Currently, franchising is emerging as one of the key growth patterns for many Asian firms and India is in the middle of retail franchise revolution  In recent times, malls have emerged as leading franchise vehicles in India, owing to their popularity and ability to increase footfall. In addition, malls provide visitors with varied recreational facilities, apart from creating a gala shopping ambience with several brands under one roof. Sometimes, malls even prompt customers to indulge in impulsive buying, thereby boosting sales of retailers. This is a common case in metros today and lifestyle brands, in particular, benefit immensely from this. The scenario in tier II and III cities is a little different yet exciting as here malls benefit franchisees more, as against metros. Surprised? Well, major brands extending their reach in these cities prefer to capture the market via the franchise business model as they believe local operators are better placed in capitalising the dynamics of these markets. Moreover, the urban population has managed to get over their xenophobia regarding malls and is very much aware that malls and high costs are no longer synonymous.
These are prompting retailers to acquire more spaces in malls, consequently encouraging developers to embark on world-class projects in the retail realty segment, including malls and hypermarkets.
Malls as franchise venues
However, it is a mistake to assume that increasing footfalls in malls automatically translate into bigger sales for franchises. The reason being even today maximum mall visitors in India come only to enjoy the ambience and therefore the onus of profitability still rest on offering bargains and imaginative display.
This has given rise to conflicting opinions on the profitability of franchised brands in Indian malls. Those opposing the idea of malls as franchise venues say that mall space is excessively priced, while those in favour believe these glitzy realty structures to be the ideal place for a franchise set-up and even consider the cost of putting up a store inside a mall to be proportional to the franchised name purchased. Brands do not franchise their name if they do not have a reputation for saleability.
Despite differing opinions, malls are expected to remain as the leading franchise venues because of their ability to attract heavy customer traffic.
Franchising: The concept
Franchising is a unique business concept, which helps to replicate a successful business model across locations through like-minded people. It is believed to be the best way to market one’s products as it helps to expand one’s reach and in the worst case, customers will be at least aware of the brand’s presence.
However, a franchise model works when it is self-sustainable, practical and partners for sharing the vision are available, and malls, as relatively novel retail formats, therefore act as perfect franchise venues in India. Hiring a professional consultant to guide through the process is imperative for businesses intending to franchise. Initially, a business should franchise at a single mall and can expand multifold after at least a year.
Currently, franchising is emerging as one of the key growth patterns for many Asian firms and India is in the middle of retail franchise revolution. As long as the realty market is buzzing and new malls are being constructed to cater to the country’s expanding retail market, franchising will continue to thrive.
Choosing the right mall
With malls springing up everywhere, most retailers now are at a loss to choose the right one. Little knowledge about variables such as locality, best locality-specific product mix and local catchment dynamics may park them in a completely inappropriate mall. Apart from this, factors comprising design and layout, overall ambience, a proper brand mix that includes anchors, multiplex, food court, recreation centre for kids and especially adequate parking space also help to make a mall work for retailers.
To increase sustainability of malls, developers can adequately space them out, with sufficient distance between each establishment. The correct distance would depend on the catchment area and the spending power of local customers, and would therefore vary from city to city. Furthermore, malls can also be clearly categorised. Even in a single area with 10-plus malls, making each one a niche mall (say a furniture or a jewellery shopping centre) would give each establishment a sort of monopoly, thereby enabling them to coexist and thrive without problems.
Shubhranshu Pani, managing director (Retail Services) of Jones Lang LaSalle Meghraj |
