Pros and Cons of Starting a Global Franchise Business in India

on Jun 06, 2024 | 2970 views

Written By: Resham Daswani

Have you noticed, that every second shop around us, includes a global brand?  Yes.  The myth of luxury goods and services being huge expenses is long gone.  Nowadays, luxury goods and services are considered huge expenses. Luxurious experiences are becoming more popular as customer tastes change. So are you interested in getting in-depth information on the global franchise business in India?

Global Franchise Business in India - Advantages, Disadvantages & More.

Premium products are in high demand, especially since Gen Z values superior purchase experiences. No wonder India's premium brand industry is booming.  Moreover, experts expect India's luxury market to expand to $200 billion by 2030. 

Global companies are taking notice of India's booming luxury goods and services industry. And therefore, considering their entrance into the country with confidence. Also, numerous multinational mega-brands have appointed several Indian stars as their brand officials,. This is therefore, highlighting the enormous scope of the Indian premium goods sector for expansion.

But while you consider becoming a part of this segment, we need to share the pros and cons associated with the global franchise business in India.

Pros of Acquiring A Global Franchise Business in India:

  1. Recognised Brand: A global franchise has many benefits, one of which being tisand's visibility. Popular foreign brands are gaining popularity among Indian customers. This is good news for businesses looking to expand their customer base rapidly.
  2. Established Business Strategy: A global franchise provides access to a tried-and-true business model. The operational procedures, marketing plans, and product offers have previously been tried and true. Therefore, this lessens the dangers of beginning a new firm from square one.
  3. Large-scale economies of scale: In many cases, master franchisees can take advantage of marketing, buying, and operational economies of scale. This has the potential to improve profits greatly.
  4. Potential untapped market: Market potential is enormous in India due to the country's sizable and expanding middle class. International businesses are seeing a surge in demand due to rising disposable incomes and evolving lifestyles.
  5. Training and ongoing support: Franchises receive a lot of help and training from their franchisors. This package includes
    1. initial training,
    2. continuing support,
    3. marketing help,
    4. and a network of other franchisees, all of which can benefit your firm's growth.
  6. Efficiency in the Supply Chain and Operations: Achieving cost savings while maintaining consistent quality is possible with access to established supplier chains and operational efficiencies. In a varied market like India, where supply chain difficulties can be extremely challenging, this is an especially advantageous strategy.

Now, let us proceed with the disadvantages of global franchise business in India.

Cons Of Global Franchise Business in India.

  1. The initial investment is quite high: A master franchise sometimes requires a sizable upfront investment. The initial inventory, franchise fees, and startup charges are all part of this. A major obstacle for many entrepreneurs is getting the money they need.
  2. Modifications to Market and Cultural Practices: Even if the brand is famous all over the world, it might need some tweaking to appeal to local tastes. Making adjustments to cater to a certain regional market may necessitate more time and money.
  3. Regulatory environment challenges: The Indian regulatory landscape is not always easy to navigate. Since state laws might vary greatly, entrepreneurs must comply with all applicable local regulations.
  4. Recurring Royalty payments: In most cases, franchisees are required to pay the franchisor a royalty fee and a portion of their income on an ongoing basis. Particularly in the early years while the company is still expanding, this could affect profitability.
  5. High competition level in the Indian market: There are a lot of local and international competitors in the Indian market. Getting noticed and taking a portion of the market calls for serious preparation and strategy.
  6. Strict operational guidelines: The capacity of the franchisee to innovate or alter the business model is frequently hampered by the rigorous operational standards and constraints that accompany franchise agreements.

To sum up, entrepreneurs in India who are up for the challenge of starting and ongoing operations can reap the rewards of purchasing a global franchise. You may greatly reduce risks and increase your chances of success in the ever-changing Indian market by leveraging the well-known brand, tried-and-true business model, and also assistance from the franchisor.

Market Drivers Leading To International Franchising Business Opportunities in India

As India's economy approaches that of the world's fastest-growing economies, the country's luxury market is seeing tremendous expansion. Premium and luxury goods are seeing a meteoric surge in demand, thanks to the changing tastes of Indian customers.

