The Top Ten Mistakes to Avoid When Launching Your Franchise

on Feb 13, 2023 | 10046 views

By Shifa Qaiyum 

Franchising refers to issuing goods or services, requiring a franchiser, who establishes and trademarks a business, and a franchisee, who pays an initial fee and royalty to start the business under the organisation’s system.

A franchise implies low risk and high returns because it is already a brand name. People trust the quality and service because of the brand name.

What mistakes should you avoid when starting a franchise business in India?

10 mistakes to avoid when starting a franchise business in India are:

  1. Surveying your business possibilities- While looking at big brands to start a franchise business, one should not avoid small business opportunities with greater returns with less investment. You should explore different sectors that help you in reaching your business target even at low-cost.
  2. Not doing an abundant market survey: You should do thorough market research before franchising a business. Some franchises may deem profitable from afar, but in reality, they might be going through losses. You can ask pre-existing franchises about running it and daily tasks that are required to be completed.
  3. Cash flow- One should keep in mind that you will not earn profits immediately. It can take months to years before you can even reach your break-even point. You need enough working capital for your expenses as well as to cover operating costs.
  4. Deciding with inadequate information- Collect sufficient statistics and figures before deciding to invest in a franchise. A thorough market survey is important before you decide to invest your time, money and hard work in the business.
  5. No clue of returning income- It is necessary to know the returns you will get from the franchise. You should have clear trading figures rather than approximations.
  6. No business aim- Having a business plan is very important before investing in a franchise as it will make it easier for you to achieve your goal. It is of vital importance to know the time and capital needed to make your franchise prosperous.
  7. Failing to evaluate the agreement attentively- A disclosure agreement is signed between the franchisor and franchisee which contains the deal and requirements of both parties. You should analyse it carefully before investing and it is better if you hire a franchise attorney to review the agreement before signing.
  8. Expecting to be the boss- When you are the owner of a franchise you are not the boss. Franchisors have much more control over the franchisee’s operation including the staff, its location and its design.
  9. Don’t expect all your work to be completed for you- Even if the franchisor has set the complete management necessities for the franchisee to follow, you still have to market and have to go through a long haul to make the business a success.
  10. You have invested your money in the latest business trends- It is not necessary that if you spend the money on the latest trendy business, you will earn high profits. It is better to stick to tried and tested franchises which have the advantage of great returns.

Do you know the mistakes that new business owners make?

Here are 4 most common mistakes made by a new business:

  • Underestimating the competitors - You should never overlook your competitors because they might just be waiting for a chance to grab your customers. You should always scrutinize your market and take measures properly.
  • Cash investment- You should consider your expenses and finances before investing money in a business.
  • Profit margin- The profit margin for your company must be logical. If you set the prices too high, then you will not get customers but if the initial prices are too low, you will have to increase the cost of your service or products to reach your target returns and you might lose customers. You should research your manufacturing and operating costs before setting a reasonable price to have a solid margin.
  • Keeping unskilled employees- You should check the skills and reliability of your staff before hiring them. You might hire cheap staff to save your money but might cost you in the future because of their lack of experience. Hire your employees carefully because they are the backbone of your business.

What are the successful franchises in India?

Here are the 5 successful franchises in India:

Franchise Business

Franchise investment (in Rs)

Examples

Food kiosk

2-3 lakhs

Amul, Cafe coffee day and Subway

Preschool

6-8 lakhs

Kidzee, DPS global playschool and bachpan

Salon

10-20 lakhs

Shahnaz Hussain, Javed Habib and Salon and Spa

Gifting

10-12 lakhs

Ferns and petals, Gift Shopee and Red moments

Electric vehicle

2-5 lakhs

Hero Electric, Pure EV and Gayatri Electric vehicle

 

What are the Top 5 franchises in India?

The top 5 franchises in India are:

  • Tumbledry- It is the largest laundry and dry-clean chain in India. It is an e-commerce organization where customers can use mobile apps to place and track orders.

Initial investment: INR 25 lakhs

Franchise fee: INR 2.5 lakhs

Royalty: 7.5% weekly

  • Subway- It is the largest fast food joint in India that even provides healthy food choices. Subway provides high-quality food at an affordable price to its customers.

Initial investment: INR 54-90 lakhs

Franchise fee: INR 4.5 lakhs

Royalty: 8%

  • Giani’s- Giani’s is one of the original and oldest ice cream parlours in India. It has launched many franchise outlets with great returns.

