Home » English » What is a Franchise? Advantages and Disadvantages of a Franchise

What is a Franchise? Advantages and Disadvantages of a Franchise

  • by

Planning to take a franchise? Well, before you proceed with the idea to get the franchise, let us inform you that it is important to decide many things before planning to take the franchise. Although it is a difficult game, at the same time, the possibilities and challenges nourish you as a strategic businessman. So, are you ready to face these challenges? Before planning to open a franchise, know about the facts and fears of the Franchise business here below-

# What is a Franchise

A franchise is a type of license that allows owning the franchise’s proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell the product or service under the business name of the franchisor. In return for acquiring the franchise, the franchisee usually pays the franchisor an initial start-up fee and an annual licensing fee.

# What is a Franchise Business

A Franchise Business is one that you buy from someone who has an established success formula that you get to churn out profit by using their brand name and systems. These types of companies are called a franchisee, who also provide you a well-defined business process, product, or service that you need for selling, training, recruiting marketing, and many other forms of support. These support elements will help you to build your business hassle-free. It also ensures that the franchise business is running smoothly.

# How to set up a Franchise Business in India

There are 2 things “make a franchise or take a franchise” Making your own business a successful franchise is a long journey but it’s quite simple to take a franchise of any existing brand. Now if you have decided to get a franchise then do have a look at the below points to setup it successfully-

  • Determine the niche: When you decide to open a particular franchise, make sure you pick the industry that has a potential market. For example, opening a luxury brand franchise in a tier-1 town will never make any profit. It is suggested to study market and city-specific and then move on. Any hospitality franchise in the grade of any city is always workable.

  • Completing formalities: Once the niche is fixed, make sure you registered yourself with the Ministry of Corporate Affairs after the initial agreement with the franchise provider. If the franchisee is from outside India, make sure you are in touch with international brokers such as Franchise International Inc.

  • Ownership: Once the formalities are completed, take over the ownership legally. It is suggested that when the legal process continues, it is important to have witnesses to avoid any future chaos.

  • Licensing: Next and one of the most important steps in the process is completing the licensing formalities. For business licenses from a related industry, all types of licenses are required before you can open a franchise in the public sector.

  • Registration: International businessmen wishing to start a franchise in India will be better off without starting operations if they are not ready to live here or at least, visit it regularly. 

  • Human resource requirements: Any franchise runs only through human resources, so you need to understand the number of employees that will be required at various stages of operation. As an owner, you also need to know the exact roles of the employees, so that you can hire according to your needs.

  • Paying Taxes: Although it comes at a later stage of the operation, it is advisable to understand the various types of taxes that are to be paid in near future. From GST to custom tax, the range of taxation is wide, so it is important to understand the layers and prepare accordingly. During this phase, you can also explore the opportunities to save your taxes.

  • Currency risk management: This is important for those dealing internationally. The first investment is usually done in international currency while the initial earnings are in INR. Therefore, it is important to understand the currency price difference before starting the business. It helps in defining profit and loss. 

# 5 Most Profitable Franchises in India

Here is the list of the most profitable franchises to own in India.

1. Subway

  • Founded in: 1965

  • Industry: Food and beverages (fast food)

  • Investment: INR 54-90 lakhs

  • Franchise units: More than 500

One of the first few fast food joints to break the stereotypes against fast food being an unhealthy alternative, it started a global trend. With its signature submarine sandwiches, Subway provided an affordable yet healthy alternative to mainstream burgers & fries which previously dominated the fast-food market. Today, Subway is one of the few mainstream fast food joints that thrive on promoting a range of healthy food options. With salads and endless sandwich combinations on a variety of bread such as whole wheat, multigrain, and gluten-free variants, Subway has created a loyal customer base in the process.

