FRANCHISING IN INDIA: A Critical Perspective

There are several reasons for this:

-          Anybody can offer a franchise: Be it a large corporation that wishes to tap the entrepreneurial pool or a neighborhood roadside hawker, they all can Franchise without any disclosure or any rules or regulations to comply or follow

-          Loosely Structured Franchise Agreements: Franchise Agreements are structured by any lawyer, when there are disputes, there is no legal remedy as neither the franchisor nor the franchisees interests are protected. Several times the Intellectual Property is not registered. I am not too sure if legislation might be the solution, but a basic disclosure mandatory guidelines would be useful for franchisees 

-          No Real Training: No real training is provided; training can vary from one day to three days with no structured agenda. Although all franchisors are prompt in touting, We-provide-Training-and-Support. There is absolutely NO branding, advertising and operational support, whatsoever.

-          Unrealistic Royalty Rates: Royalty Rates for several brands are unrealistic. Education Brands charge from 10 to 25% of gross sales (Excluding Taxes), Regional even local Food Brands start of with 8% to 15%. When does a franchisee make money at all.

-          There are several magazines in India out there, which highlight the glossy side of franchising. Simply for one reason, their advertisement revenues are directly in proportional to how well they promote franchisors, irrespective of how credible or profitable they are.  What can you expect when most of their clientele are franchisors. I know of several franchisors that go for paid advertorials to be featured on the front page.

-          Inappropriate Franchising Strategy: Several franchisors that I know of, operate company owned locations in profitable regions and leave the lessor profitable ones to franchisees, sending of wrong signals before taking up a franchise.