plan holidays. Go for that. “I had already done a few beauty courses,” says Jaya Patodia, 34, who runs a Lakme Beauty Salon in Delhi.
More likely than not, a good franchiser will check out whether you fit the bill. Shahnaz Hussain, for instance, looks for people who are “passionate about beauty care”. Most franchisers will look for specific skills apart from “entrepreneurial attitude and open mind”. Institute of Computer & Finance Executives asks for no less then a chartered accountant, and Spykar Jeans wants a year’s experience in franchising.
Since this will be a new business, it will need a lot of hard work to get it running. “The initial one year is very important as this is when you build up a customer base,” says Hema Malini, 36, who, along with Ambika Viswanath, 24, run a Ferns ‘N’ Petals franchise in Chennai. Most franchisers want the franchisee to be involved personally. Ratan Jalan, CEO, The Apollo Clinic, says: “We need a person who is himself going to run the franchise.” But some may let you hire a manager and work at the franchise part-time. Remember, the monthly expense estimate franchisers give you assume that you will work full time.
Costs & finances. The big question is: how much can you invest in a franchise? Some service franchises could cost as little as Rs 2 lakh. You would need just a room, a table, a couple of chairs and a telephone connection. At the other end are beauty parlours, fine dining restaurants, or retail jewellery outlets. Here, investments could go to a crore or higher.
Now add on recurring costs—royalty (usually a percentage of sales to be paid every week or month). In some cases, Ferns 'N’ Petals and Angeos Academy, it is the higher of percentage of net sales or a lumpsum. There would also be working capital, which would include salary of staff, power bills, rent, and some fixed overheads like ad fees. When a franchiser talks about working capital needs, ask whether it includes rent. If not, this could be a chunky add-on. Check how much you can borrow from banks and at what rate and decide whether you want to do so (see Money Matters).
The amount of capital you can raise will partly determine how long you can wait for the business to pay back. Some franchisers will say that you can start making profits from the first month itself, but it is always wise to give yourself a cushion of at least a few months. Your reserves or savings will decide how critical immediate cash flow is. Also, ask yourself how much money you can afford to lose. It would be smart to have a contingency fund.
Goals. What do you want your franchise to do for you? Will it be the primary or a supplementary source of income? Are you looking to make any specific amount every year? What is the return you want on your investment? Develop a three-tier strategy for investing, a long-term strategy and an exit strategy. Ask where you see yourself five to 10 years down the line. Do you intend to make money and shut shop, or do you want to set up more outlets later? Remember, buying a very successful franchise for a high fee makes no sense until your outlet gives returns.
After you apply these filters, your list should get down to at most four or five franchises. But you still need to zero in on one.
Due diligence. Ultimately, you are investing in a franchise and need to know what you are buying. So, bring out the acid and do the test. The first thing to ask is whether the franchise is likely to be profitable. Check the record of the franchiser and the prospects of the industry it operates in. Find out how many franchisees it has, its growth plans and how many of its franchises have shut shop. Talk to the franchiser and at least five existing franchisees to get the low down. Often, even better known franchisers like Archies Gallery and Subway won’t give you their numbers. Others like Ferns ‘N’ Petals and Turtle will encourage you to meet franchisees. Cookie Man and Tech Kidz will even give you their profit and loss details. Says Pal: “In advanced countries, a franchiser is compelled by law to disclose information about its business, on other franchisees and expected earnings. In India, it’s not so.”
One proof of a franchiser is in the way it trains its franchisees, whether it provides initial training and upgrades your skills regularly. You may have to pay a small amount for that. It should also give steady help in marketing and managing the franchise. Cost of equipment and other inputs should also be lower than the market prices as the franchiser should buy them in bulk and supply them to you.
In most cases, the franchiser will help you find a spot, but check whether it has other franchises close by. The size of the area you serve could make the difference between profits and losses. Also remember all products and services are not in demand everywhere, or throughout the year. Stay with better brands as they could mean better business. “Brands can bring people into your store; the rest of the work you have to do yourself,” says Gagan Singh, managing director, Benetton India. Don’t buy a franchise just because someone will sell you one.
