A low cost treat

Operating a low cost food and beverage franchise is the most economical and profitable way to earn maximum profits. In an interview, Puja Mahajan, Director, Unitas Foods shares a few key issues of low cost franchising businesses in F & B industry.

Abha Garyali (AG): What makes a person to go in for a low cost franchise business? What are the drawbacks of this business?

Puja Mahajan (PM): Majority believes that low investment means low risk associated with it. Also, people perceive a low investment business as a low commitment business which will not require them to put in much time and efforts. This is why low cost franchise businesses disappear from the market every few years. For instance, brands like Juice Zone, Hot & Juicy, and many more have disappeared from the market. Another drawback is the perception of people regarding return on investment. An ROI of 30-40 per cent in any business is considered excellent. As 30-40 per cent ROI on Rs One lakh investment translates into Rs.3, 000 - 4,000 per month, it often starts frustrating the franchisees after a period of time. This later affects the business as they start neglecting the business. This neglect gets magnified manifold in the case of a food business where quality concerns are of paramount importance.

AG:  How much rectification is considered necessary to make food and beverage industry more organised?

PM: To make the food and beverage industry more organised, a franchisor has to consider a number of factors. S/he has to ensure dedicated food parks for the small and large manufacturers, better amenities like treated water and electricity, implementation of food safety standards, more forums to bring educated and uneducated retailers together.

AG:  Why are large companies venturing into low cost businesses and how much challenges do small companies face with the presence of large brands in the market?

PM: Recession and a desire to expand are leading the franchisors to penetrate deeply into the Indian market. As industry is getting saturated with more and more products, marketing challenges are growing immensely, which has made the companies to look at micro partnerships to expand into unexplored markets.

AG: What kind of training and support do you offer to the franchisees?

PM: We train our franchisees and their employees. We have a unique inventory and sale system which keeps a foolproof check on stocks and cash thereby ensuring complete control on the franchisee whether s/he is physically present at his/her store or not.

AG: Do you also offer unit franchise or multi-unit franchise of your brand? If yes, then how much franchise fee is charged? On what criterion, do you offer unit or multi-unit franchise to the established franchisee?

PM: Yes, we offer both unit as well as multi-unit franchises. We encourage multi-unit franchises because chances of success start multiplying with multi-units while investment does not go up in the same ratio. We usually look for a franchisee with a decent experience in F & B industry, capability of running a franchise business and an attitude to be a franchisee.

We charge a franchise fee of Rs 10,000 per year and we charge Rs 90,000 as balance investment for a period of three +three years. So total investment is Rs 1,00,000 with additional taxes. We also lessen our investment rates depending on the location for opening the franchise business.

AG: What steps have you taken to manage the supply chain of your business?

PM: To manage the supply chains, we have our own vans that transport food in insulated boxes within NCR and we do not charge the franchisees for the transportation facility. And when we will expand beyond NCR, we will tie up with a cold chain expert like Snowman’s.

AG: How much competition are you facing from the large players in the market? What would be your strategy to promote your business?

PM: We are not facing any competition as no other player is producing dimsums on the scale as we do. We are catering the market with good quality products and we also sell frozen dimsums through supermarkets and hyper stores. We have also introduced a gourmet line exclusively for hotels and restaurants and have expanded our franchise base in and outside NCR.

AG: According to you, what is the success rate and scope of franchising in low cost businesses in India?

PM: With low cost franchising food business, the success rate is not very high due to lack of commitment, but the scope is very high as food is being sold everywhere in India.