Delving deep into the different aspects of franchising at Opportunity India

Franchising begins where a brand aspires to grow. While it’s a conscious decision taken by a franchisor, it’s all about the relationship between the franchisor and the franchisee that plays a deciding role in the fate of the brand. Day 2 of Franchise India 2016 at Pragati Maidan began with a power packed session on the different aspects of franchising with an elite panel of speakers including O.P. Manchanda, CEO, Dr Lal Path Labs, Troy Franklin, COO, World Franchise Associates – South East Asia and eminent lawyer N. Mathivanan. Gaurav Marya, President, Franchise India, opened the session sharing insights into what franchising does to a brand and how it really works.

Trends in Franchising

Franchise India Editor-in-Chief Ritu Marya began the session with the newer trends in franchising. Setting the tone, Manchanda spoke about Dr Lal Path Labs entering into an IPO. “It’s important that you are on a treadmill where the company grows continuously whether it is by funding or by IPOs. At the end of the day, it’s all about making money,” Manchanda said. “If both partners are happy, the journey will be great,” he added. He also said that IPO was a new life that was injected into Dr Lal Path Labs.

Troy Franklin spoke on how franchising was now going to newer areas. “Franchising itself is a global trend,” he said. He gave insights into the concept of franchising in the US markets. He told the audience how 32 per cent of American franchisors have their businesses outside the US. He also spoke on how brands were now turning attention to newer areas and getting them into franchising, highlighting that one of the fastest growing sector in franchising is beauty, health and wellness. He added that fast casual products and services were also doing wonders with franchising.

Another point of focus during the discussion was about how the ecosystem of franchising was changing through technology. “Why our brand has become so popular is because of technology. It’s all thanks to technology that today I can track my whole business sitting at one place,” said Manchanda.

Funding and Franchising

Why would a brand go for raising funds when a franchisee will invest their own money? And would investors be skeptical about funding a brand that is being taken care of by franchisees? “Absolutely,” said Manchanda, also adding that it is essential to tell investors that having too many stores/branches of your own has many operational barriers and hence, franchising is essential. However, he also said that funding must be a conscious decision. “If your business model doesn’t require funding, don’t go for it. Raising funds is not something fashionable,” he said.

Speaking on the legal aspects of raising VC funds, Mathivanan said, “While VC funding, there has to be an agreement on whether you want to share the brand with the investor or not. The agreement depends on the ultimate aim of the franchisor,” he said.

The Franchisor-Franchisee relationship

Much has been said about the relationship between a franchisor and franchisees. If a brand has to be on top, it’s essential for this relationship to be co-ordial. How does one ensure that?

“There has to be transparency. For the franchisor, the single most icon is Intellectual Property. And, what is expected out of a franchisee is due diligence,” said Mathivanan.

“You have to understand that franchising is not a cash flow strategy, but a brand equity building strategy,” added Franklin.

On a question as to what happens in a situation where the brand earns revenues but the franchisee does not, Gaurav Marya said, “Though that’s not the case really, but as a franchisor, you must be conscious about making financial claims.” “If franchisees make money, the business makes money,” he added.

Concluding it, Manchanda added that franchising was eventually all about expanding the brand. “Franchising builds a momentum for your brand. As the base becomes bigger, growth becomes higher. And, this growth makes you competitive on pricing, and as a result, your turnover goes up.”