2. Affinity Salon

  • Founded in: 1992
  • Industry: Beauty and wellness
  • Investment: INR 30-50 lakhs
  • Franchise units: 100 (approximately)

The unisex salon franchise has set a standard to meet global standards of hair care and beauty services in the country. Affinity Salon has seen steady growth & maintains around one hundred outlets in India. It plans to expand its footprint to many other Indian cities due to the increasing demand for unisex salons.

3. InXpress

  • Founded in: 2011

  • Industry: Courier and delivery

  • Investment: INR 5 lakhs

  • Franchise Units: 20-50

At InXpress they have world-class carriers who handle pick-up and delivery on behalf of their customers. Your local InXpress shipping specialist will work with you to determine the right carrier and service option for your needs at the right prices. InXpress allows you to build a flexible business with the support of a global franchise system. Their scalable franchise gives you a business opportunity that you can tailor to your lifestyle choices. 

4. Lenskart

  • Founded in: 2010

  • Industry: Eyewear

  • Investment: INR 30-35 lakhs

  • Franchise units: 330+ (approximately)

Lenskart is one of the fastest-growing eyewear brands in India. It can be operated in both online and offline mode. Lenskart was started as an online portal for contact lenses in 2010. In 2011, eyeglasses & sunglasses were also added to the range. The brand did not stop there and tried to launch offline stores to expand its retail footprint. As of now, the expansion plan has focused on increasing the number of offline outlets to 500 from the existing 330 outlets.

5. FabIndia

  • Founded in: 1960

  • Industry: Retail (fashion)

  • Investment: INR 40-50 lakhs

  • Franchise Units: 175+ (approx.)

FabIndia has become a household name today. It is loved equally by all age groups. It has crossed the INR 1,000 crore sales-mark to become the largest retail apparel brand in India; it is well ahead of competitors like Zara and Levi’s India. The brand stays true to its core essence of embracing and promoting Indian culture through apparel and other products. FabIndia is continuously adding new categories of products.

# Low Investment Franchise

Based on the above businesses here are the 8 Popular Franchises with low investment:

1. DTDC: DTDC is a franchise of Courier Company in India. It is a very famous brand. You need to spend 1.5 Lakh to get the DTDC franchise. The break-even of this business is very quick and you need a small space to start this courier business.

2. Career Launcher: Career Launcher franchise opportunity in the education field. It can be taken with an investment of 3-10 Lakh. The Breakeven for this business is 1 year. To start this business you need 1500 sq feet. of space.

3. Jawed Habib: You can also take a salon agency from Jawed Habib. The cost of this agency is 5-10 Lakh. You need a place of 600 sq. feet to start this business.

4. Firstcry: Firstcry is a popular brand for baby cloth and other kid items. You can take this franchise for 10-15 lakhs. You can earn money from this business from the beginning. You need a place of 1000 sq. ft. to start this business. 

5. Khadims: Khadims is in the footwear business. The investment required for this business is 25 Lakh. You need a place of approximately 1000 sq. ft. to take advantage of this franchise.

6. Dr.Batras: Dr.Batras is from the healthcare segment. To start a franchise of Dr.Batras you need to invest around 20-30 Lakhs. The Break-even of this business is one year. You need 400 sq. feet space to start this business.

7. Monginis: Monginis is popular for cake and baking products. To get this franchise you need to invest around 8 lakhs. You need 250 sq ft. a place for this business. Breakeven time is variable for this business.

8. Loreal: Loreal Beauty Parlour Franchise is one of India’s top Hair and Beauty salons with a wide network of over 700 outlets all over the country. The investment required for the business is 20-30 lakhs. To start a business you need 400 to 500 sq. ft. of space.

# Best Franchise Business in India 2021

Now, we will explain some of the best franchise businesses in India, which we have chosen after proper research.

  • Domino’s Pizza: It is one of the largest pizza chains in the country with more than 500 shops almost in every state of India. Domino Pizza started in 1960 has grown into the largest well-known brand for pizza delivery services with more than 1 million customers. To start their franchise business, you need to invest Rs. 30-40 lakhs with a minimum of 500 sq. ft. of an area for the business operation.

