- Jul 2021
Making An Easy Transition
Franchising as a distribution strategy is rapidly growing and one part of this can also be attributed to small business owners, who are converting their current stores, or businesses into a franchise ownership. Franchising is a big opportunity in India as this is the only way to organize the 70 per cent of the unorganized market. As per the global retail experts, the organized retail and services market will double from 30 per cent to 60 per cent in the next 10 years. Perhaps the clearest example of this is in the real estate industry. The US real estate company RE/MAX has grown rapidly and successfully across the world and in India in this manner. This system not only works well in real estate but also other sectors like restaurants, salons, retail, travel agencies, where brands are successfully offered existing entrepreneurs the opportunity to convert to a franchise. Sometimes an established business decides to convert some of its managed outlets to franchised outlets. Such decisions are usually taken because of a desire to accelerate growth and reduce overheads without sacrificing quality control. Studies have shown that outlets run by ‘owner-operator’ franchisees outperform company-owned outlets. Such ‘re-engineering’ of llthe franchisor’s own operations can sometimes radically transform the performance of the franchisor company by a combination of disposing of under-performing assets, slimming down the central overhead required to control and monitor company-owned assets and employees, and by the enhanced performance and financial return of franchisee-operated outlets. Read on to know the advantages of conversion franchising:
Quick Turnaround Time:When conversion happens, the brand would immediately have another operating unit and ongoing income stream. Existing independent business already have real estate, staff and customers and most (if not all) of any other requirements. Around 40 per cent of conversion franchising is happening in F&B brands in India and 25 per cent in the education brands, which are offering early education.
Capable & Competent Franchisees:One gets franchisees, who know how to operate in the industry and have proven their competency via their independent businesses. A recent survey has shown that in India 75 per cent of the businesses are still open after two years, and 65 per cent operating after five years
Niche & Technical Franchises:In franchise systems that are technical in nature like medical stores, conversion franchising is usually the only way for a franchise system to grow.
Local Experts:The franchisor do not need pilot store as the local franchisee is well aware of the common ailments and treatment patterns of that local area. The biggest hurdle to transitioning a business from an independent operator to a franchise is trust. Trust that the business model would take their business to the level they desired. Trust that the individuals involved would follow their commitments. Conversion franchising success would depend on delivering on the trust factor.
Most brands are in a hurry to spread their reach by taking franchisees on board. The aim here is to maximise profits…