If you were at the Franchise India expo held in the Capital recently you would be forgiven for thinking it was one of those discount sales that was on ?looking at the jam-packed venue with people trying to vet a business venture in five minutes flat, it wouldn’t take much imagination to think that all those brands vying for your attention were up for sale. And in a way they were ? as small entrepreneurs with a gleam in their eye attempted to decide which brand could make them a millionaire overnight.

But is becoming a successful franchisee that easy? Let’s look at the statistics first. Franchising in India has been growing at 30-35% year-on-year in the last couple of years and is gradually becoming the backbone of retailing. At present, there are more than 1,500 franchisees across categories close to 60,000 products and services ? clothing brands, furnishings, healthcare, education, restaurants, travel, logistics, lifestyle products, et al. However, the franchising industry accounts for only 2% of the total organised retail market against 50% in the US. But experts believe that it is franchising that can provide the retail revolution the required resources to expand in India. And not just that, it can also be a great employer. Right now it employs around 4,00,000 people and this could touch the three million-mark by 2010 and account for 15% of the organised retail market, believes CY Pal, national president, Franchising Association of India.

For every franchisee who succeeds, there are many others that fail. Dhawal Shah, deputy executive officer, Franchising Association of India says that while 80 out of 100 wannabe franchisees are successful, 20 have to bite the dust. ?Franchise culture has not matured yet in India as every franchisee has not whole heartedly accepted this model. Hence there is a lingering suspicion. Bad franchisees affect the growth,? says Major KV Rajan, executive director, Veta, an English language training chain.

Organised retail and franchising being a relatively new format in India, it is still a little difficult to find suitable locations and properties in reasonable amounts, adds Jay Gupta, MD, The LOOT, a multi-brand discount chain. For big brands, it is a much easier ride with both brand owners and master franchisees standing tall. The franchisees here come with the wherewithal, and many a time they are already into similar agreements with other brands, which provide them the market experience. It is the mid-rung players who find it difficult, as they fight to find acceptability in the market. Agrees Major Rajan, ?The first 13 years were challenging. Over these years, we have fine-tuned. Yet, there have been occasional hitches in national operations.? The company started its operations in the South and recently went national. ?Feasibility of sales, business culture prevalent in a new market and temperament/attitude of the consumers need to be kept in mind when you are venturing into a new territory,? he says.

Many a time it is seen that franchisors as well as franchisees follow a herd mentality. Instead of trying out innovative business options, whether in marketing, training, supply-chain logistics, they prefer to go the time-tested route. It?s as if ?here?s my idea, business plan, logo and trademark, go and replicate my business?. Now that?s a naive and opportunistic view and the vast majority of franchises that are signed up like that will definitely fail, say experts. Moreover, there are several wrong precedents set by both sides, such that many franchisees? commitment to service quality is missing and many franchisors? commitment to provide the promised support to their franchisees is in doubt, thus resulting in a tense and distrustful relationship. ?Lack of transparency in deals, loosely drafted legal agreements, absence of well-defined policies, all play their part in unhinging a franchise agreement,? says Shah.

Financing for franchises is another problem area as many financial institutions do not recognise soft expenses as part of project cost. Agrees Girish Kumar, a FitnessOne franchisee in Bangalore, ?Captive investment to open the first franchise was the foremost difficulty, but again the return seen is incredible. This has inspired us to open few more centres under the FitnessOne banner.?

Industry players feel both franchisors and franchisees need to look at it as a joint venture where both have equal stake. This is especially true when you are signing up a master franchisee for a new territory or for overseas expansion. After all, getting out of a master franchisee agreement is a nightmare. By the time you’ve set up a franchisee in another country you’ve invested a lot of time and money in someone, point out experts. Terminating that agreement is a worst-case scenario so expanding via the JV route would be a better idea. And always work out the exit route in the legal documents. As Gupta says, ?With the system getting more standardised and evolving, the franchisees are also becoming smarter. Over time as the investments become higher, the franchisees will graduate into business partners and help propel the growth of the company. Their contribution will play a very significant role and their presence will be felt.? Till then, head for the franchise fair.