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FRANCHISING STATISTICS IN INDIA

 


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With India emerging as one of the most lucrative markets in the world, franchising has proved to be the preferred entry mode to marketers who are relieved of many of the costs and risks of opening the Indian market on their own.

>> Facts & Figures - Franchising in India

  • The Indian franchising industry accounts for nearly 5 per cent of the country’s GDP.
  • Estimated annual turnover achieved by franchised businesses in India: Approximately, USD 7 billion (Contributing to around 5% of GDP)
  • Number of individuals directly employed by franchised businesses in India: Around 1 million
  • Franchising concepts in operation: Around 1,200
  • Units operating in franchisee business format: Around 100,000
  • Annual growth: 25-30%
  • The success rate in the franchised business format is over 90 per cent as against just 10-15 per cent in the self-start businesses.
  • According to Euromonitor and market-research firm RNCOS, India's $13 billion fast-food market is already growing 25-30 percent a year, and global players like Domino's, McDonald's and Yum Brands (KFC and Pizza Hut) are pushing into second- and third-tier cities.
* information source: Franchising Association of India

  • Indian franchise business to grow fourfold by 2017. India’s franchising industry is expected to quadruple in volume in the next five years, accounting for almost 4% of India’s gross domestic product (GDP) in 2017.
  • Retail, food and beverages, health, consumer services, and education are predicted to be the key sectors.
  • Only 2.5% of total retail sales are driven through franchise formats compared with nearly 50% in the US, indicating significant potential.
  • The industry was worth $13.4 billion in 2012, contributing 1.4% of GDP. That compares with almost 10-25% of GDP in most OECD (Organization for Economic Co-operation and Development) countries.
  • The industry is projected to provide almost 11 million employment opportunities by 2017.
  • There are presently more than 3,000 brands in India that have adopted the franchise model.
* information source: a report by KPMG India

>> There are over 40000 Franchisees across various sectors in India today and over 600 Franchisers, as per a study conducted by FICCI. Almost 28 percent of the Franchisers annually spend between Rs.20-50 lakh on acquiring new Franchisees. The total investment put in by the Franchisees in setting up their individual franchised businesses are over Rs.5000 crore.

>> A Federation of Indian Chambers of Commerce & Industry (FICCI) study on `Franchising in India - an industry perspective' reveals that 55 per cent of the franchise players in India are operating nationally, whereas 35 per cent are operating internationally. Only nine per cent are regional players while a minuscule one per cent of the players choose to remain local.

>> India is now the world’s second largest Franchising market place after North America and is growing at 25-30 percent, according to Mr.Tony White, Managing Director, White Connections, Australia during the conference on Franchising in India. Estimated at Rs.10,000 crore, the franchising industry has about 1500 homegrown franchisers.


>> Franchising Glossary
  • Angel Investor: An angel investor is an individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
  • Master Franchise: Master Franchising allows people or corporations to purchase the rights to sub-franchise within a certain territory. This allows the master franchisee the opportunity to grow a decent business in a fairly short timeframe. Not every franchisor offers master franchising opportunities. Franchisors that do use this system of usually grow very rapidly.
  • Multi-Unit Franchise: Multi-unit franchising creates the opportunity for a franchisee to open more than one franchise unit. In this case, multiple units are sometimes sold at a reduced rate per unit. In this type of operation, the franchisee partakes less in the day-to-day operations of the unit. Instead, the multi-unit franchisee manages all the locations at a higher level.
  • Single Unit Franchise: Single Unit Franchise Definition. Buying a single unit franchise is the most likely place a brand new entrepreneur would begin. In this type of franchise, the franchisee would only be responsible for running one unit. However he or she would be extremely involved with all of the daily operations of the business.
  • Designated Supplier: Franchise designated supplier definition. A supplier designated by the franchisor as a source for purchasing approved products. The use of a designated supplier guarantees the franchisor that each franchisee is offering the same products to its clients or customers.
  • Discovery Day: A discovery day is an event set up by the franchise company for potential franchisees. The discovery day gives the interested buyer of the franchise the chance to meet face to face with the franchisor. Most discovery days are usually at the franchisor’s main headquarters or in some cases, at an actual franchised location that is usually in the same town/city of the franchisor’s main office.
  • Uniform Franchise Offering Circular: The Uniform Franchise Offering Circular is a legal document that must be provided by the franchisor to the prospective franchisee at least 10 business days before any agreement of sale is signed and finalized.
  • Franchise Disclosure Document: Starting in July 2008, the Uniform Franchise Offering Circular (UFOC) will be replaced with the Franchise Disclosure Document. This is a legal document that must be provided by the franchisor to the prospective franchisee at least 14 calendar days before any agreement of sale is signed and finalized. This legal document is intended to provide prospective franchisees with enough information to help them make an educated decision about buying the franchise.
  • Gross Sales: The overall sales of a franchise not including operating expenses, cost of goods sold, payment of taxes or any other expenses.
  • Franchise Broker: A franchise broker (also known as a franchise consultant) is an individual who acts as an intermediary between the franchisor and an individual interested in buying a franchise. In most cases a franchise broker is not directly employed by the franchisor and represents many different franchises. There is no fee incurred by the individual interested in buying a franchise. The franchise brokers are paid a commission by the franchisor.
  • Franchise Agreement: The franchise agreement is a legally binding agreement which outlines the franchisor's terms and conditions for the franchisee. The franchise agreement also clearly outlines the obligations of the franchisor and the obligations of the franchisee. The franchise agreement is signed at the time an individual has made the final decision to buy the franchise. It is strongly suggested that anyone who is considering buying a franchise should consult with a professional franchise attorney.
  • Earnings Claims: Earnings claims are claims made by the franchisor in regards to financial performance of past franchisees or the potential financial performance of franchisees.
  • Royalty Fee: A royalty fee is an ongoing fee that the franchisee pays to the franchisor. This fee is usually paid monthly or quarterly and is typically calculated as a percentage of gross sales.
  • Franchise Fee: The franchise fee is an up-front (one-time) cost that a new franchisee pays to the franchisor. In most cases the franchise fee will cover the costs for training, support and site selection.
  • Franchisee: A franchisee is an individual who purchases the rights to use a company’s trademarked name and business model to do business. The franchisee purchases a franchise from the franchisor. The franchisee must follow certain rules and guidelines already established by the franchisor, and in most cases the franchisee must pay an ongoing franchise royalty fee to the franchisor.
  • Franchisor: The franchisor owns the overall rights and trademarks of the company and allows its franchisees to use these rights and trademarks to do business. The franchisor usually charges the franchisee an upfront franchise fee for the rights to do business under the franchise name. In addition, the franchisor usually collects an ongoing franchise royalty fee from the franchisee.
  • Franchise: A franchise is a right granted to an individual or group to market a company's goods or services within a certain territory or location. The purchaser of a franchise is called a franchisee. The franchisee purchases the franchise from the franchisor for a fee and/or a percentage of sales.


 
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