market research report : franchise market in india 2014

Franchise Market - India

June 2014

2

Executive Summary

Market

India has emerged as a viable franchising destination for major brands owing to the increasing disposable income of the people who are keen at shelling out more for luxury brands

Education, food and beverage and retail constitute the top sectors for earning revenues in the Indian franchising arena

Among market entry strategies, unit franchising is hailed as being the most opted route for entry

Drivers & Challenges

Competition

DriversGrowth in disposable income and

consumer spendingDevelopment of malls and supermarketsAccess to internet Introduction of FDI in retail Improvement in transportation

infrastructure Increasing availability of creditChange in consumer outlook

Challenges

Shortage of skilled manpower

Real estate issues

Major Players

Player 1 Player 2 Player 3

Player 4 Player 5 Player 6

E-newsletter as the latest promotional technique

Business model addressing rural-urban divide

E-franchisees

Entrepreneur Cafe

Trends

FRANCHISE MARKET IN INDIA 2014.PPT

3

•Macro-Economic Indicators

•Introduction

•Market Overview

•Types of Franchising

•Benefits & Key Success Factors

•Market Entry Routes

•Franchise Model in Key Sectors

•Drivers & Challenges

•Government Participation

•Trends

•Franchise Opportunities

•Competitive Landscape

•Strategic Recommendations

•Appendix


4

Economic Indicators (1/3)

d1

a1

11

12

13

14

15

Q4

b4

a4

Q3

b3

a3

Q2

c2

b2

a2

Q1

c1

b1

INR tn

c4c3

d2

2012-132010-11 2013-142011-12

GDP at Factor Cost: Quarterly

Inflation Rate: Monthly

q

0.0

0.2

0.4

0.6

0.8

1.0 r t

s

%

Jul 2013 - Aug 2013

p

q

Nov 2013 - Dec 2013Oct 2013 - Nov 2013Sep 2013 - Oct 2013Aug 2013 - Sep 2013


5

Though at an initial stage, yet franchising in India has progressed and is posting healthy growth over past 4 years

Franchise Market – Indian Overview

Franchise Market – Growth

• A growing urban class aided by rising disposable income has strengthened India’s position as a viable

franchising destination in the global platform

• Greater demand for goods have translated into generation of greater demand for franchises which is growing

at an impressive growth rate of x1% annually

• Further, owing to the less hassles in setting up an entrepreneurial venture an increasing number of people are

opting for franchise route to expand and enter Indian market

• Education, food and beverage, and retail sector constitute the top sectors from the Indian franchising

perspective


0

INR bn

2014e

x8

2015e 2017e

x5

2018e

x6

x4

x7

2016e

x3

2013

x2

6

SAMPLE Franchising – India Snapshot (1/4)

Franchise Market – Indian Overview

y1

s1

y2

s2

y3

y4

s4

s3

y6

y5

s6s5

2013


7

SAMPLE An analysis of geographical segmentation details about where franchising has caught up well

Franchising – Geographical Segmentation (2013)

NORTH

Has posted good growth owing to the presence of HNI (high

net worth individuals) with key hubs including New Delhi,

Noida and Gurgaon

SOUTH

Has gained focus of international franchisors with Bengaluru being recognized as

the IT capital of India and having enough population with considerable purchasing power

EAST

Slightly less developed

compared to North or West,

but is fast catching up with

Kolkata leading from the front

WEST

Is hailed as a prime region for transactions as Mumbai is

named as the business capital of India, with Pune and other regions not lagging far behind

0

North

Unit %

t1

t2West

t4

t3

East

South


8

SAMPLE Entry Routes – Segmentation

Segmentation of

different entry

strategies based

on the ones

adopted in high

probability by

the investors for

their expansion

or market entry

Text

Franchise Market – Entry Routes (2013)

p4

p5p6

p3p1

p2


9

SAMPLE

Education Franchising – Types

Sectors (2/7)

• There are multifarious opportunities in education

franchising including pre-school franchise, play

school, day-care franchise, child care, learning

center, training institute, grooming center, IT

institutes, animation school, retail school, coaching

classes, educational institute, aviation academy,

language center, recruitment service, and customer

services

• Business opportunities are blooming with the concept of franchising especially in education sector

• Education is hailed as the second largest household expenditure segment after food in India

• This makes it a more attractive sector where more than 390 franchisee owners operate

• Informal and supplementary education forms the lion’s share of education franchising

Education Sector – Overview Education Sector – Market Size & Growth

Education Franchising – Scope for Growth

0

INR tr

2014e

q3

2013e

q6q5

q4

2012

q2q1

2015e2011

q7

q8


10

SAMPLE Drivers and Challenges

• India’s affinity to receive quality education to fulfill the aspirations of its youth is considered to be the most significant growth driver for this sector

