5 Requirements for starting a franchise business in India

 

Many business owners in India find it easier to start a franchise rather than their own company.  Franchise owners offer operational and marketing support and brand equity and have a track record of success.  But to select the right franchise in India, the franchisee must do adequate study and diligence.  You need not be worried.  FranchiseBazar is here to help and walk you through the fundamental requirements you must set up before starting a franchise business in India.

 

But first, let us look at “What is a Franchise Business in India?” One of the main ways in which foreign companies and brands have grown stronger in the Indian market is by adopting the franchise model to expand their businesses.  The franchiser (also the franchise brand) is involved in the processes and offers to the franchisee (also known as the owner of the franchise outlet), with conceptual, structural, legal as well as training support in exchange for a support fee and royalty payments.

 

Furthermore, this is a win-win for both the franchiser and the franchisee, where both earn from owning and operating the franchise.  The franchiser gets to expand his presence in untapped markets, which in turn boosts the market share as well as revenues, once the franchisee has access to the brand’s devoted clientele, legal counsel, creative support as well as training support. Thus, franchising is the most valuable and practical type of business opportunity in India.

 

Types of Franchise Business in India

 

Product Franchise

 

Also known as distribution franchises in India, these are product-driven franchises, where the franchisee distributes the parent company’s products and services by typically using its branded trademark, but not the entire business management system.

 

Investment Franchise

 

These are large-scale franchises that require a significant amount of capital investment, for example, hotel chains, or even large restaurant chains.  By acquiring franchises of these, the franchisee typically invests money and hires either its management team or the franchiser to run the business and generate a good return on investment.

 

Job-Franchise

 

This is a low-cost franchise that can be operated independently or with a few staff.  All the franchisee needs to do is pay the required franchise fee along with a few initial costs, like equipment, basic materials, and vehicle charges if required.

 

Conversion Franchise

 

This is a process by which an existing business becomes a franchise or if an existing business that has multiple locations, decides to switch to a franchise structure.

 

Business Format Franchise

 

This is a franchise that operates the business and markets the products or services by using the franchiser’s trademark as well as the entire system.  The franchiser will be providing the comprehensive agreement and procedures needed to cover every aspect of the business model adopted.  Nevertheless, this also includes both initial and ongoing training and assistance.  Furthermore, this is one of the best and most common types of franchise system in India.

 

Now that we have seen the different types of franchise businesses in India, let us understand what the 5 Requirements are for starting a franchise business in India.

 

Market Research

 

When you are planning to open a franchise business in India, the first step you must learn is to know more about how franchising works in general, like what you need to expect and also how to choose from all the available opportunities.  Once you have identified your niche from a few franchises in India, you would need to do research and select the best franchise in India which meets your requirements.

 

Understanding Industry Dynamics

 

While you understand how franchising works, it is also important before you do anything else, you need to gain first-hand understanding, and preferably some experience of the industry in which you intend to start a franchise business in India.  Understanding the framework, laws, rules, and regulations involved, the best industry practices, competitors, and the market cycle is quite crucial.  By understanding these, you will be able to apply that knowledge to innovate or maneuver over other players in the industry.

 

Capital Investment

 

Having capital money to invest in a franchise is significant because this is a cash-intensive business.  This is because you will need to spend money on setting the brand outlet, furnishing the interiors to the brand standard, hiring the required staff, and covering the operational costs.  Nevertheless, you will also be sharing a portion of the profit with the franchiser which is known as a royalty fee.  Thus, financial backing is quite important to keep you afloat until you start turning a profit.

 

Location

 

Depending on the franchise business you choose to invest in, you can consider leasing or buying a space, and the franchiser can advise some of the best locations.  Deciding a location right for the business in high-traffic areas or near malls depending on the industry type is advisable as that will bring in good customer walk-ins.

 

Preparing the Franchise Agreement

 

Once you have met all the requirements, now it is time to finalize the very influential franchise agreement.  A franchise agreement is a document between the franchiser and the franchisee, charting out major points of the arrangement, between both parties.

 

Conclusion

 

The bottom line is acquiring a franchise in India is a provision of a tried-and-tested model you are getting into which minimizes the risk involved in starting your own business in India from scratch.  So it is important to carefully understand all the terms related to the franchise before venturing into this business world.  We have consultants who can help and support you in choosing the right franchise business in India with various investment ranges.