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Taking on franchise business
30
Sep '06
It will be wrong to assume that a successful franchise business model in developed countries can be replicated with ease in India.

There are major challenges posed by localized price sensitivities, operating and supply chain costs, selection of local partners and managing of networks.

There is no legislation for franchising in India, which makes local operations more open-ended.

However, Indian laws on taxation, labor and competition which clearly impact franchisee models, hence, a good understanding of laws affecting franchising will go a long way in smooth planning and efficient operations.

A critical success factor in the model is selecting the right business partner.

It is imperative that the partner shares the strategic vision; has sufficient management bandwidth to comply with systems; has the financial muscle to support aggressive expansion plans and has real depth of knowledge to add strategic value on issues ranging from retail expertise to real estate.

Franchisors need to research the Indian market, tailor their business model to foot the Indian business scenario and have adequate resources for training and management.

Indian franchisees need to understand the pull-factor of the brand they are bringing in and the commitment and level of support provided by the franchisor on marketing, training and supply chain fronts.

They also need to be aware of exit routes in case of unsuccessful ventures or in the eventuality of buy-outs by brand owners once FDI regulations ease.


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