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The Indian Retail Sector<br />The Indian Retail Sector Franchising<br />A Model for sustainable growth in organized retail...
Retail Industry – Current Scenario<br />Organized retail still a laggard, 8% of all retail<br />Big Brands; Big Money = Bu...
Retail – A unique industry<br /><ul><li>Worlds Largest Industry and Employer
Last Mile of every industry
Brutally competitive- in India 13 Million outlets
Live by the Day</li></li></ul><li>Issues with Retailing<br />Poor supply chain management and weak support infrastructure<...
 Merchandise<br />Margins<br /> Space<br /> People<br />Elements of Resource Efficiency<br />
 Merchandise<br />Margins<br /> People<br /> Space<br />Elements of Resource Efficiency<br /><ul><li>Impacted by markdowns...
Technology – a key optimizing tool.
Key control level : Favorable Buying
20-40% of operating expenses
Planogram and location choice – a key mgt tool.
Choose and utilise wisely
High Cost-High sensitivity
Wrong type- high cost impact –markdowns.
50-80% of working capital, 40-60% assets.
Wisely chosen through data analysis and NPI
 15-40% of expenses
Retention and engagement – difficult
Right people difficult to find.</li></li></ul><li>Measures of Resource Efficiency<br />Gross Margin/InventoryGross Margin ...
A Fresh Look at retailing<br />Customer Service is a complicated science<br />Impossible to come up with a “right formula”...
Franchising Facts<br />Some key facts that point to the growth of the Franchising sector in India are as follows:<br />The...
How  Franchising Works?<br />     1. Franchising essentially works by replicating a successful and proven business model a...
The Franchised Retail Model<br />
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Franchising Retail

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Franchising Retail

  1. 1. The Indian Retail Sector<br />The Indian Retail Sector Franchising<br />A Model for sustainable growth in organized retailing<br />Ravi Kumar Suman <br />
  2. 2. Retail Industry – Current Scenario<br />Organized retail still a laggard, 8% of all retail<br />Big Brands; Big Money = But no right model yet<br />Same Store growth Vs New Store Growth – The Suspect story of Growth<br />Few Chains closing down; some bankrupt; some going slow; foreign retailers still “cat-on-the-wall”<br />The Indian Retail Story is still – an emerging story<br />
  3. 3. Retail – A unique industry<br /><ul><li>Worlds Largest Industry and Employer
  4. 4. Last Mile of every industry
  5. 5. Brutally competitive- in India 13 Million outlets
  6. 6. Live by the Day</li></li></ul><li>Issues with Retailing<br />Poor supply chain management and weak support infrastructure<br />Rentals – skyrocketing to all time high<br />Crowding in unattractive locations<br />Inability to compete with traditional retail<br />Over reliance on debt funding<br />
  7. 7. Merchandise<br />Margins<br /> Space<br /> People<br />Elements of Resource Efficiency<br />
  8. 8. Merchandise<br />Margins<br /> People<br /> Space<br />Elements of Resource Efficiency<br /><ul><li>Impacted by markdowns and shrinkage.
  9. 9. Technology – a key optimizing tool.
  10. 10. Key control level : Favorable Buying
  11. 11. 20-40% of operating expenses
  12. 12. Planogram and location choice – a key mgt tool.
  13. 13. Choose and utilise wisely
  14. 14. High Cost-High sensitivity
  15. 15. Wrong type- high cost impact –markdowns.
  16. 16. 50-80% of working capital, 40-60% assets.
