From apparel to footwear or jewellery to food anything that one can think of in retail can be franchised. Considering the growing popularity and increasing desire among aspirants to take up franchise of a retail brand retailers across the nation are opting for franchise route for expansion.
Franchising no doubt is a lucrative business model and in retail it can prove to be even more successful as compared to service industry. As per a report submitted by Business Monitor International (BMI) for the second-quarter of 2011, the Indian retail industry in total account for $ 395.96 billion and is all set to grow to $785.12 billion in the next four. Ever changing consumer habits and growing number of organised players in the industry is influencing the growth of retail franchising in India. Changing consumer habits, rising urbanization, better lifestyle and increased buying behaviour are adding to the over increase of retail industry. India has emerged to be the third most significant country from retail investment point of view internationally.
Indian Government’s recent announcement of 100 per cent opening of Foreign Direct Investment (FDI) in retail is expected to bring lot of up gradation for retail industry. In 1997, FDI in cash-and-carry (wholesale) with 100 per cent ownership was allowed under the government approval route. It was brought under the automatic route in 2006 with FDI being allowed 100 per cent in single brand and 51 per cent in multi-brand retail. With the latest development Indian Government has now allowed 100 percent FDI. This passing of FDI policy would surely affect and improve the standard of organised retail and would definitely boost retail franchising in India. The well established Indian retailers like ITC Limited, Future Group, Reliance, Arvind Limited, Dabur and many more are rapidly taking up the franchise route to make significant investments in the retail industry.
As per the prevailing conditions about 80 per cent of the Indian market is unorganised and only 20 per cent share of the total retail market belongs to the organised players. By 2020, modern retail will contribute 30 per cent, compared to that of 57 per cent of traditional retail, the balance being filled by branded shops, e-commerce etc. As the industry is growing at a very fast pace year after year, the reduction in percentage of traditional channel in no way reduces the value and volume of business for traditional retail.
Even with franchising offering so many advantages some big retail brands have still kept themselves aloof of franchising. These retailers believe that developing a brand takes hard core efforts and franchising may lead to the dilution of the brand. Still as more and more people have the ambition of getting into self employed businesses, the franchise opportunity will remain high. With their rising acceptance and preference for franchising, there is a huge potential for both the franchisors and the franchisees to grow with the rapidly growing retail industry.
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