The document discusses the growth of the consumer food service industry in India between 2005-2015. Some key points: - The number of consumer food service outlets in India grew from 1.27 million in 2005 to over 2.12 million in 2015, with the majority being standalone outlets. - The total value of consumer food service sales grew from Rs. 2.23 trillion in 2005 to Rs. 4.87 trillion in 2015, a compound annual growth rate of 5.1% for standalone outlets and 9.1% for retail outlets. - Within segments, home delivery saw the fastest value growth at 35.8% from 2010-2015, while full-service restaurants and street stalls also saw above

1. Retail Channel Management –
Managing Relationships
Prof. Piyush Kumar Sinha
Chairperson, Centre for Retailing
IIMA

2. • Isaac Singer, the inventor of the sewing machine in 1858, is credited with
starting the modern-day franchise concept.
• After successfully inventing the machine, Singer was seeking to distribute
his new product outside of his immediate area, and also wanted to
provide training to customers on the proper way of using them.
• As a result, he began selling licenses to entrepreneurs in different parts of
the country – the predecessor of the current franchise agreement.
http://www.franchisedirect.com/information/guidetobuyingafranchise/whatisfranchising/29/190/

3. Franchising Industry

9. • Arrangement where one party (the franchiser) grants another party (the
franchisee) the right to use its trademark or trade-name as well as certain
business systems and processes, to produce and market a good or service
according to certain specifications.
• The franchisee usually pays a one-time franchise fee plus a percentage of
sales revenue as royalty, and gains (1) immediate name recognition, (2)
tried and tested products, (3) standard building design and décor, (4)
detailed techniques in running and promoting the business, (5) training of
employees, and (6) ongoing help in promoting and upgrading of the
products.
• The franchiser gains rapid expansion of business and earnings at minimum
capital outlay.
http://www.businessdictionary.com/definition/franchising.html

10. • A special privilege to do certain things that is conferred by government on
an individual or a corporation and which does not belong to citizens
generally of common right
• A privilege granted or sold, such as to use a name or to sell products or
services. In its simplest terms, a franchise is a license from the owner of a
trademark or Trade Name permitting another to sell a product or service
under that name or mark. More broadly stated, a franchise has evolved
into an elaborate agreement under which the franchisee undertakes to
conduct a business or sell a product or service in accordance with
methods and procedures prescribed by the franchisor, and the franchisor
undertakes to assist the franchisee through advertising, promotion, and
other advisory services.
http://legal-dictionary.thefreedictionary.com/franchise

11. • An agreement or license between two legally independent
parties which gives:
– A person or group of people (the franchisee) the right to market a
product or service using the trademark or trade name of another
business (the franchisor)
– The franchisee the right to market a product or service using the
operating methods of the franchisor
– The franchisee the obligation to pay the franchisor fees for these
rights
– The franchisor the obligation to provide rights and support to
franchisees
International Franchise Association (IFA)

13. THE HONEY

14. India - The Growth Country
Indicator
2010
2011
2012
2013
2014
3453
3777
4103
4434
4819
12
9.3
8.6
8
8.6
5295
6151
6867
7627
8447
16.3
26.1
11.6
11.07
10.75
Rural Population %
70.21
69.98
69.75
69.53
69.3
Urban Population %
29.79
30.02
30.25
30.47
30.7
GDP, Purchasing Power parity ($
Per Capita)
GDP, Purchasing Power parity
(Per Capita %)
Gross Disposable Income Per
Household $
Gross Disposable Income Per
Household Growth %

