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Pankaj Tyagi
| Updated: 11 Mar, 2021 | Category: Franchise Agreement

Potential Benefits of Starting a Franchise Business in India

Franchise business in India

Franchise based business model has gained immense popularity in India in the past few years. The enormous customer base and healthy economic structure have made sure the overseas companies come to India to strengthen their footprint.

India is one of the fastest-growing markets in the world today, making franchising a profitable business model for aspiring startups and small businesses. India is now ranked amongst the world’s fastest-growing nation with enormous market size of 5.46 trillion (US$ 73. 78 billion) in FY20. India has secured fifth place on account of consumer capacity & retail destination as per the government sources.

Meanwhile, from an economic standpoint, India stands second after China. Hence, Franchising in India has many facets. This article would unfold the beneficial aspects of having a Franchise business in India

What is a Franchise Business?

In a layman term, Franchising refers to a business model where the franchiser issues a license to another party (aka franchisee) to use the franchisor’s IPR viz design, trademark, brands, and trade profile to market the products. Parties intending to start such a business need to agree to the contract (aka Franchise Agreement).

Impact of Globalization on Franchise Business in India

Globalization & market liberalization has ensured the brand awareness among the Indian consumers, making the importation of overseas brand to India territory a great opportunity to the local business. Many off-shore industries consider franchising a conducive option to step into the Indian market, which ensures a favorable franchising environment.

Franchising is slowly gaining popularity in the retail segment of the Indian market, particularly in the food and beverage industry, which also consolidates restaurant chains and computer training centers. Through Franchising, companies can leverage India’s vast market with a degree of control & other conventional forms of distributions. 

Possible Benefits of Having a Franchise Business in India

Following are some key benefits that the franchising business model rendered to the startups in India:-

Benefits of Having a Franchise Business in India

Boost Employment

Franchising advocates self-employment & is also a prominent job generator. A single franchise store renders employment to 5-30 individuals.

India has secured a second position in the world as far as the franchise market’s size is concerned. Currently, there are 2 million franchisee outlets and 4,600 operating franchisors operating in India. Total employment in this sector accounts for 14 million and is expected to increase rapidly in upcoming years.

The franchise industry is projected to contribute approx 4% of the GDP of India by 2022. The service-based franchises, which also include food services sectors, are expected to create maximum indirect employment.

Lower Failure Rate        

The franchises possess a low failure rate when contrasted with the startups.  Entrepreneurs who are willing to setup a business other than franchise needs to pour in more money in activities like incorporation, registration, marketing, procurement of raw material and setting up infrastructure.

This inherently lures the risk of losing the business under unstable financial conditions. But that’s not the case with franchise business as it is easy to set up and attract less funding than the conventional business model. Today franchise-based business model adheres to improved efficacy, fewer risk, & low cost over any startups therefore, making it more profitable to the investors.

Need Fewer Investments

Under the franchise contract, a franchisor can diversify the services by synchronizing cost, keeping an eye on quality measures, & improved margin. Many global franchisors have already entered the Indian market and are now reaping stable revenue from this business model.

The adoption of this business model mitigates the requirement for setting up in-house facilities or marketing channel for the franchisee to serve their business objectives. It implies that startups do not necessarily have to procure substantial capital to start a business in this particular field.  Starting a Franchise Business in India is a surely a worthwhile option from the investment standpoint.

Ensure Long-Term Growth

To establish a long-term profitable business in India, one has to invest heavily in marketing and branding. However, that’s not the case with the franchising business model. The franchisor bears the pain of promoting their offerings, which inherently helps the franchisee focus on their core competency, translating into a good profit margin and long-term growth for the startups[1].

Potential Areas where Franchise Business Model is Growing Rapidly

The section below enlists the sectors that have potential growth for the franchise business model in India:-

Healthcare Sector

The improving lifestyle of people in India has escalated the demand for authentic health services & has resulted in expanding the health care services through franchises. For instance, many leading health care brands have established an extended portfolio of state health care clinic in India via their franchises.

Education Sector

With the level of education spreading at a rapid pace in India, industries perceive this as a business opportunity as this serves a dual purpose. First, it helps them reap enormous profit, and second, it allows them to educate others with relevant training modules. At present, India is considered one of the fastest-growing markets for education.

Food Sector

When you believe of franchises, most probable the names that burst into your head are all food franchises. This brand acknowledgment can really promote your franchise when starting out your business. You get to profit from a built-in customer support and a strong reputation that habitually takes years to construct up when you are doing it all on yourself.

When customers decide to eat at a food franchise in its place of an original restaurant or café, it is for the reason that they don’t want any surprises. They want to purchase products that they know they will be fond of. A sense of awareness is very striking to a lot of people. They understand knowing what it anticipate from the quality of service, types of food, as well as hours of operation and outline design.

Brief on Business Opportunities via Franchise Business in India

Getting into a franchise business is a profitable opportunity for anyone, as per the expert’s opinion. Franchising business offered much-needed stability and contained less risk for the business owners. India is a vast nation; all the global brands intend to step into the Indian market due to unparallel market potential and low labor cost, which ensures the long-term benefits for the franchisors.

Conclusion

For the most part, India’s economy provides sufficient resilience to every business model, including dealing with franchising business. The government tries every possible measure to sustain stable growth for the GDP. They are also employing the best policies to ensure the development of the new startups regardless of their business nature and structure. This is the primary reason why the franchise business in India is thriving at a rapid pace.

According to some experts, India will likely witness immense growth in the franchising business model in the upcoming years. Many industries linked with the franchise-based system have reaped considerable profit since their inception in India. As an economy, India is the perfect destination for the one who seeks a considerable profit margin from the franchising business model. Globalization is another significant factor that plays a vital role in strengthening the footprint of this business model.  

Read our article:MedPlus Franchise in India: How it can helps Startup to Grow?

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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