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Food Franchise Business in India- Everything You Should Know

calendar07 May, 2020
timeReading Time: 8 Minutes
Food Franchise Business in India

Indulging into the food franchise business in India helps a brand in getting recognition. Along with it, it’s the best way through which customers start preferring your business due to the brand value factor and reputation that a brand holds. There is no big deal in starting a food business. All it takes is the investment of money that can either be high or low in number. However, the food franchise business in India requires years of hard work to reap better results in the future course of time.

Those who are planning to make their mark in the food industry should consider franchising as the first choice. Under the umbrella of a popular brand name, you can pursue your journey in an accelerated way. After setting up a restaurant, Restaurant owners start minting money, and then they must look to expand their food business by choosing the franchise path.

Ignorant about the process of initiating a food franchise business in India? Leave your worries at bay and read this blog to get an overview of the whole process of food franchise business in India.

Is the Food Franchise Business in India the Next Big Thing?

The staggering growth of food franchise business in India has made one thing very clear that in the upcoming years, more restaurant owners would think of trying their luck in this form of business that ensures profitability as well as brand recognition. In one of the success stories in Economic Times, chairman of RJ Corp, Ravi Jaipuria has entered into the list of India’s newest billionaires. Talking about his estimated fortune, it’s the enormous amount of Rs 8,250 crore. His magnificent business empire via RJ Corp consists of real estate, carbonated beverages, fast food, health care, and more. His bag includes franchise for a brand like Pepsi that has grabbed a permanent place in the heart of cold drink lovers.

The success stories of Ravi Jaipuria and many young food franchise owners like him indicates that this food franchise business in India would turn out to be a money-making opportunity for those businesses that have the potential to grow and are looking to make the best out of it.

Fast Food Franchise Business in India

In the world of the food franchise industry, the fast-food franchise business in India is an outstanding medium through which customers who look for convenience, as well as food variety, will get served by the food business owners. The anticipated growth of the fast-food franchise business is more in India in comparison with many other countries. Investors have started doing in-depth research in studying fast-food franchise business model[1].

Terminologies Related to Franchising

  • Franchise- A franchise is a process where one entity grants rights to another entity to use their recipes, name, and trademarks along with the visual appeal to administer their business.
  • Franchisee- A franchisee can be an individual or business that purchases the business rights as well as perform its day-to-day actions.
  • Franchisor – The entity that owns the business rights.
Terminologies Related to Franchising

Different brands think from their perspective before following any franchise model. A franchise agreement is an agreement in which the franchisor gives a license to the franchisee to use their business model and trademark for a specific period. There are some set of protocols regarding menu items, layout, and design, following the prescribed protocols is mandatory. Furthermore, it’s a way to bring business from the initial days, and brands will achieve a sense of recognition.

Food Franchise Cost

The investment at the beginning of commencing a franchise includes various charges.

All those charges that are part of one-time investment are as follows-

  • Franchise Fee
  • Infrastructure set-up
  • Refundable security deposit
  • Staff hiring
  • Uniform cost of staffs
  • Additional charges

Going by the detailed reports of Economic Times, we have come up with something that will give you an idea of the investment and average break-even period for most of the types of restaurant models.

  • Food Court Outlet/Kiosk

It suits small players who are not willing to take giant steps and want to take small steps considering the mantra of low investment, healthy returns.

  1. Average break-even period- 0.5- 2 Yrs
  2. Investment needed- 5-10 Lakh
  • Cakeshop, Bakery or a Dessert Palace

Are you passionate about dessert and bakery items? Get-go with this type as you will also get brand backing.

  1. Average break-even period- 2-3 Yrs
  2. Investment needed- 15-35 Lakh
  • Casual Dine-In, Fast Food Joints

Encash on the growing popularity of fast food joints and casual dining houses.

  1. Average break-even period- 2-5 Yrs
  2. Investment needed- 35-50 Lakh.
  • Fine-Dine Property or Lounges, Bar

This model requires higher investment as compared to previously mentioned ones.

  1. Average break-even period- 4-6 Yrs
  2. Investment needed- Beyond 50 Lakh

Additional charges by the franchisor comprise a commission on the sale of a royalty fee. Most franchisees pay these charges as they feel that they are making the payment for brand coverage, assistance as well as training that a parent restaurant brand endows to them. Payment can take place on a quarterly, monthly, yearly basis, or just one time. Depending on the restaurant, there is a variation between the range of 5-30%.

Read our article:Restaurant Business Plan: A Blueprint for Kick-Starting your Restaurant Business

What are the Principal Benefits of Starting a Food Franchise Business in India?

  • Roaring Demand by Food Lovers

Eating out is the best way to escape the burden of cooking, especially for those who are doing jobs and leaving away from their hometown. People living in metro cities who have left their small towns to earn bread and butter for survival hardly get time to cook a meal every day. They love visiting restaurants and small food joints for better ambiance and foodilicious dishes of different types. By looking at the rapidly increasing demand for fast food corners, mini restaurants, and exquisite dining palaces, it’s not wrong to say that food franchise business in India in relation to these would witness a tremendous jump and invite more people to venture into the same.

  • Uncomplicated Set-Up Process

Food franchise set-up is not a complicated process. Initial start-up cost and the annual licensing amount is the essential requirement to set up a food franchise. The benefits that a franchise owner enjoys in return are franchisor’s brand attention, trademarks as well as a dependable customer base.