• Gap identified between the number of potentially employable people and the number of educational institutes available in the country poses as a big opportunity for the service providers to capitalize on

• Pre-schools are considered to be yet another domain wherein franchising seems to play a significant role

• Present scenario poses enough opportunities for education franchising as parents are ready to shell out considerable amount to provide quality education to their kids

• Growing number of working women also poses as a driver as families with two working parents generally send their kids to coaching and pre-schools for education as they cannot devote time to them

Drivers

• The sector is burdened with the high real estate prices since it requires setting up of a classroom

• Presence of stiff competition wherein cropping up of too many institutes can be termed as a challenge for any start-up

• Success of any educational franchise is dependent on the manpower resources wherein if proper qualified staff do not render teaching, then name and market reputation of both the franchisor and the franchisee is at risk

• Educational institutes are hailed as being hindered by lack of advertising, although service providers are working on it intensively by promoting through newspapers, radio and television

• Another significant challenge faced by them is the maintenance of standard between the parent institute and the authorized institute

Challenges


11

Drivers & Challenges – Summary

Drivers

Growth in disposable income and consumer spending

Development of malls and supermarkets

Access to internet

Introduction of FDI in retail

Improvement in transportation infrastructure

Increasing availability of credit

Change in consumer outlook

Challenges

Shortage of skilled manpower

Real estate issues


12

Government Regulation – Summary

Regulation

Franchising laws in India

Indian Franchise Association

Franchising Association of India


13

Trends – Summary

Entrepreneur cafeE-newsletter as the latest

promotional technique

E-franchiseesBusiness model addressing rural-

urban divide

Key

Trends


14

SAMPLE Franchise Opportunities

Automobile (1/2)

Investment Franchise Franchise Descriptions

Upto INR 0.5 mn T1 • T5

INR 0.5 – 1.5 mn

T2 • T6

T3 • T7

INR 1.5 – 3.0 mn

T4 • T8


15

SAMPLE Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3)

Competitive Benchmarking (2/5)

j5j4 j6

%

Company 2

j1

j3

Company 3Company 1

j2

Net MarginOperating Margin

• Company 1 recorded operating margin of -%, higher than that of Company 2 which recorded operating margin of negative -% and Company 3 which recorded operating margin of negative -%

• Company 1 recorded the highest net margin of -%, higher than Company 2 which recorded a net margin of negative -% and Company 3 which recorded a net margin of -%


16

Public : Domestic Company – Company 1

Key People

Products and Services

City A

Company Information Offices and Centres – India

Corporate Address

Block ABC

City XYZ

Tel No. 123456

Fax No. 1234567

Website http://www.abc123com/

Year of Incorporation 20--

Category Products/Services

Product 1 P1,p2,p3

Name Designation

ABC abc

XYZ xyz

MNO mno


http://www.abc123com/

17

SAMPLE Financial Snapshot Key Ratios

Financial Summary

• The company incurred a net profit of INR A mn in FY 20--, as compared to net profit of INR B mn in FY 20--

• The company reported total Income of INR X mn in FY 20--, registering an increase of r % over FY 20--

• The company earned an operating margin of d1 % in FY 20-- an decrease of k % points over FY 20--

• The company reported debt to equity ratio of g in FY 20--, an increase of r % over FY 20--

Financial Summary

Indicators Value (DD/MM/YYYY)Market Capitalization (INR) a

Total Enterprise Value (INR) b

EPS (INR) c

PE Ratio (Absolute) d

Particulars y-o-y change

(20-----)20-- 20-- 20-- 20--

Profitability RatiosOperating Margin a1 a a2 a3 a4

Net Margin b1 b b2 b3 b4

Profit Before Tax Margin c1 c c2 c3 c4

Return on Equity d1 d d2 d3 d4

Return on Capital Employed e1 e e2 e3 e4

Return on Working Capital f1 f f2 f3 f4

Return on Assets g1 g g2 g3 g4

Return on Fixed Assets h1 h h2 h3 h4

Cost RatiosOperating costs (% of Sales) i1 i i2 i3 i4

Administration costs (% of Sales)

j1 j j2 j3 j4

Interest costs (% of Sales) k1 k k2 k3 k4

Liquidity RatiosCurrent Ratio l1 l l2 l3 l4

Cash Ratio m1 m m2 m3 m4

Leverage RatiosDebt to Equity Ratio n1 n n2 n3 n4

Debt to Capital Ratio 01 o o2 o3 o4

Interest Coverage Ratio p1 p p2 p3 p4

Efficiency RatiosFixed Asset Turnover q1 q q2 q3 q4

Asset Turnover r1 r r2 r3 r4

Current Asset Turnover s1 s s2 s3 s4

Working Capital Turnover t1 t t2 t3 t4

Capital Employed Turnover u1 u u2 u3 u4

Improved Decline

Net IncomeRevenue

0

20--

x4

20--

x3

20--

x2

20--

x1



18

Key Recent Developments

Key Business Segments Key Geographic Segments

Description News

Overview • It sells product A under the brand name of ‘abg’ & ‘def’

