THE INDIAN FRANCHISEE REPORT

AN OUTLOOK:
Franchising in India is catching aggressively so the challenges inherited in this business model. This study is an endeavor to do an in-depth profiling of Indian franchisees. An entrepreneur who is a franchisor too, needs a trust worthy and efficient Partner or franchisee to carry forward the business model in his region. For him choosing a right franchisee is not an easy nut to crack.

It is interesting to note that most of the Indian franchisees are highly educated with 50% of them having a Post-graduate degree and 44% under-graduate. An age bracket of 30-50 is most attractive and most potential franchisee.

It was found that more than 70% potential franchisees are salaried employees. It shows that franchising business model is an attractive business option for those who are already working in a system and aspire to become an entrepreneur.

If a franchisor believe that giving a franchisee to his known relative or friend would be a good idea, then he is wrong because this study shows that 65% of the franchisees who are successfully functional had no personal relation with the franchisor.

Franchisor–Franchisee relationship is always a matter of concern for both the parties. This study tried to find out an ideal duration within which there is a need to refresh the affiliation otherwise it would be difficult to continue. We have found that in normal circumstances ideal duration to relook at the franchise contract and business relationship is 5 years, i.e. 5th year is crucial from the business point of view and more that 51% of the franchisees become critical and require attention from the franchisor to continue.

AN INTERESTING FORMULA COINED TO HELP FRANCHISOR TO GAZE A FRANCHISEE POTENTIAL:
= .28 A + .27 B + .25 C + .2 D
Key*
A : Background / Qualification
B : Skills
C : Business & Economic aspects
D : Inherent Abilities

For a franchisor, these 4 factors would be helpful for him to decide about the potential franchisee. He should give 28% importance to the franchisee’s background details, 27% focus will be given to franchisee’s skills, 25% to business and economic aspects and the remaining 20% to the inherent abilities while choosing a franchisee.

In sum, the study tries to find out the best segment for a franchise business. There are three major risk associated with a franchisee; the risk arising from a franchisee switching brands, a franchisee starting own business, the risk associated with a franchisee taking up employment with an employer and the risk with an over qualified person. Using factor analysis, the weightage to be given to the attributes of a franchisee is calculated. Principal Component Analysis is mainly used in the factor analysis technique.

KEY FORMALIZATIONS:
This study found that potential franchisees can be categorized & identified on the basis of following attributes:

• Age
• Educational Background
• Family Background
• Prior Experience
• Management Skills
• Financial Capabilities
• Networking Skills
Based on these variables franchisees could be recognized within following profiles:
• Switchers
• Leavers
• Loyal
• Innovators
• Overqualified
A model for evaluating a prospective franchisee as well as an existing franchisee is proposed in this study. The lifecycle of a franchisee in the Indian context consists mainly of five major stages:
• Search Phase
• Joining Phase
• Growth Phase
• Maturity Phase
• Critical Phase or Extended Growth Phase.
The franchisees are classified on the basis of their growth as:
• Extraordinary
• Ordinary
• Deviant Franchisees
The growth of the franchisee may be due to intrinsic as well as extrinsic factors. This study further investigates the issues faced by franchisees which affect their motivation. Factor analysis shows that on the basis of what a franchisee is looking for in the franchise they can profiled as:
• Business Oriented
• Growth Oriented
• Short-Sighted Investor

The findings in this report are based purely from primary research conducted through in depth telephonic as well as face-to-face interview with the respondents. Responses received from the online questionnaire sent to the respondents were used to draw conclusions using factor analysis and regression analysis.

We would be happy to note your thoughts on this report. If interested, we would be happy to share the formal survey in totality with you as well. All you need to do is, write to us!