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Franchising has proven to be the most successful expansion model in the history of business. It has played a significant role in developing large economies and expanding the operations of diverse businesses and companies across the world including the McDonald’s and Subway chain of restaurants. In developed economies franchised outlets account for almost 50 percent of entire retail sales.
Franchising is a win-win model for all constituents — franchisor, franchisee, end consumers, stakeholders, society, and the economy. The franchise system not only imparts the opportunity of risk minimisation through an approach of collective resource utilisation, but is also a tested and reliable model for brand proliferation in the retail market across diverse demographic terrain. It gives equitable ownership of the business to the franchisee as well, creating a higher sense of brand association vis-à-vis other models.
Further, with a ‘ready to roll’ product/service package offer from the franchisor, franchisee outlets can be started with minimum gestation periods, endowing the advantage of instant delivery to the franchisee, and end consumers. It is therefore, very important, for all franchise businesses to design and develop excellent grassroots administration, delivery processes and systems.
In my career span of 22 years after qualifying as a chartered accountant, I have spent the past eight-nine years developing and conceptualising various franchise models, and engineering the promotion of 1,100 educational franchisees in India and abroad. During this exciting period, I have realised that franchising is one of the most powerful marketing tools and networking systems for business development and expansion.
The franchise model has an edge in many respects over self-owned independent start ups. It enables franchisor companies to grow exponentially by spreading ownership and closing gaps in the distribution system without relegating control. The average gestation period to start a franchised outlet is minimal compared with owned outlets. Moreover as the franchisee manages the outlet as an owner, the brand benefits from the drive and dedication that entrepreneurs bring to unit level operations.
A successful franchising eco-system is built on the franchisor providing the entire know-how, technical support and training to the franchisee in the areas of human resources, IT systems and infrastructure, sales and marketing, market and location strategy, building design and development, interior design, capex and maintenance, inputs on fees and charges, risk management, standard operating procedures, and organisa-tional culture and values. The franchisee contributes local market knowledge, talent, social standing, investment and entrepreneurial inputs to make it a successful venture.
The Indian pre-school education market which is expected to grow to US$ 1 billion (Rs.4,500 crore) by 2012, offers a big opportunity for franchising. India hosts the world’s largest number of children in the age group 0-5 years — 110 million. And there are only a handful of branded and reliable pre-schools catering to this huge child population. While some franchisor corporates have made successful inroads into this huge market, their presence is limited to the metros and a few select tier-I cities. The potential of India’s pre-school education market is still largely untapped and we haven’t reached even a tenth of the child population in the age group 0-6. Franchising is an excellent model to adopt to quickly increase access to and supply of, quality pre-schools across the country.
In particular, pre-school franchising is a superb low resource model to reach the large number of under-provided children in smaller cities and rural India. Parents across the country including those in rural India, want to send their children to good pre-schools. I strongly believe that the franchise model offers the best option to guarantee and set acceptable learning standards and quality in pre-school education, provided it’s done with the right intent, under the right leadership and vision. The current crop of local mom-and- pop schools with varied pedagogic approaches are gradually being replaced by pre-schools with internationally accepted pedagogies and standardised early childhood education norms and practices.
Looking at the Indian demography which has its own complexities and limitations, in my opinion, quality franchising is the right way forward to quickly expand access and increase supply of good quality pre-schools across the country.
(Arun Khetan is the CEO and managing director of the Mumbai-based New Age Knowledge Solutions Ltd, a year old, multi-division education company which has promoted almost 125 education franchisees, including 90 franchised pre-schools under the brand I Play I Learn)