  • Patanjali: It has become a trusted and popular Indian brand. Baba Ramdev along with Acharya Balkishan founded this company in the year 2006. The first product lines of the company were herbal and Ayurvedic items. After getting great success in this field, Patanjali expanded business in other areas too, such as beauty products, health care, personal care, food products, and much more. To start their franchise business you need to invest Rs. 7-10 lakhs with a minimum of 500 sq. ft. of an area for the business operations.

  • Archies: Archies is a famous brand known for selling exclusive personalized gifts, greeting cards, artwork, handicrafts, and more. They consist of a wide collection of unique gifts for birthdays, anniversaries, valentine’s day, and almost all special occasions. Everyone is willing to give their special person a special gift and hence starting an Archies Retail Business is a good investment option. To start their business in your area you need a place of 500 sq. feet. An approximate investment of Rs. 10-12 lakhs is required for investing inventories, interior designing, air conditioning, music system, etc.

  • Lakme Business: Lakme is a more renowned brand of beauty products & cosmetics all over the world with almost 50 years of business operation. They have loyal customers who buy their products just for their brand name which implies quality from their online store. Starting a franchise salon for selling their beauty products is a good franchise business opportunity in India. They already have more than 150 physical outlets across 40 cities in India. A minimum investment of Rs. 10 lakh with a floor area of 500 Sq. feet are required to start their business.

  • KFC Chicken: Kentucky’s Fried Chicken (KFC) is the world’s reputed entity with over 20000 branches across various countries in the world. They started their business in 1939 in the USA, which prepares and sells chicken, snackable, and other eatables prepared with chicken. If you can invest Rs. 30 lakhs and own premises in a good location, then you can get a franchise opportunity with KFC in India. A minimum floor area of 500 sq. Ft. is necessary to commence business operation.

# Advantages and Disadvantages of a Franchise

Rather than carrying out a company formation to start a new limited company, people often buy into an established franchise to get started in the business but what are the advantages and disadvantages of a franchise?

Advantages:

  • Franchising reduces the risk of business failure. Your business is based on a proven idea. You can check how successful other franchises are before committing yourself. 

  • Franchises provide the independence of small business ownership supported by the benefits of a large business network. 

  • You do not need business experience to run a franchise. Franchisors typically provide the necessary training to operate your business model.

  • Franchises have higher rates of success than start-up businesses. You may find it easier to secure finance for the franchise. Taking a franchise may cost less than starting a business of the same type.

Disadvantages:

  • The first & most important disadvantage of a franchise is the fact that the franchisee has no control of the business or how it is run (or very limited control). The rules of the business are already established and part of the franchise agreement.

  • Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees & you may have to agree to purchase the franchise’s products. 

  • A franchise agreement usually includes restrictions on how you can run the business. You might not be able to make changes to suit your local market. 

  • The inflexible nature of a franchise may restrict your ability to introduce changes to the business to respond to the market or make the business grow. 

# Difference Between Licensing and Franchising

BASIS FOR COMPARISONLICENSINGFRANCHISING
MeaningLicensing is an arrangement in which a company (licensor) sells the rights to a company’s product to use or license intellectual property for royalties.Franchising is an arrangement in which the franchisor allows the franchisee to use a business model or brand name for a fee, to conduct business, as an independent branch of the parent company (franchisor). 
Governed byContract LawFranchising regulations or Company Law as the case may be.
RegistrationNot necessaryMandatory
Training and supportNot providedProvided
Degree of controlThe licensor has control over the use of the intellectual property by the licensee but has no control over the licensee’s business.The franchisor exerts considerable control over the franchisee’s business and process.
ProcessInvolves a one-time transfer of property or rights.Needs ongoing assistance from the franchiser.
Fee structureNegotiableStandard

Stay updated about the Latest News on Vyaparapp

Download the BEST GST Compliant Mobile Billing App

Happy Vyaparing!!!

Leave a Reply