  17. 17. Wisely chosen through data analysis and NPI
  18. 18. 15-40% of expenses
  19. 19. Retention and engagement – difficult
  20. 20. Right people difficult to find.</li></li></ul><li>Measures of Resource Efficiency<br />Gross Margin/InventoryGross Margin Return on Inventory<br />GMROI<br />=<br />Net sales/Inventory = <br />Stock turn<br />Inventory/ Selling feet =<br />Merchandise Efficiency<br />Gross Margin/Selling feet<br />Gross margin Return on Sq ft <br />GMROF<br />Net Sales/ Selling feet =<br />Sales per sq ft<br />=<br />Gross margin /Net sales = GM%<br />Selling feet/ No of Employees =<br />Service Intensity<br />Gross Margin /Employee<br />Gross Margin Return on labour <br />GMROL<br />=<br />Net Sales/ No of Employees =<br />Sales per employee<br />=<br />
  21. 21. A Fresh Look at retailing<br />Customer Service is a complicated science<br />Impossible to come up with a “right formula”; “right code of conduct & service levels”<br />Needs authority / responsibility right at the front end<br />Requires “ownership” mindset at the front end<br />Create “ownership Culture” or Franchise?<br />
  22. 22. Franchising Facts<br />Some key facts that point to the growth of the Franchising sector in India are as follows:<br />There are over 1200 active franchisors in the country.<br />There are over 1,00,000 franchisees (across sectors) in India today.<br />The total investments put in by these franchisees in setting up their individual franchised businesses is over Rs.40,000 crores.<br />The total annual turnover achieved by franchised businesses in India is in the region of Rs.8000-10,000 crores.<br /> <br />The total manpower directly employed by these franchised businesses is around 300,000. <br />All these facts & figures point clearly to the extent to which Franchising has been accepted in India as a way of doing business. There are an increasing number of businesses that are exploring the Franchising route to business expansion.<br />
  23. 23. How Franchising Works?<br /> 1. Franchising essentially works by replicating a successful and proven business model across multiple locations through a network of entrepreneurs. <br /> 2.The person who develops the business format, known as the franchisor, grants access to his business name, goodwill and business model to another person, known as the franchisee.<br /> 3.This ensures that the franchisor can extend his reach without having to invest substantial amount of money in new markets. <br /> 4.The franchisee on the other hand profits by having a readymade business model with access to backup facilities like training, marketing tools, technology etc. He hence benefits from the security provided by a tried and tested business model. <br /> 5.Many variations of franchising model exist within the sector. Some of the more popular ones include Master Franchisee, Area Development Rights and Unit Franchise. India has seen the emergence of other models also like Joint Venture cum franchise agreement, Management Contract etc.<br />
  24. 24. The Franchised Retail Model<br />
  25. 25. Benefits to Franchisor (Retailer) <br />Store Employee Salary / Number of Employees Reduction<br />Only back end operation Control<br />Rent /No Rent If No Minimum Purchase<br />Electricity<br />Stock Loss<br />Pilferage/Theft<br />Capital Investment /Interest Cost<br />Other Miss Exp<br />Expansion without Investment<br />IT Cost<br />Title Controls<br />One Point Sale<br />Ware House Out Source<br />One Time franchisee Fee <br />Maximum Promotion of Private label <br />
  26. 26. Benefits to Franchisee<br />Centralized purchase & the single-point delivery of all products!<br />Opportunity of Multi Store Ownership<br />Proven & never-ending business!<br />Readymade & ever-growing customer base!<br />Groceries, food products and vegetables at challenge prices in the industry!<br />No investment risk in the inventory!<br />Remarkable payback period - Just 1 years<br />Low on investment, high on returns!<br />Advisory for site selection, store design and visual merchandising!<br />Reliable recruitment and training support.<br />Very high success in delivery!<br />Strong Customer Loyalty!<br />Very high success in delivery!<br />An established brand! <br />Great vendor base! Excellent relationships!<br />Exclusive Rights<br />Initial Start up Training<br />Proven Support Systems!<br />Aggressive brand-promotion, advertising and marketing campaign! Mega Launch! <br />
  27. 27. 14<br />REI 6 Ten Retail Ltd. a pioneer in more ways than one<br />Successfully Running more then 300 Franchised outlets Pan India.<br />Franchised 300 + outlets with in 300 Days <br />Customers acceptance of REI 6 Ten Retail Ltd. as a Must have brand – known for F&V, Private Label ,Grocery <br />Established quality standards for products<br />A well established network of channel partners/ franchisees<br />An Indigenous model<br />REI 6 Ten Retail Ltd. should keep creating new paradigms & seizing new service opportunities<br />
  28. 28. 15<br />New Paradigms that REI 6 Ten Retail Ltd. have created<br /><ul><li>Store In-charge run format / Store Franchising /warehouse Franchising
  29. 29. The store walk method
  30. 30. The Eye Ball customer contact “trust”
  31. 31. Vendor managed Inventory
