Brewing growth through franchising

India is known to be a country of tea lovers however now more and more people have started consuming coffee, especially the people working in corporate sector and younger population. In western countries, cafeterias and coffee lounges are part of people’s everyday lives. In recent years, the coffee culture in India has grown substantially driving the consumer demand for café outlets. Currently, the Indian cafe market is worth USD 230 million and as per industry experts, by 2017, the market will be around USD 410. Many Indian and international cafe brands have established their presence in Indian market. Franchising has been a popular mode of business expansion among F&B players and the model is also being increasingly being preferred by café brands.

Major market players

Many local and foreign brands that have become already popular in the country have selected franchise route for business expansion. They include Gloria Coffee Jeans and Costa Coffee, both international along with home grown brands like Café Day Express (CDX), Brewberry’s, Café Desire, Café Buddy’s, Cuppa etc.  It is important to note that Costa Coffee does not sub franchise. Australian brand Di Bella Coffee, a new entrant into Indian market has also begun franchising now. 

Factors driving café sector

Some key factors that have contributed to the growth of Indian café market are:-

Enhanced purchasing power: The purchasing power of Indians has grown immensely in the past few years. With most of the families drawing double incomes, the consumers are quite comfortable   in spending money while visiting a branded café store. 

Young consumers: College going population and younger people also like to hang out with their friends in café as they offer vibrant atmosphere.   

Social meeting point: Cafés are today considered an apt place for social engagements like for meet friends and even relatives. Several young women like to catch up with their friends in the relaxed and casual atmosphere of cafes. 

Business meetings: Other than social meetings, cafés are also becoming popular for business meetings. Now- a-days several brands offer Wi-Fi and internet facility at their cafes and thus business people and corporate employees prefer to meet their business associates there.   

Given these factors, both franchisors and franchisee can expect higher footfalls at their stores and operate profitably.  

Franchising brews growth

Franchise business model is driving the growth of café brands and in process brewing immense   business opportunities for interested investors wanting to enter café business by associating with leading brand names. Rahul Leekha, Co-partner of Di Bella Coffee shares his views on how franchising is helping their brand to expand its presence, “ Franchising is the only way to expand our retail presence with the brand recognition, economics of sales and most importantly localised management structure”. Australian coffee chain Di Bella currently has seven outlets in Mumbai and plans to expand into Bangalore, Pune, Hyderabad and Delhi via franchising. The investment of around Rs 50-60 lakh and area of 800-1200 sq ft is needed to partner. CDX has more than 900 outlets on in which 226 is franchised outlet. It has recently launched its first CDX kiosk in Kolkata and plans to open café express format in tier I and tier II cities. The prospective would require an area of 50-100 sq.ft in a location to tap more opportunities. The other brand Brewberry already operates 45 stores including two franchise outlets across 15 states.  It wants to expand its presence pan India and is looking for prospective franchisees who can invest Rs 15 lakh and an area of 250 sq ft.

Competition & Challenges

As more and more brands are saturating the Indian cafe market, the competition between the brands is also increasing day by day. Cafés can be found at almost all the locations like shopping malls, high streets, schools and hospitals etc. Café Day Express targets varied locations for opening its outlets. K Ramakrishna, President of Marketing CCD, says, “People can easily find the super class of coffee at affordable price through the kiosk format stated at malls, high street, railway stations and airports.

Apart from competition, there are certain challenges that every new or existing café brand faces.   Indians still prefer tea over coffee as it is relatively cheaper beverage than coffee. Most brands offer between Rs 50- 90 and locals are quite price conscious. Location is also another challenge for the cafe brands because many brands have already occupied the good places in metro cities. The brands that are entering now have to look for other places for expansion.

Finally

It is expected that in coming years, the café industry will touch even greater heights. As consumer spending on food and coffee increases, the sales in café and restaurants will also increase. It is the most promising industry as compare to other industries.