15. Consumers Ready to Spend
Consumer Expenditure
Household
2006
2007
2008
Total US$Million
Couple with children
3,29,364 4,01,651 4,37,863
Couple without children
82,941 1,05,418 1,16,065
Single parent family
10,012 13,149 14,473
Single person
6,825
8,115
8,603
Other
1,20,100 1,60,975 1,73,835
Total
5,49,241 6,89,308 7,50,838
US$ per household
Couple with children
3,001
3,596
3,854
Couple without children
1,984
2,446
2,617
Single parent family
2,214
2,825
3,025
Single person
1,012
1,204
1,276
Other
2,494
3,316
3,550
Total
2,603
3,210
3,437
2009
2010
2011
4,48,467
1,19,630
14,926
8,547
1,76,419
7,67,990
5,55,701
1,49,432
18,646
10,319
2,16,964
9,51,061
6,22,907
1,68,575
21,039
11,292
2,41,361
10,65,174
3,882
2,625
3,039
1,268
3,571
3,457
4,734
3,195
3,702
1,529
4,351
4,212
5,223
3,517
4,078
1,672
4,795
4,643

16. Incomes Rising All Over
2015
2025
Household Income
Brackets, Annual
Number of
('000 INR)
Households, mn
Globals (>1,000)
3.3
Strivers (500-1,000)
5.5
Seekers (200-500)
55.1
Aspirers (90-200)
106
Deprived (<90)
74.1
Source: McKinsey Global Institute
9.5
33.1
94.9
93.1
49.9
2015
2025
2015
2025
Aggregate
Aggregate
Disposable
Consumption,
Income, INR tn
INR tn
6.3
21.7
4.1
14.1
3.8
20.9
2.7
16.5
15.2
30.6
11.8
24.6
14.6
13.7
12.2
11.9
3.8
2.6
3.3
2.4

17. Development of Modern Retail
Source: Indian Retail report

18. Buying All Products Share of Food and Grocery Very High
Retail Sales
US$bn
2006
23.81
2007
26.63
2008
29.72
2009
33.37
2010
37.44
2011
42.31
Electronics and Appliance Specialist Retailers
7.18
8.26
9.08
9.90
10.99
12.28
Health and Beauty Specialist Retailers
7.32
8.21
9.09
9.92
10.96
12.15
Home and Garden Specialist Retailers
7.52
8.47
9.09
9.48
10.11
10.84
13.92
16.31
18.15
19.78
22.48
24.93
Mixed Retailers
0.71
0.98
1.22
1.23
1.50
1.85
Other Non-Grocery Retailers
0.36
0.39
0.43
0.46
0.51
0.55
60.82
69.26
76.78
84.14
94.01
104.91
Apparel Specialist Retailers
Leisure and Personal Goods Specialist Retailers
Non-Grocery Retailers
Grocery Retailers
109.98
123.49
139.78
155.50
176.39
202.66
Source: Euromonitor International from official statistics, trade associations, trade press, company research, trade
interviews, trade sources

19. Location
Standalone
Leisure
Retail
Lodging
Travel
Total
2005
1,143
5.9
31.4
54.8
31.8
1,267
2006
1,244
7.6
44.9
56.3
40.7
1,394
2007
1,340
11.3
55.9
57.3
48.2
1,513
Location
Standalone
Leisure
Retail
Lodging
Travel
Total
2005
90.2%
0.5%
2.5%
4.3%
2.5%
100%
2006
89.3%
0.5%
3.2%
4.0%
2.9%
100%
2007
88.6%
0.7%
3.7%
3.8%
3.2%
100%
Consumer Food Service Outlets ('000)
2008
2009
2010
2011
1,428
1,523
1,609
1,685
12.5
13
14.4
15.5
75.5
87
99.1
112.3
58.2
60.5
63
63.1
55
64.2
68
72.7
1,629
1,748
1,853
1,949
2008
87.6%
0.8%
4.6%
3.6%
3.4%
100%
2009
87.1%
0.7%
5.0%
3.5%
3.7%
100%
2010
86.8%
0.8%
5.3%
3.4%
3.7%
100%
2011
86.5%
0.8%
5.8%
3.2%
3.7%
100%
2012
1,737
16.9
119.9
65.5
76.5
2,016
2013
1,771
17.7
130
67.4
79.8
2,066
2014
1,791
19.2
136.1
68.8
82.7
2,098
2015
1,803
19.8
144.7
69.2
87.1
2,124
2012
86.2%
0.8%
5.9%
3.2%
3.8%
100%
2013
85.7%
0.9%
6.3%
3.3%
3.9%
100%
2014
85.4%
0.9%
6.5%
3.3%
3.9%
100%
2015
84.9%
0.9%
6.8%
3.3%
4.1%
100%
The Number of Outlets is Increasing and Will Keep Increasing
Prof. Piyush Kumar Sinha, IIMA
19

