Before taking the franchising route to grow your business, be sure that you have a tested product or a service, a fairly popular brand, adequate systems and processes and money to spend on marketing

The year was 1994 and Vikaas Gutgutia had just opened a flower shop in New Delhi’s up-market South Extension. The store did brisk business, good enough to convince Gutgutia to expand with a couple of more stores under the brand name Ferns N Petals (FNP). However, the thought of “franchising” his business did not pass the promoter’s mind until one day in 1998, a lady walked into an FNP store looking for trained manpower to open her own flower shop. Gutgutia offered her enough support to open an outlet as an FNP store, in return of a fee and a share in revenue. Thus, the company’s first franchisee got up and running.

“The franchising model soon picked up. Today, we have 93 outlets spread over 40 cities. Of these, 13 are company-owned, while the remaining are franchisees,” says Pawan Gadia, Vice-President, Ferns N Petals. The franchising route has done wonders for FNP, and Gadia claims that on an average, they are opening two-and-a-half outlets a month. “We are looking at 30-40 outlets in the next one year,” he claims.

FNP’s growth story is part of the $20 billion franchising industry that is a mix of both distribution franchise business and business format franchising, according to Gaurav Marya, President, Franchise India Holdings.

The industry is steadily growing at 30 percent annually. Taking the franchising route is one of the quickest ways to grow one’s business, but not until enough groundwork has been done in the form of product development, brand building, marketing strategies and putting in place adequate systems and processes.

“It is our clear learning that if you want to grow fast, franchising is the way to go. Running of business will be much better, span of control will be much easier and it will be much profitable,” says Nishant Saxena, CEO, Elements Akademia, that provides training and skill development. Saxena initially thought that while franchising helped a company grow, it almost always resulted in loss in quality. “Very soon we realized, however, that unless you have local entrepreneurial people, business development just does not happen as much as you want it to,” says Saxena, who tested the franchisee model and discovered that “both the revenue growth and the profit margins were much higher through the franchisee model.” Saxena wants to see Elements Akademia grow from nine cities at present, to 100 cities, and franchising is on top of his mind.

Franchisee Vs Distribution
There is a thin line between a franchisee and a distribution model as both are distribution channels that expand the reach of your product or service. In the case of distribution, you authorize someone else to sell your product or service without being bothered as to how he sells it. “In the distribution franchise model, you buy the product or a service from a company and put the board and sell it under their name. It does not come with any business operation guidelines outlining how you have to conduct the business,” says Marya. In the case of business format franchising, you lay down a process as to how the business will be run. It could involve everything from how the employees will dress, to the color of the ceiling and the design of the furniture. “Earlier, there was no discipline in the market. But now it is graduating to a more advanced form of franchising. The identity of the store is very standardized,” adds Marya. The franchising model eliminates the extra layer in the supply chain, thus bringing in extra profits and cost savings.

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