Alongside, here are some market drivers which are supporting this rapidly growing market.

  1. There is a sizable proportion of the Indian population that is younger than 35 years old. Millennials and Gen Zers are more likely to try out foreign brands and items. They are receptive to high-end goods. Moreover, they also garnish with fashion trends worldwide.
  2. In India, e-commerce has been growing rapidly due to the widespread availability of cell phones and internet. With the use of the internet, global companies can connect with more people. E-commerce expands brand penetration by making foreign products accessible to consumers in even the most remote places.
  3. Retail outlets and retail chains are expanding across India, creating opportunities for global brands to set up shop in the country. Better infrastructure, an improved shopping experience, and more exposure for global brands are all benefits of organised retail settings that increase the growth potential of these businesses.
  4. Indian officials have launched a slew of new programmes and regulations meant to make conducting business easier and entice international investors. Foreign direct investment (FDI) rules have been loosening, and the retail and e-commerce industries have received government assistance, making it simpler for multinational businesses to join and operate in India's market.
  5. Cultural globalisation in India is on the rise due to travel, social media, and exposure to global media. International products that are stylish and fashionable are in high demand and are more conscious of international businesses and trends.
  6. Quality, variety, and one-of-a-kind experiences are becoming more important to Indian consumers than low prices. In particular, the fashion industry, the food and beverage industry, and the personal care industry are experiencing a shift in customer preferences, which is increasing demand for worldwide brands that provide distinctive products and services of a high quality.

Therefore, there is a perfect storm of currents in the Indian market that is fostering expansion and demand for global companies. Investors and entrepreneurs in India can use these trends. Those who want to acquire a worldwide franchise will have to capitalise on the growing demand for global products and services among consumers.

Top Global Franchise Business Opportunities in India

Here are some of the top master franchise opportunities you can consider, if you have decided that acquiring a global franchise is your forte.

Top global franchises include:

  1. McDonald’s Franchise: Market research, strategic alliances, product localization, and also a strong supply chain were all part of McDonald's master franchise entrance strategy for the Indian market. Fast food giant McDonald's became a household name in India by studying local tastes and adjusting to them. Being sensitive to local customs, forming alliances, and taking a personalised approach are all keys to their success.
  2. KFC India Franchise: In-depth market research, strategic alliances, product localization, and a strong supply chain were all components of KFC's entry strategy into the Indian market. Fast food giant KFC became a household name in India by catering to local preferences and customs. Their strategy highlights the significance of adaptability, community involvement, and ongoing innovation in succeeding in a varied and ever-changing market such as India's.
  3. Domino’s Pizza Franchise: Domino's Pizza was able to break into the Indian market and grow its business there thanks to smart alliances, menu localization, supply chain growth, and marketing power. Domino's become a successful Indian fast-food chain by knowing and responding to the local market.
  4. Pizza Hut Franchise: Their efficient supply chain development, aggressive marketing, strategic partnerships, and good menu localization allowed it to enter and expand in India. Pizza Hut became a successful Indian fast-food chain by knowing and responding to the local market.
  5. Subways Franchise: Developing strong supply chains, forming key alliances, and launching focused marketing efforts were all part of Subway's strategy. Subway is well-known among health-conscious fast-food customers in India because the company learned about and catered to local tastes.

For more assistance and helping you out with the process of understanding the master franchise agreement, you can also reach out to experts at Sparkleminds, who have an in-depth understanding of the international market.

To summarize,

Starting a global franchise business in India can be a good thought, but like any franchise business, you will need a strong and systematic approach to getting there.  For your assistance, experts at FranchiseBazar are just a click away.

Disclaimer: The brands mentioned in this blog are the recommendations provided by the author. FranchiseBAZAR does not claim to work with these brands / represent them / or are associated with them in any manner. Investors and prospective franchisees are to do their own due diligence before investing in any franchise business at their own risk and discretion. FranchiseBAZAR or its Directors disclaim any liability or risks arising out of any transactions that may take place due to the information provided in this blog

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