By now you should have enough information to home in on one. That would leave just one step—signing the agreement.
THE FINAL CHECKLIST
Understanding the franchise agreement is a must as it formalises your rights and obligations. Whether it is a two-pager or a whole booklet, once you sign it, you will have to abide by it. In the US, all the franchisers have to provide a uniform franchise offering circular (UFOC) to prospective franchisees at least 10 business days before any money is paid or agreement to purchase is signed.
There are strict guidelines about what the UFOC should include. There is no such rule in India. “The franchiser and the franchisee need to be on the same plane,” says Reebok India managing director Subhinder Singh. So, always get a lawyer to explain the agreement to you. He should also assist you with negotiations, if any. He may charge Rs 20,000-50,000, says Srijoy Das, an advocate at law firm Archer & Angels, but you should spend it as it might save you bigger losses later. And always look out for the following in the agreement you sign.
Term. The duration of the franchisee agreement and whether it is renewable should be clearly stated. Usually it would be for three years, and could be renewed for a fee.
Territorial rights. Most franchisers do not allow two outlets within 3 km of each other. But watch out for the ‘good business’ clause and make sure you know what it means in numbers. If you do not measure up, it will allow the franchiser to sell another franchise in your area. Also check out whether you can buy more franchises in neighbouring area if you want.
Exit and resale. But what if you want to shut shop before the term ends? Normally, there would be a notice period and you should get back any deposit you made. Deductions, if any, for a loss-making business should be included. Some franchisers let you sell the franchise. If the franchiser is part of the deal, you should know how much of your money you can recover. No franchiser actually likes to talk about selling options when you are buying a franchise. But it is good to be prepared for the worst.
Termination. In the whole franchisee game, the franchiser is bigger and stronger and, therefore, has the advantage over you. It might decide to terminate the franchise any time. Know by heart the reasons for which it can.
THE BOTTOM LINE
Franchising is an easier way to start your business, but certainly not an easy way to do it. It is a challenge, but one that may be worth taking. As the fraternity says: “When you are a franchisee, you are for yourself, but not by yourself.”
Source:Outlook Money.Com
CookieMan Franchisee Mumbai
had always wanted to strike out on his own. So, when he left the i-flex Solutions office in Mumbai as its senior banking analyst for the last time, he did not regret it. An alumnus of the IIT-Mumbai and IIM-Lucknow, he had worked at Times Bank and ICICI Bank before i-flex.
You would walk into Orbit Mall on the Malad-Goregaon Road in Mumbai to the aroma of freshly baked cookies. The bouquet will lead you past the Good Earth store on your left, and round the corner to the Cookie Man shop. And there, presiding over chocolate and honey-almond cookies, you would meet Mathur again. Counting the cash, checking the cookies, and serving them straight out of the oven at the back to the crowds thronging the counter. “I always wanted to do something on my own as I think that’s where the real fun is. You can never get that in a nine-to-five job.” Mathur’s entrepreneurial spirit is alive and well.
Jaya Patodia 34
Lakme Beauty Salon, Delhi
She invested Rs 25 lakh initially and now has a monthly income of Rs 50,000-60,000. Her average monthly turnover is Rs 3.5 lakh
“I have a Swiss watch store in Khan Market, but that was not giving me good returns. The turnaround happened when a friend, who owned a Lakme franchise, told me about it.”Franchisee Checklist
While Mathur cut loose, a lot of others wanting to do so have not. With responsibilities and dependents, they don’t dare to leave the warmth of a regular income and plunge into the financial turbulence a new business could bring. But today, the ‘fresher’ can go in with the safety tube of franchising. That’s what Mathur did. T.K.S. Kumar, a franchisee of Whirlpool Service Centre in Chennai for a decade now, says: “I wanted to realise my long-cherished dream of becoming an employment giver from an employment seeker.” But P. Ramarao, president, Australian Foods, which owns Cookie Man, warns: “It’s not for people who aren’t passionate.”
