Franchising is not a new concept within India, but it is only in the last few years that the franchising of foreign services and goods has really started to increase here.
The leading global franchise companies have of course been established for some time – McDonald's entered India in 1995, while Subway plans to have 5,000 outlets in the country by 2022. However, the smaller ones such as Snap Fitness and Papa John's are now entering and expanding too, and the Indian franchise industry is expected to quadruple between 2012 and 2017*.
So what is it that has recently made this country so attractive to multinational corporations?
The Retail Boom
Over the last two decades the Indian economy has flourished, shifting from being agricultural to service based. This has resulted in an increase in the average household income, and consequently a rise in consumerism and the willingness to spend.
There is a growing enthusiasm for true international brands in this country, particularly amongst the younger members of the population. People wish to enjoy the very same services and products that are on offer in the global markets, but at home in India. Furthermore, as people travel they start to become more experimental, looking for a wider variety of offers. One example is the food industry: customers are now willing to try everything from street food to fine dining in five star hotels that originated in the USA.
Accommodating the Culture
Entering a country via a franchise or distribution agreement allows a company to benefit from a franchisee's knowledge of the local market. The franchisee can advise how a non-national service should be translated so that it suits the Indian culture, for example altering menus so that beef and pork are not served.
With over one billion people, India is famously the second most populated country in the world. Its sheer number of consumers makes it a large market, and it is a demographically diverse place with a range of buyers and workers available. The population is naturally opportunity-driven and there are an increasing number of young, educated entrepreneurs becoming aware of the low risk business model that is the franchise unit.
No Formal Franchise Law
In contrast to other, stricter countries like Australia or Brazil, India has no specific franchise law. Franchise offerings do not need to be registered, and there is no requirement for 'disclosure documents' to provide details of the franchise such as its history and financial status. But don't worry, the franchisee still has protection – there are a range of common laws and regulations that can be made applicable to franchising. Check out our article Franchising Law in India for more information.
There are organisations – such as the Franchise Association of India and the International Franchise Association – doing their very best to promote franchising in India because it has the potential to create millions of jobs and contribute generously to the country's GDP. These groups are releasing positive reports, and organising annual exhibitions and conferences, thus helping the industry to gain attention.
*Franchising Association of India in conjunction with KPMG.
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