The Franchising Summit 2005: Franchising can drive growth in many new sectors

One of the factors that have contributed to the success of mobile telephony in India is the franchise model. According to Rony Kurien, faculty, Indian Business Academy, “The franchise business model has the potential to drive growth in several other sectors such as healthcare, food and beverages, fitness clinics, education and courier services.”

Kurien was speaking at The Franchising Summit 2005, organised by the Franchising Association of India (FAI), in Mumbai on September 28, where stalwarts from the franchise industry discussed the prospects for this sector in India.

Kurien added, “One of the biggest factors that will fuel the growth of franchising in India is the retail industry, the market size of which stands at Rs 28,000 crore today. In addition, India’s GDP (gross domestic product) is growing at a rate of 7 per cent annually, which is likely to increase to 8-10 per cent in the next five years.”

Talking about the potential markets for the growth of the franchise business in India, Pranav Roach, president, Hughes Network Systems, said, “The maximum growth will happen in the smaller towns. People in the smaller towns want all the facilities and services available in the metros in their own world.”

He said, “It’s important for companies to leverage this demand by riding on the franchise model.”

Roach added, “In future, many more sectors and product categories will have to depend on the franchise model for their growth.”

From a questionable concept, the franchising business has become more admissible today in India. However, industry stalwarts add a word of caution for this sector as it can also prove to be fatal at times.

As Arun Khetan, CEO, Zee Interactive Learning Systems, said, “In the US, more than 200 franchising business start every year and 85 per cent of these businesses fail to complete even a year of operations.”

“It is very important for the companies to evaluate whether their sector fits into the franchising business,” he added.

According to Khetan, “There are several other parameters that one should be careful of. Implementation of correct policies pertaining to the terms of the contract between the franchiser and the franchisee is equally important. The terms should also clearly define the territories for operation.”

Jayant Kochar, MD, Amorettos, agreed. He said, “In India, young consumers are more demanding and also price conscious. So, as a franchisee, it is crucial to understand the consumers. One should only make promises that people will believe.”

Albert Kong, chairman, Asiawide Franchise Consultants, Singapore, said, “There are risks involved because franchising is like any other business. However, there are certain factors that reduce the risk to a large extent. They are concept, correct contract, convenience for the consumers and capital.”

Several other issues were also discussed at the event such as, for instance, the absence of specific government legislations that are levied on a franchising business. However, there are several laws connecting the franchiser-franchisee relationship.

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