- Franchise Sector Expected To Outpace Indian Economy-wide Job Creation In 2021
- Oct 2021
Franchise Sector Expected to Outpace Indian Economy-Wide Job Creation in 2021
Businesses &its related industries are invariably bound not just by their economic responsibilities but also to help the society overcome the socio-economic issues. At the core of India’s economy and population lie three major issues- unemployment, economic imparity and stunted industrial growth. A select few industries have the strength to help a nation with a population of almost 1.5 billion benefits from the opportunities that arise from this.
Employment Overview in India
According to an NSSO data, the total of Indian employed population is close to 478 million of which only 2.3% are officially skillfully trained for their jobs.
Out of the 31 million unemployed, close to 80% fit the criterion for Blue-collar jobs, 15% for White Collar jobs & 5% are deemed unemployable.
The official number of people employed as domestic help is 4.2 million. Most experts believe that this number is close to 50 million, which is a more plausible estimate, considering the Indian lifestyle.
Combine this with the 31 million unemployed, there is a big employment gap to be covered in the market.
The Global employment scenario in the franchising sector
Franchises play an integral role in supporting the local economy through job creation and the payment of taxes.
A CNBC report suggests that the franchising industry in the USA is worth close to $451 billion and employs 8.1 million people through 759,000 locations. In Canada (second largest market) the franchising industry employs 1.5 million people out of a total employed population of 18 million. The top 12 franchising markets employ 20 million people out of a total global employed population of 3 billion. That comes to around 1.5%
In India, the franchising industry is valued at $51 billion (2017). It has grown 4 folds since 2013. In the next three years, it is set to rise 35% annually. In India, the industry employs close to 1.5 million people though the potential is much bigger if the franchise industry get its due recognition in the country.
These figures of leading markets have only been achieved in about two decades. Even though the franchising industry has existed in the US since the 80’s. This goes to show that there is a huge potential for the market to grow exponentially in India.
How franchising can contribute to employment in India
Currently in India, there are 4,600 active franchisors across all sectors like Retail, Food service, healthcare, business services, Beauty and wellness; technology led business operatingnearly 200,000 outlets. Though the Indian franchise market is still very young, the industry accounts for close to 2% of the national GDP. The job creation is estimated to be to be to the tune of 1 million in franchise industry in India.
A high young population also indicates a high entrepreneurial energy in the country. This is where a franchise model helps through shared ownership. More entrepreneurs get associated with brands that assure a relatively higher rate of success. This is one way India can fight the issue of economic imparity.A Franchising is not only a great way to encourage self-employment but it also is a big employment generator. A single franchise store employs between 5-30 people.
The Blue-Collar empowerment: For the 50 million population employed in the unorganized sectors/domestic help can only aspire for things like job satisfaction & financial stability. Franchising at its core promises to skill them, as training is the core of the transfer that is made by the Brand to the franchisee to achieve desired standardization across brand stores and therefore brings higher remuneration and more organized work culture for blue-collar employees.
Focus Sectors: such as Retail, Food Service and Beauty & wellness, healthcare contribute 60% to overall franchising industry .The simple math is that the more successful a business is, the more it can grow and the more it can employ. The Indian Food service sector has already been termed as an engine for ‘Economic Growth & Development’ for India by the Federation of Indian Chambers of Commerce & Industry (FICCI). The sector officially employs 5.5-6 million people in the country. The organized market or franchisees including large and small format restaurants & cafes in F&B account for 30% of the market. 15% of the F&B employment can be attributed to franchising.
By that statistic, if jobs were to grow proportionately and franchising gets a hold of the lager market and given the overall need to organize the F&B services for reasons of food safety and better tax services enablement, it has a potential to increase employment by 60 million.
Work from Home Enabler: An interesting fact to be noted over here is that the most searched job description in India for 2017 was ‘work from home’. One quick Google search can be testimonial to how much of it is out there. Franchising concepts strengthens the Work from Home culture that brings many such jobs that primarily include consulting, man and a truck model and also micro franchising that is being done by Uber and OLA kind of large organizations. All of these business models have offshoots in the franchise industry.
Overall, franchise employment is projected to grow by 35% annually, continuing to outpace the rest of the economic sectors. By the end of 2021, the industry is set to have 2,50,000 outlets through 5,000+ brands who are in the process of entering the system as festival season sees big growth. A company like Vakrangee has a franchisee network in India with over 45000+ Vakrangee Kendra point looking to add another 4000 by Diwali.
An average franchisee in India employs 5-20 people (70% blue collar & 30% white collar). Even a conservative estimate shows that the creation of another 1 million jobs by the end of 2019 is quite achievable. The upcoming 16th edition of International Franchise & Retail Show alone projects a job creation of 1 million over 2.5 years. With an estimated footfall of 50,000, the show assures the nation of productive jobs, of which we still need 117 million. 500+ brands including 150 major international ones are set to attend the show along with 40,000+ investors.
A safe haven for India’s high entrepreneurial energy
An IBM data suggests that 90% of Indian start ups fail within five years. The biggest reasons quoted are- lack of mentorship and structure. On the other hand the success rate in franchising is about 85% .Infact, the most successful startups have gainfully used the franchise route for growth. The high potential for new investors to put their monies in bigger or up and coming franchise brandslike OYO hotels, Xiaomi , Pepperfry, Firstcry, Yaatra.com has already been gaining steam. At the same time more entrepreneurs get associated with brands that assure a relatively higher rate of success. This is also one way India can fight the issue of economic imparity.
The economic conditions of the country goes to suggest that India is ripe for a franchising boom as the burgeoning middle class helps boost small retail sales by 10% every year. This shows that there is no dearth of demand now and in the future. The momentum that the sector is gaining combined with the country’s employment condition and the high entrepreneurship drive is set to put the industry in a robust ecosystem.
Owing to all these factors and perhaps more, the International Franchise Association has rated India as the 12th most valuable market for franchising. Considering the pace of growth it won’t be too long before the sector completely incubates the retail sector (largest industry in India that contributes 10% to the nation’s GDP) and becomes a formidable force.
Most brands are in a hurry to spread their reach by taking franchisees on board. The aim here is to maximise profits…