WHAT IS A FRANCHISE?
During the Great Depression, Colonel Harland Sanders started selling fried chicken in the little town of Corbin, Kentucky, on the road to Florida. He is said to have used 11 herbs and spices in a secret recipe that gave the chicken its distinctive taste. Sanders’ fare gained fame and Corbin was a routine stop en route to Florida till a new highway bypassed it. That’s when the colonel shut shop and tried selling his chicken to restaurant owners. In 1952, Pete Harman of South Salt Lake, Utah, signed an agreement to sell Sanders’ chicken and pay him five cents for each piece sold. The eatery was called Kentucky Fried Chicken. It was the world’s first franchise. While Sanders was sharing proprietory knowledge and reputation with Harman for a fee, the latter was running the business on Sanders’ behalf. And that is the essence of a franchise even today.
WHY A FRANCHISE?
The simple answer is to mitigate risk. “The franchiser can expand its reach by investing almost no money and capital, while the franchisee is almost sure of success as he is working in a tested area,” says C.Y. Pal, president, Franchising Association of India, an industry body. A US Department of Commerce study conducted during 1971 to 1997 showed that less than five per cent of franchises closed down each year. In contrast, a study by the US Small Business Administration found that from 1978 to 1998, 62 per cent of non-franchised businesses could not make it past the sixth year. But remember that a franchise will never give the returns that a successful own business will. For example, Biocon CEO Kiran Mazumdar-Shaw, who started her business with Rs 10,000 in 1978, is now the richest woman in India with a net worth of about Rs 2,000 crore. Some franchises could give you annual returns of 70 per cent, but most will be in the 20-40 per cent range.
Good franchisers will help you get your business rolling and to keep it that way. Vivek Kaicker, 44, runs a US$ Dollar Store franchise in Delhi. “I had a retail business, but I liked this concept and thought it would increase footfall,” he says.
Retail giant Wal-Mart, with a turnover of $316 billion, announced that it would franchise its Indian operations to Sunil Mittal’s Bharti Enterprises. The latter would own and run Wal-Mart retail stores in India. Wal-Mart would also set up a joint venture with Bharti for the supply chain. Thus, systems honed over 46 years would be Bharti’s from Day One. Overnight, Bharti, whose retail plans had earlier been dwarfed by the Rs 3,200-crore investment announced by Mukesh Ambani’s Reliance Retail, was being billed as the company that would battle for supremacy in organised Indian retail. That’s the kind of fillip the right franchise can give. The model is versatile enough to work for Mittal, as well as Mathur. And it can work for you.
WHY IS THIS A GOOD TIME?
As a share of GDP, franchising accounts for 12 per cent in the US, but not even one per cent in India. The comparison gives an idea of where it could go. Industry estimates indicate franchising has grown to a Rs 8,000-crore sector now, from Rs 4,578 in 2004. Pal says there are over 750 franchisers in India today. Throw in the foreign franchisers, and the opportunity grows even bigger. It is attracting local talent in sectors such as food, lifestyle, retail, business services, healthcare, communication, education, entertainment and travel, among others. India is now the world’s largest franchise market after North America and is growing at about 30 per cent a year, says Tony White, managing director, White Connections, which advises franchise companies.
A big opportunity is in the Rs 40,000-crore organised retail sector, of which less than a fifth is franchised. It is expected to grow at 30 per cent a year for the next five years. But it may not be for everyone. “Retail often involves high costs as prime real estate, decoration and furnishing,” says Gaurav Marya, president, Franchise India Holdings, an integrated franchise solutions company. A cheaper option is a service franchise. Instead of the local guy, more people are getting specialists to, say, find a match, or clean a water tank. For a money-spinner education franchise, “in most cases all you need is a room and the course material”, Marya adds. “Eating out constitutes 11 per cent of the wallet of Indians; mom and pop stores are being replaced by organised F&B outlets,” says Ajay Bansal, director (business development), Yum International, which owns Kentucky Fried Chicken. But growth is concentrated more in the takeaways and value eateries than fine diners (see 26 Hot Franchises: An Invitation to Join the Fast-growing Fraternity, page 24).
