Retail Layoffs: A Catalyst for the Rise of Micro-Entrepreneurs and Franchising

In the wake of rising unemployment, the dynamics of the job market are shifting significantly. Gaurav Marya, Chairman of Franchise India Holdings Limited, sheds light on how retail layoffs are contributing to a surge in micro-entrepreneurship and franchising. The current economic landscape, marked by a 9.2% unemployment rate as of June 2024 according to the Centre for Monitoring Indian Economy (CMIE), has driven many to explore franchise-led business opportunities. Marya emphasizes that franchising offers a safer and more investment-friendly path compared to starting a business from scratch, catering to a wide range of investment levels from as low as ₹20 lakhs to as high as ₹20 crores. This diverse spectrum includes everything from micro-entrepreneurship in coaching, skilling, counseling, and advisory-based models to master franchise opportunities, allowing ambitious investors to build multi-million-dollar businesses.

Arunabh Sinha, Founder, UCLEAN, echoes the sentiments expressed by Marya, noting that layoffs have historically led to a rise in micro-entrepreneurship. With job security diminishing, many are turning to entrepreneurship, finding the prospect of being their own boss more appealing than the uncertainties of traditional employment. Retail employees, in particular, are well-positioned to make this shift due to their hands-on experience with various aspects of business operations, from customer interactions to managing daily challenges.

Reliance Industries, which operates in five principal segments; Oil to Chemicals (O2C), Oil and Gas, Retail, Digital Services, and Financial Services cut its workforce by 42,000 employees in FY24, representing about 11% of its total workforce

Expressing his views on the recent retail layoffs leading to a rise in entrepreneurship and a boost in the franchise industry, Jasvinder Arora, AVP-Retail at Siyaram Silk Mills Ltd. says, "A lot of young entrepreneurs are emerging and being drawn to reputable brands in the franchise industry. Fashion and QSR (Quick Service Restaurant) franchising are among the top searches for startups looking to invest in franchises."

The Shift from Retail Employment to Franchise Ownership

A growing trend is emerging where former retail employees are transitioning into franchise ownership or startups. These individuals possess valuable experience from their time working within franchise systems. They understand what it takes to operate a business, having been exposed to best practices and operational strategies during their employment. Franchisors are increasingly recruiting from within their ranks, targeting employees who have demonstrated operational aptitude as unit managers or higher. This internal recruitment strategy helps in maintaining system uniformity, ensuring local responsiveness, and achieving system-wide adaptation

Franchising presents a viable path for those affected by retail layoffs. Gaurav Marya mentions,  “Successful corporate employees bring essential business skills to the table, such as sales, marketing, finance, leadership, and people management. These competencies are crucial for running a franchise, making corporate employees particularly well-suited for this transition. Individuals from industries like food service, hospitality, or education often excel in franchise roles, given their experience with long hours and operational challenges.”

Sinha also highlights the increasing trend of retail employees gravitating toward franchise ownership. Their familiarity with franchising models and the value they add makes franchising an attractive option for those looking to venture into entrepreneurship. Retail franchising options such as salons, gyms, laundries, and restaurants are natural fits for these individuals, with newer sectors like electric vehicles (EV) also gaining traction.

The Role of Consulting Services and Financial Solutions

Consulting services play a critical role in guiding laid-off retail workers as they transition into entrepreneurship. Sinha stresses the importance of consultants in helping potential franchisees navigate the growing array of franchising options, identifying the right opportunities, and ensuring a good fit between the franchisee and the business model.

Moreover, financial solutions are vital in supporting this transition. With the loss of a steady income, many laid-off workers may be hesitant to invest their savings into a new venture. Sinha suggests that access to financial loans, whether for starting capital or working capital, can be a significant enabler, allowing these individuals to embark on their entrepreneurial journey with greater confidence.

Opportunities for the Franchise Industry

The franchise industry stands to benefit greatly from the current wave of retail layoffs. The industry should proactively engage with laid-off workers, offering financial assistance and creating business models that allow these experienced individuals to become operating partners. By absorbing this talent pool, the franchise industry can tap into a wealth of experience and skill, driving growth and innovation in the sector.