Initial investment: INR 10-20 lakhs

Franchise fee: INR 5 lakhs

  • Jawed Habib hair and beauty Ltd.- It is a hair grooming brand.

Initial investment: INR 30-40 lakhs

Franchise fee: INR 7.5 lakhs

Royalty: 15%

  • InXpress- It is a courier service business that assures fast and safe delivery at an affordable price.                                                                                                                                             

Initial investment: INR 10-15 lakhs

Franchise fee: INR 9 lakhs

Royalty: 30%

 

What are the gains and losses of Franchising?

Although it is better to invest in a franchise business rather than starting a business on your own, there are pros and cons to both.

Advantages of Franchising

Disadvantages of Franchising

Brand consciousness is already present among the people which makes it easier to get customers and bring about profits.

Initial expenditure can be high.

It is not required to have experience in the field of your business investment.

Since you are just a franchisee, the rules and regulations are limited and you must comply with them.

Franchisors help you in managing the business and can provide training.

It might be difficult to manage the business if you do not know about it and the franchisor is also not helpful.

You are investing in a well-known and authorized brand with a systematic set-up to help you succeed.

Your cost might increase if you have to pay royalties, rent, service charges and other expenses.

You can invest in different franchise sites and broaden your services.

You are answerable to the franchisor.

 

What are the most profitable franchises in India?

The top 8 profitable franchises in India are:

  • Patanjali Ayurved- It is a well-known global brand which sells herbal and ayurvedic products. It was started by Baba Ramdev and Acharya Balkrishna in 2006.

The initial investment is INR 7 lakhs and the retailers with the franchise state that they earn a 15% gross profit margin.

  • KFC (Kentucky Fried Chicken)- The brand is known for its fried chicken but it also offers a great variety of chicken options.

 Although the initial investment in this franchise is a bit expensive, varying from INR 1-2 crores, you can get a great return in a short period.

  • Lakme- Lakme is one of the most trusted brands of cosmetics in India and is owned by Hindustan Unilever Limited. It has been ranked as number 1 among cosmetic brands in India.

The initial investment in a Lakme franchise is INR 25 lakhs and its profit margin is approximately 20%.

  • Bikanervala- It is one of the largest restaurant chains in India and is known for its snacks and sweets.

The initial investment to start a Bikanervala franchise is INR 12 lakhs and it also requires an outlet space of 1200-2000 square ft. You can expect a 10% to 15% profit margin from this franchise.

  • Domino’s Pizza- It is the largest and one of the most loved pizza delivery chains in India.

You will need an initial investment varying from INR 65 lakhs to INR 2 crores and an outlet space of 1500 square ft. You can expect to get a 1-3 lakhs profit margin on this franchise.

  • Lenskart- It is an eyewear retail chain from India. It also has an online store which sells varieties of eyeglasses and contact lenses.

The initial investment in this franchise is about INR 30 lakhs and an outlet space of about 300 square ft. This brand offers a profit market of around 25% to 30%.

  • Dr Lal Pathlabs- It is a chain of healthcare and diagnostics centres in India. It offers a variety of services including blood tests, urine tests, radiology testing and lab management.

The initial investment required for this franchise is about INR 3 lakhs and an office space of about 200-250 square ft. You can earn a profit return of more than INR 1 lakh monthly.

  • Fabindia- This brand consists of ethnic Indian wear handcrafted by people from rural India.

The initial investment for this franchise is about INR 30 lakhs and an outlet area of 3000 square ft.

 

Frequently Asked Questions

1. What is the cost of starting a franchise business?

Ans. Most franchises require an initial investment of INR 1 lakh to 10 lakhs. Some small-scale businesses can require an investment of INR 2 lakhs.

2. Do the franchisors provide training before starting a franchise?

Ans. Yes, the franchisors do provide the required training to the staff and management of the franchise unit. It can be done onsite or even online.

3. What is the cheapest franchise business in India?

Ans. Giani’s is one of the cheapest franchise brands in India with an initial investment of ₹10-15 lakhs and great profit returns.

 

Conclusion

Investing in a franchise business is better than taking a risk of starting a new business. Customers trust the brand name and are ready to buy products or take services from your organisation.

Before investing in a franchise business, the franchisee should do thorough market research to know which industry would be profitable to spend their capital on.

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