WHICH FRANCHISE?
While buying a franchise, you have to consider several issues.
Abilities. This is the time for brutal self-assessment. Rule of thumb: stay off what does not interest you. If you are indifferent to food, stay off restaurants. If kids exasperate you, avoid play schools. But don’t lose heart. Your passion for travelling may make you one of the best equipped to plan holidays. Go for that. “I had already done a few beauty courses,” says Jaya Patodia, 34, who runs a Lakme Beauty Salon in Delhi.
More likely than not, a good franchiser will check out whether you fit the bill. Shahnaz Hussain, for instance, looks for people who are “passionate about beauty care”. Most franchisers will look for specific skills apart from “entrepreneurial attitude and open mind”. Institute of Computer & Finance Executives asks for no less then a chartered accountant, and Spykar Jeans wants a year’s experience in franchising.
Since this will be a new business, it will need a lot of hard work to get it running. “The initial one year is very important as this is when you build up a customer base,” says Hema Malini, 36, who, along with Ambika Viswanath, 24, run a Ferns ‘N’ Petals franchise in Chennai. Most franchisers want the franchisee to be involved personally. Ratan Jalan, CEO, The Apollo Clinic, says: “We need a person who is himself going to run the franchise.” But some may let you hire a manager and work at the franchise part-time. Remember, the monthly expense estimate franchisers give you assume that you will work full time.
Costs & finances. The big question is: how much can you invest in a franchise? Some service franchises could cost as little as Rs 2 lakh. You would need just a room, a table, a couple of chairs and a telephone connection. At the other end are beauty parlours, fine dining restaurants, or retail jewellery outlets. Here, investments could go to a crore or higher.
Now add on recurring costs—royalty (usually a percentage of sales to be paid every week or month). In some cases, Ferns 'N’ Petals and Angeos Academy, it is the higher of percentage of net sales or a lumpsum. There would also be working capital, which would include salary of staff, power bills, rent, and some fixed overheads like ad fees. When a franchiser talks about working capital needs, ask whether it includes rent. If not, this could be a chunky add-on. Check how much you can borrow from banks and at what rate and decide whether you want to do so (see Money Matters).
The amount of capital you can raise will partly determine how long you can wait for the business to pay back. Some franchisers will say that you can start making profits from the first month itself, but it is always wise to give yourself a cushion of at least a few months. Your reserves or savings will decide how critical immediate cash flow is. Also, ask yourself how much money you can afford to lose. It would be smart to have a contingency fund.
Goals. What do you want your franchise to do for you? Will it be the primary or a supplementary source of income? Are you looking to make any specific amount every year? What is the return you want on your investment? Develop a three-tier strategy for investing, a long-term strategy and an exit strategy. Ask where you see yourself five to 10 years down the line. Do you intend to make money and shut shop, or do you want to set up more outlets later? Remember, buying a very successful franchise for a high fee makes no sense until your outlet gives returns.
After you apply these filters, your list should get down to at most four or five franchises. But you still need to zero in on one.
Due diligence. Ultimately, you are investing in a franchise and need to know what you are buying. So, bring out the acid and do the test. The first thing to ask is whether the franchise is likely to be profitable. Check the record of the franchiser and the prospects of the industry it operates in. Find out how many franchisees it has, its growth plans and how many of its franchises have shut shop. Talk to the franchiser and at least five existing franchisees to get the low down. Often, even better known franchisers like Archies Gallery and Subway won’t give you their numbers. Others like Ferns ‘N’ Petals and Turtle will encourage you to meet franchisees. Cookie Man and Tech Kidz will even give you their profit and loss details. Says Pal: “In advanced countries, a franchiser is compelled by law to disclose information about its business, on other franchisees and expected earnings. In India, it’s not so.”
