McDonald’s, KFC, Barista or Cafe Coffee Day…what are they? For that matter, in India, they largely look the same; yet beneath the layer of similarity resides different organizations that own these brands and operate through their outlet, that is, franchise.
The term ‘franchising’ defines the business relationship where owner of the brand (franchisor) permits a franchisee to use its brand trademark, product or business process in return of an annual fee. At a conceptual level, franchising is a method of business expansion and distribution, and brands embrace franchise models as a tool for growth and increased customer base.
The term Franchising comes from the French language and means `to be free from servitude’. The term was coined as business perspective during 1850s in the United States. Few argue that franchising as a method of licensing developed much earlier in feudal times when the head of the Roman Catholic Church gave his clergy the right to collect church taxes locally. Franchising in India has been recognized as a low-capital rapid growth market expansion option. The goal of a franchisor is to provide a consistent product supply and enhance consumer experience that will culminate into business expansion and growth in varying geographic locations. The franchisors achieve this by transferring operational processes to its franchises and monitoring their performance.
The very nature of franchising process is suited to generic services that revolve around a recognized brand name, a basic standardized process which is capable of delivering consistent product or service through a wide network of operational units.
Today, India is counted among world’s largest commercial marketplaces. Along with the industrial development and growth of IT industry, franchising as a franchise business model has also evolved. India has been ranked fifth in the list of largest retail destination in the world. Consumer spending in India has rocketed 75% higher within a time frame of four years. Franchising has attained an industry status, with over 1800 franchise formats operating and employing over 1 million people in the sector.
One of the main reasons for surging popularity of franchise model is the Indian populace that has become brand conscious. This has made foreign brands invest in Indian market and reap rich dividends. The foreign brands have set up their local stores in different Indian cities and have been getting astounding response from the booming market trend. Brands such as McDonald’s customized their products to cater to consumer preferences and have been successfully thriving on the geographically diverse Indian market, through franchise. Other brands like KFC and Barista has reached wider potential consumer base in this country and have successfully met their business expansion goals which other channels of distribution cannot match.
If the statistics are to be believed, the global brands have 40% of all retail sales reached consumers through the franchise route.