20. Location
2005
Consumer Food Service Value (Rs. Billion)
2006 2007 2008 2009 2010 2011 2012
2013
2014
2015
Standalone
1,778 1,973 2,183 2,518 2,755 3,091 3,285 3,429 3,532 3,601 3,655
Leisure
Retail
Lodging
Travel
Total
23
31
45
55
59
70
76
83
87
94
98
128
167
201
257
290
344
389
434
474
508
531
211
226
240
262
272
298
304
317
323
327
330
88
108
121
150
168
191
208
220
231
242
253
2,227 2,504 2,789 3,241 3,543 3,993 4,261 4,483 4,647 4,772 4,867
Location
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Standalone
79.8% 78.8% 78.3% 77.7% 77.8% 77.4% 77.1% 76.5% 76.0% 75.5% 75.1%
Leisure
Retail
Lodging
Travel
Total
1.0% 1.2% 1.6% 1.7% 1.7% 1.7% 1.8% 1.8% 1.9% 2.0% 2.0%
5.7% 6.7% 7.2% 7.9% 8.2% 8.6% 9.1% 9.7% 10.2% 10.6% 10.9%
9.5% 9.0% 8.6% 8.1% 7.7% 7.5% 7.1% 7.1% 7.0% 6.8% 6.8%
3.9% 4.3% 4.3% 4.6% 4.7% 4.8% 4.9% 4.9% 5.0% 5.1% 5.2%
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
The Value is Increasing and Will Keep Increasing
Prof. Piyush Kumar Sinha, IIMA
20

21. Standalone
2010-15 2010/15
CAGR
TOTAL
Consumer Foodservice Sales Value Growth %
Leisure
Retail
Lodging
2010-15 2010/15 2010-15 2010/15 2010-15 2010/15
CAGR
TOTAL
CAGR
TOTAL
CAGR
TOTAL
Travel
2010-15 2010/15
CAGR
TOTAL
100% Home Delivery
6.3
35.8
-
-
8.4
49.4
-
-
4.8
26.3
Cafés/Bars
Fast Food
Full-Service
Restaurants
1.1
3
5.7
15.9
-
-
4.5
8
24.8
47.1
3.1
-7.1
16.5
-30.7
4.3
8.6
23.3
50.8
3.3
17.9
-
-
9.1
54.7
2
10.2
4.5
24.8
Street Stalls/Kiosks
5.5
30.9
-
-
15.5
105.9
-
-
5.1
28.4
Consumer
Foodservice
3.4
18.2
6.5
37
9.1
54.6
2.1
10.7
5.1
28.0
The Number Of Outlets Is Increasing And Will Keep Increasing
But
Not In Every Location
Prof. Piyush Kumar Sinha, IIMA
21