One proof of a franchiser is in the way it trains its franchisees, whether it provides initial training and upgrades your skills regularly. You may have to pay a small amount for that. It should also give steady help in marketing and managing the franchise. Cost of equipment and other inputs should also be lower than the market prices as the franchiser should buy them in bulk and supply them to you.
In most cases, the franchiser will help you find a spot, but check whether it has other franchises close by. The size of the area you serve could make the difference between profits and losses. Also remember all products and services are not in demand everywhere, or throughout the year. Stay with better brands as they could mean better business. “Brands can bring people into your store; the rest of the work you have to do yourself,” says Gagan Singh, managing director, Benetton India. Don’t buy a franchise just because someone will sell you one.
By now you should have enough information to home in on one. That would leave just one step—signing the agreement.
THE FINAL CHECKLIST
Understanding the franchise agreement is a must as it formalises your rights and obligations. Whether it is a two-pager or a whole booklet, once you sign it, you will have to abide by it. In the US, all the franchisers have to provide a uniform franchise offering circular (UFOC) to prospective franchisees at least 10 business days before any money is paid or agreement to purchase is signed.
There are strict guidelines about what the UFOC should include. There is no such rule in India. “The franchiser and the franchisee need to be on the same plane,” says Reebok India managing director Subhinder Singh. So, always get a lawyer to explain the agreement to you. He should also assist you with negotiations, if any. He may charge Rs 20,000-50,000, says Srijoy Das, an advocate at law firm Archer & Angels, but you should spend it as it might save you bigger losses later. And always look out for the following in the agreement you sign.
Term. The duration of the franchisee agreement and whether it is renewable should be clearly stated. Usually it would be for three years, and could be renewed for a fee.
Territorial rights. Most franchisers do not allow two outlets within 3 km of each other. But watch out for the ‘good business’ clause and make sure you know what it means in numbers. If you do not measure up, it will allow the franchiser to sell another franchise in your area. Also check out whether you can buy more franchises in neighbouring area if you want.
Exit and resale. But what if you want to shut shop before the term ends? Normally, there would be a notice period and you should get back any deposit you made. Deductions, if any, for a loss-making business should be included. Some franchisers let you sell the franchise. If the franchiser is part of the deal, you should know how much of your money you can recover. No franchiser actually likes to talk about selling options when you are buying a franchise. But it is good to be prepared for the worst.
Termination. In the whole franchisee game, the franchiser is bigger and stronger and, therefore, has the advantage over you. It might decide to terminate the franchise any time. Know by heart the reasons for which it can.
THE BOTTOM LINE
Franchising is an easier way to start your business, but certainly not an easy way to do it. It is a challenge, but one that may be worth taking. As the fraternity says: “When you are a franchisee, you are for yourself, but not by yourself.”
Source:Outlook Money.Com
Tuesday, December 8, 2009
Canon To Open 6 'Prozone' outlets through franchise model in all major cities of India.
Leading digital imaging company Canon India will open six outlets in various cities in the country over the next few months. According to the Canon India Senior Vice-President Alok Bhardwaj, these outlets name 'Prozone' will display its 160 products under one roof and would be set up on the franchise model in Delhi, Mumbai, Chennai, Kolkata, Bangalore and Hyderabad during the next few months.
The company was witnessing tremendous growth in Tier-II cities on sales of its flagship model 'digital single lens reflector (DSLR)' cameras. The company had only three exclusive outlets so far-in Bangalore, Gurgaon and Mumbai. He added that they were getting a huge response particularly in the mid-end DSLR cameras.
