The word ‘franchise’ comes from the French language which means to be free from any bond. In 1850 it was developed as a business method in the United States. So, if we go by its definition, it can be understood as a marketing concept which can be adopted by any organization as a strategy to expand its business. Some of the known examples of franchisers all over the world are Levi’s, Nike, Adidas, McDonald’s, Benetton, Marks & Spencer, Pizza Hut etc.
The whole business of franchising is divided into two parts: Franchiser and franchisee. While a franchiser is the one who licenses its Business model, brands and rights to sell its branded products and services to a franchisee, on the other hand, a franchisee pays a certain amount of fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.
Franchising: origin and scenario in India
In India, the market for franchising is still gaining a momentum. However, in recent times, its acceptability has grown in the various Indian industries like retailing and entertainment sectors. Not just international brands like McDonald’s, KFC, Nike, Adidas etc. are doing well among Indian customers but Indian brands are also shining brightly in the franchising market.
In a country like India, where lots of cultural diversities still prevail, franchising is helping people and the market to think globally. So whether a business owner is from north or south, he will not find it difficult to deal with local customers with the same brand.
Traditionally, franchising in India was limited to the clothing and footwear brands. However, in the last few years, it has been penetrated to many other industries like computer education, F&B, healthcare, entertainment and cyber kiosks. Going by the stats, it can be said that the major industry which has promoted the concept of franchising in India is the IT industry. Over 55% of India’s 600 odd franchisors happen to be in the IT services industry.
Some key facts on Indian Franchising Industry
- There are close to more than 1 lakh franchisees in India across various sectors.
- It is estimated that the total investments made by Franchisees are over 2 crores and more than 5 lakh people are directly employed by franchised businesses.
- The total annual turnover achieved by franchised businesses in India is in the region of Rs.90000-11,0000 crores. (Source: Annual Surveys of the Indian Franchise Sector, conducted by First Franchising).
- The Education sector dominates the Indian franchising scenario, although Retail and entertainment are catching up fast.
Industries which have top prospects for successful franchise opportunities in India include:
- Food and beverage
- Retail and Entertainment
- Courier Services
- Stationery and gift shops
- Health and beauty salons
- Fitness and nutrition
Factors which have led to the bright future of Franchising India:
- The average Indian income is rising steadily which is helping individuals to increase their purchasing power.
- Internet is playing a major role in bringing consumers to one platform. Thus, it is helping global as well as domestic brands to recognize themselves easily among the consumers.
- On the other hand, the Internet is making it easier for international companies to gain an understanding of India’s; culture, geography, and politics.
With all such positive approach, the purchasing power of common man is increasing at a very fast pace and thus helping Franchising industry to strengthen its base in India.