Loop opts for own stores, not franchisees

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Jul 11 2011, 07:48am hrs
Moving away from the industry trend, telecom service provider Loop Mobile is betting on a company-owned-and-operated model for its stores rather than franchises. The telecom operator, which operates only in the Mumbai circle, is not just opening new stores but is also buying out the big and old franchise stores in a move to create more emphasis on service quality. An industry average suggests that telecom companies have most of their stores on a franchise model. We are moving more towards company-owned showrooms model, unlike the industry, in order to provide uninterrupted reach and excellence in service, said Surya Mahadevan, COO, Loop Mobile.

We will try and take over all our large format stores, in order to ensure a standardised services delivery and larger control of the overall operations, he explained. We will closely monitor the performance of these stores and then take our decision. If they are doing well, we will not disturb them. If not, we will evaluate the option to take over. There are some 25-26 small format stores which we wont disturb, he added.

Loop currently has about 45 stores across Mumbai, of which 16 are company owned and operated. Mahadevan said Loop is targeting to launch 72 company-owned new stores and as per the need and customer demand, will go ahead to touch 100 stores. Mostly, all telecom companies have 90% of stores on a franchise model and the rest are company owned and operated, reason being it becomes expensive to own all of them on a pan-India basis. They have company-owned stores only in creamy metro areas, said a Mumbai-based analyst. However, franchisees of the company to whom FE spoke to are disappointed at this move and are blaming the company for not providing them with proper assistance and resources. Mahadevan refutes these allegations. They want to share the profit when the business is doing well and start asking for subsidies when it goes a bit out of track, he added.

Loop Mobile will be spending in the range of R25-30 crore for expansion of company-owned stores. However, the proposition looks a bit expensive in the beginning as, on an average, a telecom store of area 250-300 sq ft would cost anywhere between R10-15 lakh, whereas in a franchise model, the upfront investment in the store, its losses (if any) for the first three months and operating costs are borne by the franchise partner.