The lower-end Canon cameras range between Rs.26,000 to Rs.50,000, while the mid-end between Rs.50,000 to Rs.1.50 lakh and the high-end cameras were priced above Rs.1.50 lakh. Bhardwaj told that the company had launched the new DSLR Electro Optical System (EOS) 7D with new features in the mid-end category, priced at Rs.1.10 lakh. The EOS 7D has a resolution of 18 megapixel and features a lock, which helps camera setting s not to change without the knowledge of the photographer.
He also mentioned that this year witnessed the highest growth in the sales of DSLR cameras despite the global meltdown. The company grew over 30 per cent in the last three years. Canon India is the currently the market leader in DSLR Cameras. It has 54 per cent market share. South India was the largest market for Canon, contributing 28 per cent on its total sales.
Canon India currently has 10 exclusive service centres across various cities. The company reported a turnover of Rs.665 crore last financial year and hopes to reach Rs.830 crore this financial year.
Source:Paisewaise.com
The company was witnessing tremendous growth in Tier-II cities on sales of its flagship model 'digital single lens reflector (DSLR)' cameras. The company had only three exclusive outlets so far-in Bangalore, Gurgaon and Mumbai. He added that they were getting a huge response particularly in the mid-end DSLR cameras.
The lower-end Canon cameras range between Rs.26,000 to Rs.50,000, while the mid-end between Rs.50,000 to Rs.1.50 lakh and the high-end cameras were priced above Rs.1.50 lakh. Bhardwaj told that the company had launched the new DSLR Electro Optical System (EOS) 7D with new features in the mid-end category, priced at Rs.1.10 lakh. The EOS 7D has a resolution of 18 megapixel and features a lock, which helps camera setting s not to change without the knowledge of the photographer.
He also mentioned that this year witnessed the highest growth in the sales of DSLR cameras despite the global meltdown. The company grew over 30 per cent in the last three years. Canon India is the currently the market leader in DSLR Cameras. It has 54 per cent market share. South India was the largest market for Canon, contributing 28 per cent on its total sales.
Canon India currently has 10 exclusive service centres across various cities. The company reported a turnover of Rs.665 crore last financial year and hopes to reach Rs.830 crore this financial year.
Source:Paisewaise.com
Monday, December 7, 2009
Starwood Hotels Opens Up In Pune.
Starwood Hotels & Resorts Worldwide (NYSE: HOT) today announces the opening of The Westin Pune Koregaon Park - the first of six new Westin Hotels to open in India over the next three years and the brand's 25th Hotel in Asia Pacific. The hotel is illustrative of Starwood's overall growth in India with 24 existing hotels and plans to grow its footprint by 60 percent by 2012.
"As home to the world's fastest growing population, India represents a significant opportunity for Starwood and our development partners," said Frits van Paasschen, President and CEO for Starwood Hotels & Resorts Worldwide, Inc.
India makes up 21 percent of the world's incremental growth, and by 2016, its population is expected to be larger than that of Europe, Russia, Australia, New Zealand, Japan, Canada and the United States combined.
"Coinciding with its population boom is the rise of India's middle class, which is driving domestic tourism growth. In this decade, disposable income in India has grown about 10 percent annually, and much of that is being spent on travel," added van Paasschen. "By working to further establish relationships with travelers in this critical, high-growth market today, we are ensuring the success of Starwood tomorrow."
In 2009, Starwood made meaningful gains in India with the debut of the Four Points by Sheraton brand in Mumbai and Jaipur. And looking ahead to 2010, Starwood will launch its Aloft brand in India, opening the first three of its six hotels in the pipeline
"India's dynamic and resilient economy makes it a highly attractive choice for further hotel development," said Miguel Ko, Chairman and President of Starwood Asia Pacific. "India has a strong GDP growth rate, an established role as global hub for the outsourcing industry and the infrastructure to support travel to and within the country. And with our plans to grow our footprint by 60 percent in the next three years, Starwood is well positioned to meet the pent-up demand for our lifestyle brands throughout India."
While India is a growth powerhouse in and of itself, when combined with China, the implications for Starwood are even farther reaching.
