Why Franchising Model has Become a Huge Success

Franchising has been around for decades. It’s a method of business that takes something that works and repeats it over and over again. By building businesses that are successful, and then recreating the best parts, business owners have been able to find growth over and over again. This is true for all industries and all markets.

It's what makes franchising so great, and becoming a franchisee a successful model that more and more entrepreneurs have set out to conquer. It’s also why more and more professionals are looking to become business owners by purchasing a franchise vs. starting from scratch. Whether you’re already a franchisee or are in your beginning stages of research, take a look at these factors and keep them in mind:

Factors Affecting the Business-

Franchised outlets in India have built such a massive consumer base mainly by focusing on Indianisation or customization of products or services, thus connecting with the customer segment and catering to their specific needs. The demographic shift that India is experiencing with its middle class has led to an increase in its disposable income. Due to this shift, there has been a consistent growth in the number of consumers for branded products and franchised names. However, there are multiple other factors influencing the franchising model to become such a huge success such as:

1. Lower Rate of Failure-

Franchises have a lower rate of failure as compared to start-ups. According to a study by IBM and Oxford in 2016, 90% of the Indian start-ups fail within the first five years, against only 15% of franchises. Since the business concept has already been worked out with the existing loopholes been fixed, the model today is efficient, low risk, and low cost over any start-up. Thus, making it more appealing to the investor.

2. Increasing Income and Purchasing Power-

Indian disposable income was approximately INR 131 trillion in 2018 and is expected to double by 2025. The rising income levels in rural and urban India have resulted in increased spending on discretionary items as against necessities. This rise in income and spending capacity across India coupled with increased awareness, has created a substantial demand for domestic and international brands. A large number of companies are expanding beyond tier-I cities and increasing their presence by adopting the franchise model.

3. Privatization in Different Sectors-

With the rapid privatization in India across various sectors such as education, healthcare, telecommunication, and others, there is a constant rise in the influx of international brands in the country. With this increase, the scope for franchising has also gone up. Today, companies across sectors such as EuroKids, Ferns N Petals, Vakrangee, Connect India, and DTDC are key examples of successful privatization and franchising in India.

4. First-time Entrepreneurs-

The newfound entrepreneurial spirit of young Indians has led many individuals to enter the franchise business. Presently, around 35% of all franchise owners have been first-timers in business. These entrepreneurs choose franchising due to the range of benefits it offers such as reduced risk, association with an established brand, training, and support, etc.