Franchising

FRANCHISING

Although the franchising system in India, relative to developed nations, is considered to be in its infancy (i.e., due to the lack of comprehensive set of franchising laws, customs and practices, transparency in the sector, lack of market intelligence and data, etc.), the industry is forecasted to experience exponential growth based on  the Country’s strong demographics, continual increase in disposal incomes amongst the middle-class, increased consumer spending, and the increased appetite for uniform business systems.

 

The United States, having one of the strongest and sophisticated franchise systems in the world, is in an opportune position to become a key player in India’s franchise boom. Indians with growing incomes are demanding high quality products and services, which can be delivered by U.S. franchise systems. Simultaneously, India is witnessing huge growth in entrepreneurial energy and talent, and most franchisees are in their first decade of operations and are very receptive toward American franchises.

Some Interesting Facts:

  1. Franchise management will grow at a whopping 30-35 percent per year in India[1]
  2. Indian franchise industry is currently estimated at $13.4 billion with an expectation to reach $35 billion by 2020[2]
  3. Currently, there are more than 3,000 franchise brands in India and around 1,000 global brands every year are considering plans for entry into India.

India Global Advisors, with their on-the-ground teams in India and the U.S., assists U.S. based and other international franchise systems enter into or expand within India.


Cross Border Franchising Challenges

  • Foreign Direct Investment (FDI) Restrictions and Rules in India
  • Strategic Market Assessment / Lack of Local Market Intelligence / Transparency (India)
  • Franchising Business Methods, Formats and Strategies, Lack of Sophisticated Legal Framework (India)
  • Finding, Properly Vetting and Entering into Local Area Developer, Master Franchisee, Partner, Joint Venture or Other Business Alliance Arrangements
  • Cross-Cultural Deal-Making Custom and Practice in the U.S. v. India, Including Negotiation Protocols and “Do’s” and “Don’t’s”
  • Effective Local Deal Making, Including Restrictive Covenants, Transfer Restrictions, Termination and Remedies
  • Governmental Approvals and Requirements
  • Effective Markeing Strategy / Region Customization
  • Supply Chain / Logistical Management Issues in India
  • India / U.S. Business Entity Formation, Licensing and Permitting
  • India / U.S. Retail Employment and Recruitment Challenges
  • Local Legal Issues, Including Deal Structure and Documentation, Labor Law Compliance, Deal Structure and Documentation
  • International Tax Issues, Including Tax Efficient Deal Strucuring, Withholding, Tax Treaty Planning & Benefits, Tax Deferral Strategies, Etc.

 

Services provided by India Global Advisors for the Franchising Sector:

 

Phase I: Market Research and Analysis; Franchise Models:

  • Market Research– Led by experts in research, data, market intelligence and analytics, our market research team assists in assessing current industry and consumer trends and opportunities for the franchisor’s goods or services in the local markets, local competitor analysis, with strategy recommendations.
  • Franchise Business Models– Working closely with the franchisor’s management team to review and preliminarily assess market research, franchisor capabilities and offerings, and product specialization factors, we assist in evaluating different franchise business models for market entry (i.e., Direct Franchising, Joint Venture, Master Franchise, Area Development, etc.), including regional focus models.

Phase II: Local Partner Assessment; Negotiation and Engagement:

  • The IGA team will support the total process of finding the right local India partner for your franchise.  Based on Phase I assessments and criteria, and leveraging our local India networks, IGA will assist franchisors with locating potential area developer, master franchisee, joint venture or other India based “all-India” or regional local partners for market entry and expansion.
  • Our team will assist in the interviews and negotiations between the U.S. based franchisor and local India partner, taking into account local market intelligence and trends, requirements and offerings of the franchisor, and capabilities of the local India partner.  .
  • Finally, our team  will assist in the engagement of local premier India law firms for the preparation of the franchise, area development, and other related agreements, working with the franchisor’s management team and counsel.

Phase III: Marketing and Recruiting:

  • IGA can help franchisors market their franchise systems using the most effective medium of advertising, based on client marketing budgets and parameters.
  • The IGA team can help you recruit professional employees for your Franchise, taking into account your requirements, labor compliance and benefits, making the entire process manageable.
  • IGA can help you in designing training modules.

Phase IV: After Services:

  • IGA helps franchisors with sales and market audits through our affiliate accounting and marketing firms.
  • IGA can help with back end support for your franchise system, including accounting and tax services

Franchising Success Stories: 

New 130-140 Domino’s Pizza outlets and around 20 new Dunkin’ Donuts restaurants in the current fiscal to expand its footprints in the country.

Baskin Robbins to expand

 

[1] KPMG and FAI (Franchise Association of India) – Collaborating for Growth- 2013

[2] KPMG and FAI (Franchise Association of India) – Collaborating for Growth- 2013

X