"The potential numbers of new international travelers from India and China are staggering," said Simon Turner, President of Global Development for Starwood. "When you take a look at India and China, you have 40 percent of the world's population, and between them, they are averaging 8 percent growth in GDP. Furthermore, by 2015, 400 million Chinese and Indians will have sufficient incomes to travel abroad - as a point of perspective that is seven times the number of international travelers who visited the United States last year."
Starwood Hotels & Resorts Worldwide is one of the leading hotel and leisure companies in the world with 982 properties in more than 100 countries and 145,000 employees at its owned and managed properties. Starwood Hotels is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points by Sheraton, and the recently launched Aloft, and Element SM. Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts.
Source:Real Estate Channel
"As home to the world's fastest growing population, India represents a significant opportunity for Starwood and our development partners," said Frits van Paasschen, President and CEO for Starwood Hotels & Resorts Worldwide, Inc.
India makes up 21 percent of the world's incremental growth, and by 2016, its population is expected to be larger than that of Europe, Russia, Australia, New Zealand, Japan, Canada and the United States combined.
"Coinciding with its population boom is the rise of India's middle class, which is driving domestic tourism growth. In this decade, disposable income in India has grown about 10 percent annually, and much of that is being spent on travel," added van Paasschen. "By working to further establish relationships with travelers in this critical, high-growth market today, we are ensuring the success of Starwood tomorrow."
In 2009, Starwood made meaningful gains in India with the debut of the Four Points by Sheraton brand in Mumbai and Jaipur. And looking ahead to 2010, Starwood will launch its Aloft brand in India, opening the first three of its six hotels in the pipeline
"India's dynamic and resilient economy makes it a highly attractive choice for further hotel development," said Miguel Ko, Chairman and President of Starwood Asia Pacific. "India has a strong GDP growth rate, an established role as global hub for the outsourcing industry and the infrastructure to support travel to and within the country. And with our plans to grow our footprint by 60 percent in the next three years, Starwood is well positioned to meet the pent-up demand for our lifestyle brands throughout India."
While India is a growth powerhouse in and of itself, when combined with China, the implications for Starwood are even farther reaching.
"The potential numbers of new international travelers from India and China are staggering," said Simon Turner, President of Global Development for Starwood. "When you take a look at India and China, you have 40 percent of the world's population, and between them, they are averaging 8 percent growth in GDP. Furthermore, by 2015, 400 million Chinese and Indians will have sufficient incomes to travel abroad - as a point of perspective that is seven times the number of international travelers who visited the United States last year."
Starwood Hotels & Resorts Worldwide is one of the leading hotel and leisure companies in the world with 982 properties in more than 100 countries and 145,000 employees at its owned and managed properties. Starwood Hotels is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points by Sheraton, and the recently launched Aloft, and Element SM. Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts.
Source:Real Estate Channel
McDonalds Real Business Burgers or Real Estate
Last time when I went to McDonald’s outlet in Delhi with my nephew (my sis’ elder son), I decided to irritate him a bit. I just love it when he is frustrated with my questions. He is all of 8, but just like any other kid, outspoken and naughty.
I wanted to give him a tough time and as we entered McDonald’s outlet, I told him that I am not going to buy him a cold drink if he is not able to answer my answer which obviously was to irritate him and he was definitely going to have the cold drinks irrespective of his answer.
“So, Chummu (his nickname) tell me what do McDonald’s sell?”, the moment I asked this question, he frowned at me as if I am a fool or trying to make fun of him by asking this stupid question. He didn’t uttered anything for next two minutes and was double checking at the back of his mind whether the answer he is going to say is correct or not.
I reiterated, “Chummu tell me what is the business of McDonald, what do they deal in?” The purpose of irritating him was seeing some accomplishment as I started smiling and he finally opened his mouth – “mamu don’t make fun of me! They sell burgers aur kya.” I knew this was coming and then started tweaking the question which was not his cup of tea.” Hey dude! I agree with you that they sell burgers but selling burgers is not their core business.