  • This Industry is a Recession-Survivor

The economic condition of every nation always carries uncertainty factor, but food franchises never get affected much even in the hours of high-level economic crisis. Some foodies can’t resist themselves from hitting the restaurants for a night out, and their cravings for fast foods are just unstoppable. Even if a time when consumers will face difficulty in purchasing luxury items, they won’t mind having late night parties and celebrations for different occasions at restaurants, small food joints, etc. and thus, your business will rock throughout the season.

  • Gainful Opportunities

The opportunity to grow and evolve increases with a food franchise in case there is an escalation in the traffic volume for food franchises. You can begin your journey with limited staff and end up increasing the number of employees with a progression in demand. Things that work the best for food franchise business in India are easily accessible location, nearby a landmark place, workplaces and retail stores. The perfect location would reward this business and could be the reason behind the success of the food franchise business in India.

  • The Mammoth Industry of Franchise

When we talk about the most booming sector in the franchising industry, the first name that strikes our mind is the food franchise industry. It is demonstrating its success from time to time. This industry wholeheartedly welcomes only those business persons who are capable of devoting their sweat and blood in the direction of establishing their prosperous food business.

Benefits of Starting a Food Franchise Business

Food Franchise Model Types

  • Single-Unit Franchising

In this type, the responsibility of managing the restaurant lies in the hands of the owner of the restaurant. In brief, we can say that the owner is the operator. Direct franchising is another term for this type. New entrepreneurs believe that single-unit franchise is the best to-go option.

Two examples of this type are- Sagar Ratna and Moti Mahal.

  • Multi-Unit Franchising

Multi-Unit franchising is a type of franchising model in which a franchisor awards a franchisee the right to own as well as operate more than one unit. The franchisee is responsible for developing the business for all these outlets. In case of successful running of a unit, franchisee and franchisor can join hands in the future.

Two examples of this type are- Wendy’s and Nirula’s.

  • Area Development Franchising

There is some sort of similarity between multi-unit franchising and area development franchising. The way it is different is the point that it associates a greater number of units spreading its wings in a larger territorial division. When it comes to elevating brand awareness, area developers have got the best opportunities in hand.

Examples of this type are- Commencing an American brands’ franchise unit in the boundaries of India.

  • Master Franchising

It’s a franchisor-franchisee relationship-based contract in which the restaurant owner (master franchisor) gives a degree of power to the master franchisee to control and handle the franchising activities of a specified territory. Within the areas of this territory, the master franchisee extends support to all those franchisees that they sign.

Examples of this type are- Yo China and Taco Bell.

  • Company-Owned Franchising

In this type of franchising, the brand goes on to form its own representative office in the country and assists the franchisee in constructing a business. The team members of the representative office work along with the franchisee and is known for upgrading the brand image and promoting healthy consumers-brand connection.

Examples of this type are- Berco’s and Pizza Hut.

Food Franchise Model Types

Tips to Get a Food Franchise

  • Equip Yourself with your Budgetary Plan

The initial requirement of every business regardless of its nature and scale is the financial prowess of that business. Financial investment revolves around three key points-

  1. Budget Analysis– It’s crucial to analyze the available budget and managing capacity of the additional budget.
  2. ROI Expectation– The return on investment that you expect matters up to a great extent. Financial decisions will get considered in line with ROI expectations.
  3. Break-even Period– A fundamental insights on this makes the road smoother.
  • Consult your Neighbors

There is a need to discuss with fellow restaurant business persons who have taken a franchise in the past. Directly approach restaurant brand or go for checking its name in third-party website listing like Franchise India. During the whole journey, a consultant would guide you and usher you on the right track. They will reduce the communication gap between you and other franchisors and will help you out in developing a business plan.

Points to remember during brand selection-

  1. Which cuisine demand is high in your craved location?
  2. What is the financial position of the franchisor?
  3. Is the brand harmonizing with the restaurant’s vision?
  4. Which well-known restaurant brands your area lack?
  5. Do your values resonate with the franchisor’s values?
  6. What type of franchise model can do wonders for you?
  • Serve them Questions on the Table.

Food franchise business is a game of investment and commitment. Confusing the franchisor is a bad idea, ask thoughtful questions. The relevant questions would surely bring loads of help to you. Get ready to catch the questions-

  1. In what way they are going to train and prepare you?
  2. With whom they are competing?
  3. What are the terms and conditions?
  4. What is the mission and vision of the restaurant’s brand?
  5. Who are their associate partners working together?
  • Gear Up for the Paperwork Process

Finally, the time has come when you should think of bringing a lawyer on board as there is paperwork along with the agreements. The lawyers will help in navigating the details and would re-verify the paperwork. Focus on resources like staff, location, and fund instead of delving into legal matters. Let the best men, i.e., Lawyers, handle the legal work.

  • Make things Official and Enter into Action Mode.

Sort out the issues; ask the questions, and say done to make things official. Furthermore, legal support and consultant aid would help you in finalizing the best deal. Embrace your customers with an open heart.

To Wrap Up

We, at Corpbiz, will provide you with legal assistance and a consultant so that you can weigh the pros and cons of engaging in a food franchise business in India. Need any kind of favor from us? We’d be more than happy to be a companion in your quest.

Read our article:Food Truck Marketing Plan: A Master Recipe That will Help your Business Blossom

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