  32. 32. Private label business
  33. 33. On the job training
  34. 34. Direct to store logistics…..</li></ul>Processes which others will take years to perfect<br />REI 6 Ten Retail Ltd. invented the new private FMCG retail<br />
  35. 35. Brand is neither owned by the Company nor by the franchisee – it is owned by the Consumer<br />Evidences<br /><ul><li>Consumer waits for stores to open
  36. 36. Specialized orders of non available SKUs are placed and consumers are ready to wait for the product arrival
  37. 37. Even if there is a quality issue in the product, the franchisee & store staff are blamed but brand is perceived to be clean
  38. 38. Other Stalls such as F&V perform better when placed within the store premise rather than placing outside the store physical boundary
  39. 39. There is a consumer perception that even if the product quality is unsatisfactory, the store will take back the product
  40. 40. There is a consumer pull for the brand
  41. 41. It is the consumer who will drive the future and not the company or franchisee
  42. 42. Quality can not be compromised .</li></li></ul><li>Possible Action Points <br />At least 2500 direct customer contacts to be established By the Individual Store /Managers & Sales representative<br />New product launches to be done based on customer feedback – taste panel for customers<br />Formal training to all franchisee & their staff<br />Focus on Higher rate of product innovation<br />Apart from standards focus on packaging to avoid petty issues<br />Daily replenishment & smaller consumer packs<br />
  43. 43. Brand goes beyond products…. Its “quality”<br />4 Pillars of Quality<br />Service<br />Depth<br />Product Standards<br />Freshness<br /><ul><li>Product depth within all categories in a store is the highest
  44. 44. Meets all buying & usage occasions of consumers
  45. 45. Consumers perceive have highest range of staples & FMCG products for any organized retailer
  46. 46. Apart from basic packaging issues, REI 6 Ten Retail Ltd. product quality per say is perceived to be best
  47. 47. Procures the best in class products for all its SKUs within a store
  48. 48. Apparent quality superiority in Dairy & bakery products in terms of freshness
  49. 49. Consumers feel that Store. has an efficient supply mechanism to maintain the freshness of highly perishable products such as breads, curd, milk, cream, paneer etc.
  50. 50. Eye ball recognition
  51. 51. Quick response time
  52. 52. Personal attention to every customer – even by the franchisee
  53. 53. Customized order taking on special customer request
  54. 54. Customers neither neglected nor over intimidated while shopping in store</li></ul>Evidences<br />
  55. 55. Possible Action Areas<br />Possible product category expansion option:<br />Ayurvedic<br />Skin acre<br />Wellness<br />Bakery<br />Organic<br />Dairy Products<br />Exclusive Hand Made Products<br />Travel & Tourism kiosk (shop In Shop)<br />Home Rental Consultation kiosk (Shop In Shop)<br />
  56. 56. Retailers should aim to:<br />Bringing down Real estate costs<br />Renegotiating Real estate costs<br />Entering into revenue sharing model as against fixed rental<br />Leveraging Information Technology<br />Manpower training<br />Real Estate Management<br />Supply chain visibility<br />Store operations<br />Logistics management<br />Reevaluating store viability and expansion plans<br />Efficient store management<br />It’s the time of Private Labeling<br />Venture into under penetrated markets: Rural<br />Retailing<br />
  57. 57. Project: Franchise Development Outsourcing (FDO)<br />
  58. 58. Background<br /><ul><li>Franchise Connect India is the nation’s first full-service franchise sales outsourcing firm operating on a cost-justifiable compensation schedule. FDO is Franchise Connect India’s professional lead management service which assists you right the way through the franchisee recruitment process, from lead generation through to the signing of the franchise agreement.
  59. 59. We have franchise 300 Retail outlets of 6 Ten with in 300 Days on Pan India Level
  60. 60. Designed the India’s First Model of Franchising into FMCG Sector</li></li></ul><li><ul><li>Brand Image
  61. 61. Franchise Opportunity
  62. 62. Success Story
  63. 63. Franchise Support Structure
  64. 64. Franchisee Background
  65. 65. Financial Assessment</li></ul>Share Business Plan<br />Share Agreements<br />Site selection<br />Franchisee rollout Plan<br />Meeting with Brand Team<br /><ul><li>Targeted Investor Group
  66. 66. Word of mouth</li></ul>Lead management<br />Marketing<br />Lead Generation<br />Recruitment<br />Reaching the dedicated investors registered in franchise Connect database through different mediums of marketing<br />Letter of interest signed.<br />Agreement Process<br />Final conversion and lead goes to operations for processing<br />Basic Information provided to interested investors<br />Expression of Interest generated<br />Site visits/franchisee details collected<br />Weekly progress sheet submitted to Moti Mahal<br />Franchise Meetings , conference call , to be organized with the qualified prospects <br />
  67. 67. Thank You<br />Ravi Kumar Suman<br />+91-9311552759<br />

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