I mean they don’t make enough money from selling burgers. So, what is it which fetches money to them?” The mercury was rising as he could not counter me and made a second guess that McDonald’s then must be making enough money from cold drinks.
On the face of it, Chummu is absolutely right that McDonald’s sell burgers and cold drinks and it is a common perception too. McDonald’s do sell burger but they don’t make enough money from selling burgers as they do from real estate business. Yes, this is what they do in most of the countries abroad. Close to 15% outlets are owned by McDonald and as per their business model which is completely different from other food chain models, they charge rent on the basis of sales. Apart from this, as in case of normal franchise business they also charge franchise fees and marketing fees.
The former CFO of McDonald’s CFO, Harry J. Sonneborn is often quoted as having said -
“We are not basically in the food business. We are in the real estate business.”
“We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent.”
It is a common belief among masses that McDonald’s, the largest chain of fast food restaurants is a market leader in hamburgers which is true but actually it is a real estate power house. It is the largest commercial real estate landowner in the United States. McDonald’s property portfolio was estimated to be valued around eight billion dollars, as of 2001. To explain it further, McDonald’s makes money on real estate by buying and selling properties which are generally restaurant lots. On the one hand, it invests in hot locations while under performing locations are also sold out to balance the portfolio.
Well !! Chummu is too young to understand the business model of McDonald’s and he finally had his share of cold drinks but next time you don’t lose on yours if someone asks you – What is the business of McDonald’s ?
SOURCE:Amit Khandelia on forum4ca.com
I wanted to give him a tough time and as we entered McDonald’s outlet, I told him that I am not going to buy him a cold drink if he is not able to answer my answer which obviously was to irritate him and he was definitely going to have the cold drinks irrespective of his answer.
“So, Chummu (his nickname) tell me what do McDonald’s sell?”, the moment I asked this question, he frowned at me as if I am a fool or trying to make fun of him by asking this stupid question. He didn’t uttered anything for next two minutes and was double checking at the back of his mind whether the answer he is going to say is correct or not.
I reiterated, “Chummu tell me what is the business of McDonald, what do they deal in?” The purpose of irritating him was seeing some accomplishment as I started smiling and he finally opened his mouth – “mamu don’t make fun of me! They sell burgers aur kya.” I knew this was coming and then started tweaking the question which was not his cup of tea.” Hey dude! I agree with you that they sell burgers but selling burgers is not their core business.
I mean they don’t make enough money from selling burgers. So, what is it which fetches money to them?” The mercury was rising as he could not counter me and made a second guess that McDonald’s then must be making enough money from cold drinks.
On the face of it, Chummu is absolutely right that McDonald’s sell burgers and cold drinks and it is a common perception too. McDonald’s do sell burger but they don’t make enough money from selling burgers as they do from real estate business. Yes, this is what they do in most of the countries abroad. Close to 15% outlets are owned by McDonald and as per their business model which is completely different from other food chain models, they charge rent on the basis of sales. Apart from this, as in case of normal franchise business they also charge franchise fees and marketing fees.
The former CFO of McDonald’s CFO, Harry J. Sonneborn is often quoted as having said -
“We are not basically in the food business. We are in the real estate business.”
“We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent.”
It is a common belief among masses that McDonald’s, the largest chain of fast food restaurants is a market leader in hamburgers which is true but actually it is a real estate power house. It is the largest commercial real estate landowner in the United States. McDonald’s property portfolio was estimated to be valued around eight billion dollars, as of 2001. To explain it further, McDonald’s makes money on real estate by buying and selling properties which are generally restaurant lots. On the one hand, it invests in hot locations while under performing locations are also sold out to balance the portfolio.
Well !! Chummu is too young to understand the business model of McDonald’s and he finally had his share of cold drinks but next time you don’t lose on yours if someone asks you – What is the business of McDonald’s ?
SOURCE:Amit Khandelia on forum4ca.com
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