Overview of Franchise Industry

An Expert's View about Retail Trade and Electronic Commerce in India

Posted on: 28 Nov 2011

Summary

With a thriving consumer population of over 300 million, coupled with sustained economic growth, India is an exciting destination for American franchisors. The Indian franchise industry offers excellent opportunities for new U.S. brands/franchisors. Increasingly, franchising is becoming a successful business model for foreign, especially American companies, planning to enter the Indian market for the first time.

The $3.3 billion franchise market in India has the potential to grow to $20 billion by 2020, with an impressive growth rate of approximately 30% per year. Presently, there are 1,200 franchisors in India, of which 25% are of international origin, with U.S. companies the most prevalent.

The Indian franchise operations have started expanding beyond the metropolitan centers into rural India. The top prospects for franchising include: food, education, retail, beauty salons/cosmetics, business services, apparel and travel/tourism. This report will provide a generic overview of the Indian franchise industry and opportunities.

Market Demand

India is a rapidly changing country. The country is witnessing an unprecedented consumption boom. While the rest of the world still faces the impact of the economic slowdown, India is growing at approximately 8% per year, the second fastest growing economy in the world. This rapidly growing economy has led to a population of over 300-350 million middle-income Indians with high disposable incomes. This group continues to fuel the consumption demand in India. The many factors that contribute to increasing consumption include the emergence of a young urban elite population with increasing disposable income, changing lifestyles, mounting aspirations, penetration of satellite TV, increasing appetite for western goods, international exposure, options for quality retail space, and greater product choice and availability. The greater demand for goods in India is in turn generating a greater demand for franchises.

The Indian population of one billion is growing at a rate of 2.5 percent per year. Of that total, about 300-350 million have the demand for, and the discretionary income to purchase, premium products and services. Many in the growing "middle income" segment look for international quality products and this trend is likely to continue for the next five years and beyond sustaining the demand growth.

Market Data

The franchise market in India has the potential to grow to $20 billion by 2020. Franchising in India is growing at an impressive rate of approximately 30% per year. Presently, there are 1,200 franchisors in India, of which 25% are of international origin, with U.S. companies the most prevalent.

Best Prospects

Approximately 1200 franchisors, 40,000 franchisees spread across the country are successfully operating in diversified industry sectors including healthcare/beauty (3%), IT enabled services (14%), IT education (40%), Education -preparatory and fashion (10%), professional services (11%), retailing (9%), Entertainment (4%), F& B (2%), Cyber Cafes/Kiosks (2%), and miscellaneous services (5%).

Key Suppliers

Several foreign companies with strong brand names have established a presence in India through franchising. In the hospitality and food service industries, this has been the preferred method for starting operations in India. Some international companies that operate through franchises include: Hertz, Avis and Budget car rental; Radisson, Best Western and Quality Inn hotels; Kentucky Fried Chicken, Domino’s Pizza, TGI Friday’s, Ruby Tuesday, Subway, and Baskin Robbins for food. Pizza Hut and Domino’s Pizza have opened many outlets under the franchise model. Similarly, Indian companies with strong brand recognition are also using the franchising route to expand business volume. Examples of such Indian companies are: Thomas Cook, Cox & Kings, Kuoni, SOTC, Raj Travels for travel and tourism, Euro Kids, Kidzee, Apple for pre- school, Café Coffee Day for food and beverage and Apollo Hospitals for healthcare.

Prospective Franchisees

Local investors are very receptive to franchises from the United States. Technical knowhow, and dedication to adapting the franchise concepts, proven operational and marketing methods, and financial resources to maintain the franchise over the long term, all aid in a franchise’s success. Quality, name recognition, standards, and innovation all play a big part in the success of U.S. franchises with Indian investors. It is important that U.S. Franchisors choose the best franchisee not only for strong financial support, but also their capability to manage the system. Good master franchisee needs to know and understand clearly the franchise’s concepts such as product standardization, international outlook, standard operation manual, and training.

Read the full market research report


Posted: 28 November 2011

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