Production facilities • In India the company has k manufacturing hubs and j marketing offices

Shareholding pattern • Promoters of the company hold j % of the share while k % is held by general public

Clients • Clients are spread across ghj countries spanning across t continents

Investments • The company wants to invest INR K mn in a company through a joint venture in Country 2 producing product a and product b

• So far the company invested INR 0.C mn in company A in country A

0

20--

cd

20--

ba

20-- 20--

y1

0

c1

a1

20--20--

b1

20--

India



19

SAMPLE Investment Details

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

Date of Operation

Franchise

Requirements

Rights

Supports Offered



20

SAMPLE

• Text• Text• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text • Text• Text

TO

WS



21

Key People

Products and Services

City A

Company Information Offices and Centres – India

Corporate Address

Block ABC

City XYZ

Tel No. 123456

Fax No. 1234567

Website http://www.abc123com/

Year of Incorporation 20--

Category Products/Services

Product 1 P1,p2,p3

Name Designation

ABC abc

XYZ xyz

MNO mno


Private : Domestic Company – Company 2

http://www.abc123com/

22

SAMPLE Shareholders of the Company Ownership Structure

Name No. of Shares held

n1 m1

n2 m2

n3 m3

n4 m4

n5 m5

n6 m6

n7 m7

Total

p2

p1

p3 p4



23

SAMPLE Financial Snapshot Key Ratios

Financial Summary

• Company earned a net loss of INR - mn in FY 2013, as compared to net loss of INR - mn in FY 2012

• It reported total income of INR - mn in FY 2013, registering an increase of -% over FY 2012

• Earned an operating margin of -% in FY 2013, a decrease of - percentage points over FY 2012

• The company reported a current ratio of - in FY 2013, a decrease of -% over FY 2012

Net Profit/Loss

Total Income

-200

-150

-100

-50

0

50

0

INR mnINR mn

2013

h2

h1

2012

g2

g1

2011

f2

f1

2010

e2

e1


Particulars y-o-y change

(20-----)20-- 20-- 20-- 20--

Profitability RatiosOperating Margin a1 a a2 a3 a4

Net Margin b1 b b2 b3 b4

Profit Before Tax Margin c1 c c2 c3 c4

Return on Equity d1 d d2 d3 d4

Return on Capital Employed e1 e e2 e3 e4

Return on Working Capital f1 f f2 f3 f4

Return on Assets g1 g g2 g3 g4

Return on Fixed Assets h1 h h2 h3 h4

Cost RatiosOperating costs (% of Sales) i1 i i2 i3 i4

Administration costs (% of Sales)

j1 j j2 j3 j4

Interest costs (% of Sales) k1 k k2 k3 k4

Liquidity RatiosCurrent Ratio l1 l l2 l3 l4

Cash Ratio m1 m m2 m3 m4

Leverage RatiosDebt to Equity Ratio n1 n n2 n3 n4

Debt to Capital Ratio 01 o o2 o3 o4

Interest Coverage Ratio p1 p p2 p3 p4

Efficiency RatiosFixed Asset Turnover q1 q q2 q3 q4

Asset Turnover r1 r r2 r3 r4

Current Asset Turnover s1 s s2 s3 s4

Working Capital Turnover t1 t t2 t3 t4

Capital Employed Turnover u1 u u2 u3 u4

Improved Decline


24

SAMPLE Key Recent Developments

Description News

Overview

• Is a wholly owned subsidiary of the concern g

• It is working at establishing a standardized network of h

• Is considered to be positioned to be the largest corporate player in the I market

Services

• It addresses diurnal t1, t2 needs

• It offers a complete range of services such as consultation with t4, t5, t6 Consultations are provided in diverse fields such as t7, t8, t9

Boasts of having laboratory that are equipped to handle investigations related to t9, t10, t11

Moreover, it also processes t12



25

SAMPLE Investment Details

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text

Date of Operation

Franchise

Requirements

Rights

Supports Offered



26

SAMPLE

• Text• Text• Text

• Text

• Text

• Text

• Text

• Text

• Text

• Text • Text• Text

TO

WS



27

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