Many times entrepreneurs ponder about the right business for them. Some entrepreneurs challenge their potential and veer into establishing their own company. Others want a secured investment where they can gain more merits and profits than losses and disadvantages.
The business industry bears several risks and intricacies. If you are the kind of entrepreneur who desires stability and security in your investments, you need to consider franchising in India as one of the best business options.
Like in any business, it is necessary to be well-versed and knowledgeable about the kind of business you oversee. You must get to understand the basic concepts of franchising and an overview of how it works.
First, what is franchising?
Franchising: Definition and Nature
There are two main terms you need to be familiar with: franchisee and franchisor. In simple terms, franchising means acquiring rights to produce, market, or distribute the products or services of a well-known business. A franchisee is a person or company who receives a franchise, while a franchisor is a person or company who allows or grants a license to franchise their product or services.
Franchising is a strategy executed by companies to expand the reach and market of their business. Meanwhile, franchisees earn the right to market products or services that already have an established consumer market. It is a win-win situation where both parties help each other gain profit and further amplify the scope and credibility of the products or services.
Suppose you ever consider franchising in India, most likely. In that case, franchisors will provide qualification requirements for their potential franchisees to be part of the family. They can directly impact the success or failure of the business. They have to ensure a smooth and secured transaction and agreement.
Typically, franchisors will provide their franchise candidates with the franchise disclosure document (FDD). The FDD consists of critical details about the company - for example, financial statements, franchise fees, and more. This is non-binding paperwork which means receiving the FDD does not guarantee a close partnership with the franchisor. You will be given fourteen days to think, scan through the document, review the information, visit franchise stores, or communicate with the franchisor to arrive at a well-thought decision about whether or not to invest in a franchise.
After which, if you proceed, you will be provided with the Franchise Agreement (FA), this document enumerates the obligations of the franchisor and franchisee to each other, the duration of the franchise agreement, provisions, investment fees, the terms and conditions, and more.
Business franchise in India is very particular regarding legal documents and finding the right franchise partner. So, you have to make sure that you know all about franchising in India.
Four Types of Franchise Business
Along with acquainting yourself with the concepts and nature of franchising, you also need to choose what type of franchise in India you want to venture into. This can be very difficult and necessitates you to conduct in-depth research on the types of business franchises and their corresponding features and offers.
There are four main types of franchise business in India: business format franchises, product franchising, manufacturing franchising, and business franchise ventures.
Business Format Franchise
This type is the preferable franchise. This format is highly advantageous to the franchisee because they acquire the franchisor’s efficient and effective business model and support a famous brand. The franchisee and franchisor who engage in this type of franchising have a deeper bond and trust.
The franchisor assures the quality of their products or services through organizing compulsory training and provides supplies and raw materials to the franchisee's branch.
The franchisee has the privilege of getting much guidance from the franchisor in terms of operational, marketing, strategic planning, production, advertising, quality control, and many more.
This type of franchise in India is common in fast food chains such as KFC, Pizza Hut, Subway, Taco Bells, Kenny Rogers Roaster, New York Pizza & Fried Chicken, Domino's Pizza, and Quiznos.
In this case, product franchising entails a franchisee purchasing distribution rights of a product or service from the franchisor. The franchisee pays for utilizing the brand name of a product in the distribution process.
This model does not have the same level of support as the business format franchise. Franchisees are left to their own devices when selling, but they get to use the manufacturer's trademark and utilize their experience.
Business franchise in India of this type is common in the automobile business, Apple, Samsung, etc.
The manufacturing franchise model provides rights for distribution and licenses the production of their goods or services. If you choose this type for your franchise in India, you only need to pay the franchise fee and a negotiable price for the unit sold in exchange for using a popular company's trademark and brand.
This is common in the food and beverage industry. Indians love coffee and tea, which drives the success of the F&G sector. Over 8%-9% constitutes India's Fast-Moving Consumer Goods (FMCG) market, with only the beverage sector alone.
It explains why food and beverage franchises in India are big and famous. The most popular franchises are coffee and cafe, hot beverages, power and energy drinks, and carbonated beverage.
Business Franchise Ventures
This type of franchising involves buying and selling products from the manufacturer. An example would be the vending machine business, where franchisees purchase the product and sell them. The franchisor handles and provides the location spot and client base.
Why Choose Franchising?
India stands as one of the world’s franchising leaders with the best franchise business prospects. Despite this fact, people still wonder what makes franchising in India appealing. Not everyone has a knack for establishing a business of our own, but many people want to try out the company. In this case, franchising is the right avenue for them.
Venturing into franchising does not require years of experience and knowledge because the franchisor will handle it for you. Additionally, it has lower chances of failing when compared to a start-up business.
Here are some reasons why you should consider franchising.
- Purposeful Partnership - You are guaranteed a collaboration that strives to expand and dominate the market. You both have the same enthusiasm to succeed and make the business grow.
- Lower Business Risks - As you partner with a well-acknowledged and popular company with an established client market, there is little chance of failing. Although there are risks and franchise business scams, as long as you choose the right franchise in India, you are in good hands.
- Freedom to Choose - You are given autonomy about what franchise in India you want to engage in. You are fully controlled by your financial budget, status and considering tons of franchise business prospects.
- Gets Benefits When the Business Expands - As the franchisor's business grows, your business also grows with it. There is stability and a huge opportunity for further development.
Benefits of franchising
Every business has its advantages and disadvantages, but franchise business remains profoundly resilient even during economic setbacks. This is one reason why a meaningful investment such as franchising has more edge and benefits than its drawbacks.
So here are the benefits of franchising:
- Training and Technical Knowledge - This is why franchising does not require full-blown knowledge and experience in the franchise business. Most franchisors organize training for new franchisees to orient and teach them all the complexities of the company. You are commonly held in the franchise business location or at offices at home. The skills and knowledge that you gain out of this training are relevant for your future business ventures. This helps in avoiding mistakes and ensuring the success of your business.
- Franchisor's Experience - You get to access the knowledge and experiences of an expert in the business industry. Franchisors share their strategies and challenges with their franchisees as part of the package of purchasing the franchise.
- Advertising Materials - In franchising, you do not have to worry about high-priced advertisements. Franchisors typically demand an ad royalty fee to the franchisees and compile these to fund high-quality advertising.
- Support and Guidance - The franchisors will continuously supervise and support you until you are well-prepared and capable of handling it independently. You do not have to be apprehensive in venturing into a franchise business because you will have solid support and extensive training to get you ready.
Franchising in India is highly lucrative, constructive, and beneficial. It is a secured investment as long as you choose a trustworthy franchise venture. However, doing business is always difficult and demanding. You need to be very determined, hardworking, and passionate about your business. You become a part of a meaningful cooperative with your franchisor and other franchisees working hand in hand to expand and dominate the market.Back to Blog