Lifestyle Retail Franchise: Questions From an India Perspective
Over the last 2 months we have been working with 3 different clients in the lifestyle retailing space and could categorize them in these categories:
Company 1: Art, Craft & Handicraft from some of the finest Indian artisans put into a store delivering a complete ‘India’ experience within a store.
Company 2: World Class European Shoes for the upwardly mobile Indian male and female.
Company 3:Home Décor imported from some of the best companies across the globe and presented in a store for the Indian consumer who’d rather pick it up here at a price lower than what he picks up anywhere else across the globe.
All these companies were seeking expansion and were contemplating whether franchising could be the solution to their success. The following were typically the challenges faced by them and the solutions to the questions below were concluded whilst we embarked upon getting them started with franchising:
What Should The Ideal Franchisee Profile Be:
a) Should he/she work full time at the store and be committed to the store.
b) What do you do to the franchisee that owns a great property and is seeking a minimum guarantee? How much will they be committed to the store?
c) What do you do with investors who see the return on investments on the store and are purely looking at it from a financial angle? Should they be approved? Can they be ignored?
d) What kind of skills & background is an essential and are these kinds of people available practically?
e) What should be the screening process applied and how should the application forms and other negotiation process with intending franchisees made?
f) What should be done with franchisees seeking more than 1 franchisee and seeking exclusivities on entire regions?
Location & Price:
a) Should the store be in a Mall or a High Street?
b) If it is a mall, how do you identify which one, as there is one being constructed round the corner everywhere? The good malls already are full and don’t have space, the ones that are being made are going to be ready from a few months to a few years and how does one choose whether this one is right and this one is not?
c) Everybody seem to be asking prices that do not seem right…. with these rentals how does one keep the price of the product right and yet keep everyone happy that is the customer, the franchisee and off course make a profit.
d) What is the ideal lock in period? What are the ideal escalations & CAM charges? Renewals?
e) Who pays the rentals and who signs the agreement? The franchisor or the franchisee. What if the rentals are not paid on time? What happens if the franchisee fails in his obligations? How can the company ensure that operations are not effected despite anything happening with the franchisee?
f) Within what distance should the next store come up? What do you do on exclusivities of locations?
g) What is the ideal size of the store and what do I do with stores that could be smaller or bigger than the ideal size, but whose locations are ideal?
h) Can I work with similar brands and share bigger spaces with them?
Franchise Fees, Deposits, Royalties, Prices, Goods & Margins:
a) What should be the ideal franchise fee & thereafter royalty be.
b) Should there be a uniform pricing across the country. What about prices in the same geographies where the rentals could be 500 Rs/sft and 50 Rs/Sft.
c) Who bears the taxes?
d) What happens if goods are not sold?
e) Discount sales, promotional offers and other activities to sell unsold goods.
f) How often is the stock replenished and at what costs if quantities are low.
g) Who bears damages at the store.
h) How much deposit should be taken from the franchisee and for what.
i) What is the credit limit a franchisee gets.
j) What is the optimum stock level a franchisee has to maintain?
k) What about deferred payments on stocks, franchise fees etc?
Staff:
a) How do you ensure that the product is communicated properly to the consumer with the staff available, with their turn around time, with their commitment to the store?
b) What is the ideal training programme and how often should this be done. How do you keep updating the staff with the new products and developments?
c) What role does the training manual play?
d) How do you keep the staff motivated? How do you incentives them. How do you measure their performance?
e) Who should pay the staff…. the franchisor or the franchisee and what are the repercussions
f) What should be the reporting methods?
Marketing & Advertisement:
a) What is the ideal marketing contribution that the franchisee and the franchisor make respectively?
b) Who is responsible to bring the customer to the doorstep and who for conversion after that?
c) In store promotions and other events
d) Newspaper, TV and other media advertisements.
Back End Preparedness:
a) What are the systems the franchisor must develop to ensure the smooth functioning of the franchise? The operations manual functionality.
b) What are the continuous training and support functions that the franchisor and franchisee comply to?
c) Initial launch and start phase support mechanism.
d) Daily reporting support and response to those reports with clear people assigned on the backend with each of their roles and responsibility defined
e) Continuous Product Development and Supply chain mechanism issues to be addressed?
Franchise Recruitment, Marketing, Location Visits and Agreement Signups
a) What mediums should I use to get to the ideal franchisee?
b) Will franchise magazines and expo’s work for our kind of business.
c) Which newspapers and media’s should I utilize?
d) Should we use the Internet franchise portals? Are they effective?
e) How much should I invest in either of the above and what is the quality of response?
f) Which mediums to be used on TV.
g) Who inspects the locations when a franchisee says I have a location and want you to see it?
h) What are the different stages of discussion one goes through and how long does it take for a sign up?
And a host of other questions that were answered whilst every industry within this domain was looked at microscopically and what every possible solution would result in terms of creating a healthy franchise system.
From The Desk Of Amit Nahar
Founder & CEO of Sparkleminds Franchise Catalysts –A Franchise Consulting Company Specializing in Franchising Solutions for Companies Seeking Franchise Growth and Entrepreneurs seeking New Businesses.
You could reach him on naharamit@gmail.com or on +9180-41512345for comments on this article.