22. THE TRAP

23. Location
Standalon
e
Leisure
Retail
Lodging
Travel
Total
Location
Standalon
e
Leisure
Retail
Lodging
Travel
Total
2005
2006
Average Per Outlet Consumer Food Service Value (Rs.)
2007
2008
2009
2010
2011
2012
2013
2014
2015
1,55,475
1,58,579
1,62,825
1,76,355
1,80,870
1,92,191
1,94,914
1,97,432
1,99,424
2,01,050
2,02,757
3,93,220
4,06,369
3,84,124
2,75,786
1,75,704
4,02,632
3,71,047
4,01,599
2,64,128
1,79,673
3,95,575
3,59,392
4,18,150
2,51,660
1,84,324
4,40,000
3,40,132
4,49,828
2,72,000
1,98,969
4,51,538
3,32,989
4,48,926
2,61,526
2,02,695
4,83,333
3,46,620
4,73,333
2,80,147
2,15,482
4,90,323
3,46,483
4,81,775
2,85,695
2,18,674
4,88,757
3,61,968
4,84,275
2,87,582
2,22,409
4,92,655
3,64,385
4,79,525
2,89,348
2,24,918
4,89,583
3,73,255
4,75,000
2,92,261
2,27,455
4,92,424
3,66,966
4,77,023
2,90,930
2,29,200
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
100.0%
102.0%
102.7%
108.3%
102.6%
106.3%
101.4%
101.3%
101.0%
100.8%
100.8%
100.0%
100.0%
100.0%
100.0%
100.0%
102.4%
91.3%
104.5%
95.8%
102.3%
98.2%
96.9%
104.1%
95.3%
102.6%
111.2%
94.6%
107.6%
108.1%
107.9%
102.6%
97.9%
99.8%
96.1%
101.9%
107.0%
104.1%
105.4%
107.1%
106.3%
101.4%
100.0%
101.8%
102.0%
101.5%
99.7%
104.5%
100.5%
100.7%
101.7%
100.8%
100.7%
99.0%
100.6%
101.1%
99.4%
102.4%
99.1%
101.0%
101.1%
100.6%
98.3%
100.4%
99.5%
100.8%
Value Per Outlet Will Start Tapering Very Shortly
Prof. Piyush Kumar Sinha, IIMA
23

24. REALITY CHECK

28. Power Dynamics in Franchisor - Franchisee Relationships
Sources of Power
Franchisor Franchisee Franchisor Franchisee Franchisor Franchisee
Position
Reward / Punishment
Expert
Referrant
Knowledge
Type of Relationship
+
+
+
-
+
+
Dependent
+
+
+
+
+
+
+
-
Interdependent
+
+
+
+
+
+
+
+
+
+
Independent

36. Why is Franchising Used Commonly
•
•
•
•
•
I have a strong Brand
I want quick entry/expansion
I need not invest in Capex
I have the SOPs (Standard Operating Procedure)
I sell standard product/ My product or service does not require much
customisation
• Regular MIS reports would help in tracking the performance
• It is the most used and hence the most effective way of
distribution/channel arrangement

37. Successful Franchises
•
•
•
•
•
•
•
•
QSRs (McDonald )
Retailing (LVMH/Hugo Boss)
Hotels (Holiday Inn)
Education – NIIT
Courier (FedEx)
Third Party Service
Health (Apollo)
And Several Others

38. Thumb Rules
•
•
•
•
•
•
Ownership of Customers
Franchisee Profitability
Prominence of Franchisor without Subservience of Franchisee
Sales Through NOT Sell Into
Micro-Management
Trading Area Assessments

39. Key Success Factors
• Franchisee
– Commitment
– Involvement
• Customer Focus
– Customer Orientation
– Solicitation of Customer
– Knowledge of Customers
• Employee Orientation
– Welfare
– Motivation
• Ethical and Transparent Operation
– System Orientation
– Process Capabilities

40. Customer Symbolic Adoption
High
Low
Franchisee Adoption
High
Low
Order Taking/
Order Fulfillment
Stringent
Company
Policies
Margins /
Good to Have Brands
Emotional Atyachar

41. New Paradigms
• P – A to Partnership
• Knowledge over any other source of Power
• Franchisee Recruitment based on Chemistry and not just market
potential
• Working together in the initial period even when the brand is strong
and the franchisee is reputed
• Role of Franchisee Managers as Key Account Managers
• Role of Franchisees as the Extended Company
• It is all about implementation and attention to details
• The switching costs for the customer is absolute minimal
• Customers are very un-pardoning and give a damn to a retail brand

42. Q
uestions
&
S
uggestions
pksinha@iimahd.ernet.in
+91 – 9825070891