Franchising & retail roadmap 2012
Vinod Behl

The year 2011 will be remembered as a landmark year for Indian retail and franchising, with government approving 51 per cent FDI in multi-brand retail and 100 per cent in single brand retail. Though the electoral politics superseded economics, and the policy was put on hold for want of consensus among stakeholders, yet the retail sector holds out hope. Especially, as the government is expected to notify the rules for 100 FDI in single-brand retail after the winter session of the parliament as there is no opposition to it.

Even in the case of 51 per cent FDI in multi-brand retail, the government has declared that the policy decision will be fast-tracked after assembly elections in few states are over by March-April 2012. Currently, it may be a wait & watch situation for retailers and franchisors, but the new fiscal (2012-13) may well bring in a much anticipated cheer for the sector. It will be a perfect timing as the Indian retail sector, after recession is well on path of recovery. The cumulative retail demand is expected to touch 43 million sq ft by 2013. More than 50 per cent of this demand will come from tier II & III cities, signifying the growing importance of smaller towns in future growth of retail and franchising. Despite growing spending power and aspirational values, young people in these cities have lesser choices. Obviously, then there is a greater scope for organised retail as franchise business in malls is a major attraction for customers in tier II & III cities. Attractive rentals, improved mall management and profit sharing model adopted by mall owners is proving to be a boon for franchise business.

The FDI reforms in retail will have accelerating effect on organised retail and franchising, particularly as organised retail that still forms five per cent of overall retail business, has a big scope. Organised retail has a great synergy with franchising business that is growing at a healthy rate of 30 per cent and is expected to touch US$20 billion mark by 2020. Currently with 1,200 franchisors and 20 lakh franchisees, the franchise business has gained foothold in sectors like education, healthcare, beauty & wellness, fitness, business consulting, food & beverages, apparel, retail and service industry. On one hand, there's an increasing demand for global brands, and on the other hand, international exposure of Indian brands is going up, creating newer opportunities for franchise business. It is evident from the growing number of international franchise chains setting up shop here and more and more Indian franchisors taking franchise business to neighbouring SAARC countries and South East Asian countries. It's little surprising then that despite a number of challenges in terms of barriers to funding, training, infrastructure, franchise laws and regulatory mechanism for effective governance of franchise business, more and more standalone businesses are getting converted into franchisee businesses. A notable positive trend in the franchise business is that educated and trained youngsters are getting into it, bringing in the much needed professionalism. The growing popularity of social media, has come as an effective marketing tool for franchisors to boost their business.

As we look ahead, all this bodes well for the fast evolving organised retail and franchise business which holds great promise for the New Age Indian consumer.