India Focus: The Future of Franchising

Since its beginning in early 90′s, franchising in India has grown in leaps and bounds and there is still much to explore, based on the seccessful growth of many franchised brands already present. The future of franchising in India will continue to show a rapidly increasing trend line.

It is estimated that India has over 25 Million businesses operated mainly by individual proprietors or family members. Of these, over 14 Million are retail businesses and the vast majority fall into what is described as the unorganised retail sector.

The emergence of branded chains, (organised retailing) is just beginning. At the same time, an emerging aspirational consumer middle class fuelled by the socio-demographics of India with 54% of India’s population under the age of 25 is looking for opportunities and a retail experience. As a result the opportunities for franchise networks to grow in India are enourmous.

Over the previous decade many global brands have sought to grab the first mover advantage by rushing to India. During the early stages of this gold rush the common perception was that the owner-operator effect, when combined with the local knowlegde of franchisees, would guarantee success. However, this misconception, inadequate consideration of complex cultural and social dynamics and supply chain issues served to thwarte many initial forays. Yum Brands, with its KFC outlets, was one of the more prominent early failures due to a combination of the above factors.

Domestic Indian businesses have embraced franchising especially over the past 5 years and the types of businesses that are franchising are diverse. Motilal Oswald, one of India’s biggest financial services companies has over 1500 franchisees selling broking and other financial services and plans to have over 5000 franchisees by 2012. Euro Kids a pre-school provider is market leader in India with over 350 franchisees and is projecting growth of 20% growth per year over the next 10 years. Cafe Coffee Day now operates from over 733 company-owned and franchised locations in 103 Indian cities providing a cafe lifestyle experience to the younger aspirational consumer.

As is evident in many retail precincts in India, franchising is flourishing.