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How to Start a Franchise Business in India?

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Oct 08, 2021
How to Start a Franchise Business in India?

Introduction

Starting a new business demands a lot of planning. The first step is to identify the right business idea that will add value to the buyers. The second step includes planning for branding, marketing, hiring, and sales. And finally comes the product strategy and working capital needs.

Does it sound like a lot of chaos and high risk? This is where a franchise business comes into the picture. India remains one of the hottest destinations for a franchise business, with over 2 lakh active franchise outlets. So, let us talk about the franchise business model today. Keep reading as we outline every essential aspect of this business format for you.

What is Franchise Business?

A franchise is a type of business where the owner licenses its business rights and operations to the franchisee. The franchisee gets access to trademarks, processes, and the franchisor’s business knowledge.

Apart from this, they also get the right to sell products or services on behalf of the franchisor. Does the business owner get anything in return? Yes, they get annual licensing fees, royalty, and an initial start-up fee from the franchisee.

Please note that the current royalty rates lie between 4.6% and 12.50%. The relationship between a business owner and a franchisee is contractual. Pizza Hut, Dominos, Starbucks, Subway, and McDonald’s are a few examples of the franchise business.

Benefits of Undertaking a Franchise Business in India

Let us look at the range of benefits this business model offers to a franchisee.

  • Low Risk – One of the factors that demotivate people from starting their business is the risk involved. Starting an independent business for the first time can invite a high risk for the owner. Moreover, there is no guarantee that it will work. On the other hand, a franchise business is a tried, tested, and proven business format. Also, this low investment franchise business in India comes with a ready-made customer base. Therefore, the overall risk is low as it comes with the name of a well-established brand.
  • Training – When you step into a franchise business in India, you get an opportunity to understand the business world. That’s not all. You will also get to learn the latest technologies and business practices prevalent in this business format. Getting hands-on training on already tested business methodologies will prove beneficial to your business. You might not get this opportunity in a private business venture.
  • Marketing Strategies – Effective marketing strategies play a vital role in boosting brand awareness, brand loyalty, and conversions. Once you step into a franchise business, you get direct access to the already established marketing strategies of the brand. It means you get ample time to concentrate on promoting your products and services on other platforms. All this will give an excellent podium and push to our business.
  • Excellent Support – New business owners seek guidance and support when they enter the market. They need someone to help them understand the market dynamics and consumer behaviour. Getting a hold of all these concepts is a time-consuming activity. Unfortunately, it can cost dearly in the long run. Franchise business owners need not worry about these things. The franchisor is there to assist and guide them through the business setup process. They can also help you understand more about loans for new businesses.
  • Better Networking – We know how crucial networking is for a business and its growth. A franchise business allows you to network with the right people at the right time. The franchisor will share a list of people who can help grow your brand loyalty and boost sales. What more can you ask for? On the contrary, private business owners need to start from zero when it comes to networking. Establishing the right networking might take several years here.

Steps to Start a Franchise Business in India

Are you planning to step into a low investment franchise business in India? Here is a step-by-step guide for you.

  • Identify your Niche – First of all, identify the industry that interests you the most. It can be anything such as cosmetics, apparel, electronics, or automobiles. Make sure you study the market conditions and demand graphs before finalising your business niche.
  • Find the Right Franchisor – Once you identify your niche, it is time to find the best franchise in India. Start the process by shortlisting the top franchisors who can cater to your business needs. Meet the franchisors to understand:
    • How does their business work?
    • What kind of challenges can you expect while running the business?
    • What are the available business loan online options?
  • Complete the Formalities – It is crucial to register your business with the Ministry of Corporate Affairs once you enter into a contract with the franchisor. Franchisees located outside India need to connect with international brokers for the registration formalities.
  • Ownership – It is time to take over the ownership of the business legally once the registration formalities are complete. Make sure you seek legal help during this process to avoid any confusion and inconveniences later. Also, don’t forget to read the terms and conditions of the franchise contract properly.
  • Licensing – It is an essential step in setting up a franchise in India. The franchisee will need several relevant licenses to open a franchise outlet in the public domain. You can get in touch with a market expert to know more about this.
  • Hiring Manpower – Manpower is crucial to run a franchise business. Thus, you need to identify how many employees you will need to manage different business operations. Make sure you decide the duties of your employees before you go ahead with the hiring.
  • Understand Taxes – The taxation system for franchise businesses in India is different from other business formats. Make sure you take some time out to identify the different layers of taxes and prepare accordingly. Moreover, if you plan to apply for financial assistance, ensure to check the business loan eligibility criteria first. You can also check the monthly EMIs payable with the help of a business loan EMI calculator.
  • Start Operations – Once you are done with all the formalities and legal procedures, you are good to kickstart your franchise business operations. Make sure your business goals are aligned with those of the franchisor. You will get all the necessary details about the business from the franchisor. All you need to do is refine the marketing strategies and aim to drive your business to the pinnacle of success.

5 Quick Tips to Run The Best Franchise Business in India

Here are some quick tips that can help you mark your presence as the top franchise in India.

  1. Be Passionate – Passion is a strong emotion that can turn the tables at any time and get you to the top of the game. Therefore, the best way to lead the race is by staying passionate about your business, products, and service. This approach will prove invigorating, give your ideas a boost, and let you offer better products and services to your customers.
  2. Make Sure Your City Needs this Franchise – Please understand that running a franchise in India is not a piece of cake. It is crucial to research diligently before stepping into it. So make sure you pick a niche that will add value to the lives of your customers. It is also crucial to get support from your target demographic.
  3. Enough Capital – You see, you might need a good amount of funds in the initial six months of business. So make sure you have reliable sources to ensure a smooth capital flow into the business. Experts recommend consulting a market expert and nailing down a budget that will help you survive the next six to eight months. You can also go for a business loan for Franchise or mudra loan to meet your capital requirements.
  4. Get the Best Employees on Board – Make sure you hire the best in the industry for your business. Trustworthy and experienced managers and sales professionals will help take your customer service a notch higher.
  5. Focus on Customer Service – You cannot cut corners when it comes to a franchise business. Even the slightest things such as consumer reviews and testimonials can make or break your reputation in the market. So make sure you focus on keeping your consumers happy and become the best franchise business in India.

Takeaway

You would be surprised to know that the Indian franchise business industry is growing at a whopping rate of 30% to 35% per annum. This industry is also estimated to touch the USD 100 billion mark by 2024. And this has made India the second largest franchise market around the globe after the USA.

These stats prove that going for a franchise business can prove to be one of the wisest decisions of your life. So what are you waiting for? Start preparing the blueprint of your business plan, arrange for a working capital loan, and explore all the latest franchise opportunities in India.

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