Franchising is basically the replication of a successful business model format across locations through like-minded partners. As long as the model is self-sustainable, workable and partners for sharing one’s vision are available, one can franchise any business. Malls, as relatively novel retail formats, are the perfect venues in India. However, a business intending to franchise at a mall or anywhere else must qualify on the following parameters:
- The business should be successful and profitable since at least the last 3-4 years
- The business should be manageable across locations
- The business should be on a format that can be shared with like-minded entrepreneurs for implementation
If one has been running this business for something like 5-10 years, it must surely be profitable. To go for the franchising option, one should get a professional consultant to provide guidance through the process and also to develop a workable format. One must then try franchising the business at one mall. After running this for about a year, one is then ready to expand manifold.
MALLS AS FRANCHISE VENUES
There are conflicting opinions on the profitability of franchised brands in malls in India. Those in favour state that malls are the best places for a franchise set-up because they assure a lot of customer traffic. While those who say that mall space is too costly, those in favour rightly state that the cost of putting up a store inside a mall is proportional to the franchised name you have purchased. Brands do not franchise their name if they do not have a reputation for saleability. For heavy traffic, the inside of a mall is the most viable location. It is the perfect way to merchandise one’s products, even if one is just breaking even. In the worst-case scenario, customers will be aware of one’s presence.
Franchising is becoming a key part of growth patterns in Asia for many companies, and India is in the middle of the retail franchise revolution. As long as the real estate market is hot and new malls are being built to feed the hunger of the expanding retail market, franchising in India will thrive. Malls will continue to be the leading franchise vehicles in India, thanks to their popularity and ability to draw large numbers of shoppers. Indians have long since overcome their xenophobia regarding glitzy malls and hypermarkets and are now aware that visiting a mall does not necessarily mean higher costs.
However, it is a mistake to assume that a high footfall rate in a mall automatically translates into increased sales for franchises. A significant number of Indian mall visitors come only to enjoy the ambience. The onus of profitability still rests on offering bargains and imaginative display.
In our metros, people have started going to malls not only for shopping but for leisure and entertainment, thanks to the ambience that malls offer and also because they provide a number of brands and facilities under a single roof. Malls boost retailers’ sales because customers who had no plans of buying their products may still do on impulse there. Lifestyle brands, in particular, benefit from this factor.
Interestingly, malls benefit franchisees more in Tier II/III cities than in metros. In the large cities, major brands have no problems with attracting customers, and therefore operating from their own premises makes sense. However, in Tier II/III cities, major brands prefer to first test out the market via franchisees, since local operators are better at capitalizing on local market dynamics.
The author, Subhranshu Pani is Managing Director – Retail Services, Jones Lang LaSalle India
