FRANCHISE BUSINESS IN INDIA

One of the business options open to India's first time or small entrepreneurs is to take up a franchise. Buying a franchise of an established brand is a good alternative to starting on a new idea from scratch or could offer a faster way to take an existing business to the next level.

This option offers several advantages - not the least of which is an opportunity to latch on to a tried and tested model. A well established franchise brand also affords instant visibility, and with most rules being laid out already by the franchisor.

However, you need to consider several factors before deciding on a franchise business:

Start with the motive - Prioritize your reasons for wanting to enter this business. What do you expect to get in terms of return on investment or annual income? Most important, do you have the commitment to go the distance? It is very important to be sure that you really need the brand to make a business. Many franchises are generic in nature, and not much is offered by way of specialized knowledge or support. If there's a chance you can enter the business by yourself, minus all the franchise costs, maybe it is better to go it alone.

Don't do it unless you have adequate funds - The better known brands come at a hefty price. The annual franchise fee itself can run into several hundred thousand rupees, and will vary with territory. Different franchisors adopt different models. We know that (at least some years ago) leading garment retailer Arvind would place goods on consignment and pay franchisees a commission on the value of the sale. On the other hand, the training and education company CADD Centre charges a territory based flat franchise fee, regardless of volume.

When you start negotiating, the franchisor is likely to sell you some dreams and their ROI calculations will likely focus on initial franchise fee, royalty payments if any and capital expenditure for setup. However, remember, that the business is not likely to pay for itself for a while, so the ongoing requirements will be substantial. Don't take it up unless you have the resources to hang in there for three years. If you still have conviction in the idea, but are strapped for funds, rope in some partners; in any event, don't start still you have enough resources.

Be sure you can handle it - Even with a franchise business, some basics don't change. As with any venture, the success of a franchise will depend on whether you and your team have the requisite skills to run it. A good franchisor is choosy about who they sign up as a franchisee. In the same way, you should choose a franchise opportunity that draws upon your capability or passion or leverages the strengths of the existing business in some way.