Malls taking the franchise route to gain higher profits

Mall developers across the country have found a new mantra to attract or retain tenants by taking up brand franchises themselves. Consider this: Tablez India has taken master franchising for brands like Toys R Us and Babies R Us. “We have formed a different company to look into this segment of the business since it is a different line altogether. It is a good practice because sometimes the brands are not very keen to come to Tier II and III cities. If the mall is confident about the property and can run the business well, then it certainly is a good concept and provides a profitable channel,” says Shibu Philips, Business Head, Lulu Mall.

As per sources, the square feet yield out of such brands is way higher than the rentals. “Franchisees have created long-term opportunities for real estate developers. In the initial phase, the shopping centers are very expensive as it costs about Rs 15,000 - 20,000 per sq. feet but if one is buying the property and putting it up on a lease then it’s profitable as the revenue could be around 10-12%,” says Munish Baldev, Founder of retail consultancy, J S Martin.

Among others, the food and beverage category is gaining huge momentum through using the franchising model. “From a mall perspective, we are also looking at food brands like Cream Centre and kids wear brand like Mothercare,” Philips adds. 

Win-Win Situation
The franchising model is beneficial for both the developer and the brand. Retailers’ occupancy cost comes down and the revenue share component goes up and developers have control over the managing again, depending upon the business arrangements.

Yogeshwar Sharma, Executive Director & CEO, Select CITYWALK, says, “We understand the needs of the catchment and are already taking on the franchise model. As a shopping centre, to offer a variety of brands to our shoppers is a win-win situation for both the retailer partners as well as for us. As a business partners route, it also helps us to work closely with the brands.”

Echoing similar views Pushpa Bector, EVP and Head, DLF Shopping Malls, says, “It’s beneficial for both the developer and the brand with the latter getting the advantage of expansion with minimal risk involved while the developer has the liberty to select a brand, define the brand mix and position the mall right.”

“The concept of franchising is the only way to go forward because franchisees are doubling up the revenues of developers and providing them new opportunities to grow across the nation. India has 526 districts and a single developer can’t look after each and everything all alone. Therefore, these franchisees are helping developers to bridge the gap in between,” concludes Baldev.