Everything You Need to know before starting a Franchise Business in India
In this blog, let's address all entrepreneurs out there who want to start a franchise business in India.
At FranchiseBazar, we’ve counselled thousands of entrepreneurs over the years and guided them to successfully start their entrepreneurial journey in India.
Today, we’ll cover everything about franchising.
Starting with what is a franchise business, How different is it from starting your own business from scratch, and which ones would match your profile.
Everything out there is not for Everyone.
Without further ado, let’s get started.
What is a Franchise Business ?
A Franchise Business is one which you’d buy from somebody who has an established success formula that gets you to churn out profit by using their brand name and systems. This somebody is called a Franchisor who helps you build the business from the ground up by providing you with a well defined business process, the product or service that you will be selling, training, recruitment, marketing, and various other kinds of support needed to ensure smooth running and sustainability of the franchise business.
In exchange, the franchisor asks you for an initial franchise fee and an ongoing royalty (profit sharing) while running the business apart from the capital investment you put in to start the business which can vary depending upon the brand, the location, and most importantly, the products/services being offered by the brand.
How Different is A Franchise From A Distributorship, Agency, Dealership?
They are all similar in the sense that they all involve channel partners who perform functions as intermediaries between the producer and the consumer. Franchising however is the most advanced form of this distribution as it has pretty much everything defined and is not limited just to selling or transfer of the product or service from the producer to the consumer.
Let’s understand Franchising better by looking at an example :
If you decide to explore a food franchise in India and a Subway franchise in India, matches your interests and investment level, then Subway becomes the franchisor who will provide you with the necessary documents and manuals to define the business process, to help you recruit and train your employees, and will take care of marketing in your area to get you hungry customers craving for some delicious subs and sandwiches!
In exchange, the total cost of subway franchise in India will involve a sum of capital required to set up the Subway franchise outlet, an initial franchise fee set by the Subway management and a recurring royalty fee as you run the operations.
Wasn’t so hard now, was it?
The Franchise Models in India
Another common terminology quite prevalent in the franchise industry is around various franchise models involved while starting a franchise business in India. You must have come across terms like FOCO, COCO, FOFO, and COFO. So, what are these and how do they affect your plan of starting your dream franchise in India?
Well, they don’t! Yes, You read that right.
Franchise Models are nothing but a certain way in which a business is operated in the industry. It is away for brand owners to define the stakeholders and their involvement in operating the business. Let’s get to know them a little better :
FOCO - Franchise Owned Company Operated, where you invest in the business while the company takes care of the operations while giving you a fixed percentage/share of return. The ROI from this model could be as good as keeping your money in the bank with slightly higher returns.
FOFO - Franchise Owned Franchise Operated. This is the go to franchise business model for brand owners who are taking the franchise route for their expansion. FOFO is where you own and operate the franchise business as per the directions set by the franchisor and the returns are slightly higher than the FOCO model.
COFO - Company Owned, Franchise operated. This is where the company invests in the franchise business but you operate it as per the directions set by the brand. The returns for this can lie somewhere between the FOCO and FOFO model. This is rare and not very prevalent in the industry because most companies investing in the expansion of their business operations would prefer to run it on their own.
The next model is the COCO model - Company Owned and Company Operated, where the company owns and operates the business and does not have to do anything with franchising.
Even though so many different franchise models exist in the world of franchising, you don’t have to get confused at all as most of the franchise businesses that you see around you, work only on the FOFO model where you get to own and operate the franchise business you’ve invested in while getting the necessary support from the franchisor.
Should I take up a Franchise or Start my own brand from scratch?
Now that we’ve covered what a franchise business is and the various models associated with it, let’s understand how is it different from starting your own business from scratch and how to decide if you should be going for it or not.
As discussed, when you take up the franchise of an established brand, you get all kinds of support from the franchisor in terms of business processes, employee recruitment and training, marketing and getting customers to sell a product or service to, all of which has to be done by yourself while starting your own business. In a nutshell, you save a lot on the time, effort, and capital required in BUILDING your brand and business from scratch and directly jump to RUNNING the business and reaping the profits.
Deciding whether to BUILD your business from scratch or starting a franchise business is quite simple. As you take up and start running a franchise business, you have to follow a certain set of guidelines and processes that are defined by the franchisor as to how that business will be operated. In other words, you will not be having the freedom of thoughts and ideas of working in your own way.
So, if you’re someone who has numerous years of experience in a particular field and would like to start a new business in that field with the freedom of running it the way you like and incorporating your years of learning, we will highly recommend you to start your own business and give out franchises as you work towards expanding it.
However, if you’re someone who would like to start a new franchise business in a field you’re not well experienced, would require the franchisor’s experience and expertise and are OKAY with following certain set of rules and processes while running the business, your profile is perfect for starting a franchise business and you should not be thinking otherwise.
That’s pretty much it to get into the world of franchising.
Hope now you’ve got a clear picture about What is a Franchise Business and if you should be taking up a franchise or starting your own business in India.
Next steps to find out the perfect franchise business opportunity for you…
Register your entrepreneur profile at www.franchisebazar.com/entrepreneur-registration to get a curated list of top franchise opportunities in India matching your investment profile.
Check out the Top Franchise Opportunities in India at www.franchisebazar.com/top-10-franchises-in-india
Share this blog with your fellow entrepreneurs and friends who may be having similar doubts and looking for guidance on how to start a franchise business in India.