market research report : franchise market in india 2013

Franchise Market - India

May 2013

2

Executive Summary

Market

India has emerged as a viable franchising destination for major brands owing to the increasing a1 who are keen at shelling out more for luxury brands a2, a3 and a4constitute the top sectors for earning revenues in the Indian franchising arena Amongst market entry strategies, a5 is hailed as being the most opted route for entry

Drivers & Challenges

Competition

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

Major Players

Company A Company B Company C

Company D Company E Company F

E-newsletter as a latest promotional technique Business model addressing rural-urban divide E-franchisees

Trends

FRANCHISE MARKET IN INDIA 2013.PPT

3 FRANCHISE MARKET IN INDIA 2013.PPT

•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

•Competition

•Strategic Recommendations

•Appendix

4

SAMPLE Franchising has surfaced as a prospective business model spelling international growth for brands

Franchise Market – Global Overview

•A key strategy when growth becomes saturated in domestic markets, franchising helps brands look across borders for untapped markets and potential growth

•Conducive macro conditions including business climate, legal and regulatory system, judiciary practices, credit facility are considered to be factors responsible for franchising growth

•Leading franchises have recognized the factors leading to growth and now have requisite resources to grow and ramify into emerging markets

•Top franchises have proven their success in global expansion, mastering linguistic and business challenges as also adapting to cultural alterations in order to fit in the schema of franchising

The global franchising market is expected to reach

INR b1 by the end of

b2

Franchise Market – Global Snapshot

g7

g6

g5 g4

g3 g2

g1 g14

g13

g12

g11

g10

g9

g8

xxxxxxxxxxxxxx

h7 h6

h5

h4

h3 h2

h1 h14

h13

h12

h11

h10

h9

h8


5

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

Franchise Market – Indian Overview

Franchise Market – Growth

•A growing urban class aided with 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 c1 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

•c2, c3 and c4 constitute the top sectors from the Indian franchising perspective


INR bn

20--e

p

a

b

c

d

e

f

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SAMPLE Franchising – India Snapshot (1/3)

Franchise Market – Indian Overview

t1

Franchise’s Contribution to overall GDP

t6

Sales through franchised outlets

t3

t2

t5

t4

t9

t10

t8 t7


2012

7

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

Thus it can be inferred that d1 is the most adopted

franchising route in India as companies generally try to test the water by setting up d2 and based on

its performance ventures into d3

Franchise Market – Entry Routes

u6 u5

u4

u3

u2

u1


8

SAMPLE

Snapshots

Sectors (1/7)

• In a diverse market like that of India, certain factors work in conjunction to make a brand successful

• Factors including e3, e4, e5 and e6 and services constitute the key determinants of success of F&B concept

• Many brands have tweaked their menu offerings in order to cater to the local tastes and preferences along with dishing out international flavors

• India’s food and beverage (F&B) sector is estimated to grow at a rate of e1 year-on-year

• India being positioned among the top four Asian destinations e2, this sector is witnessing a major influx of international players through franchising

•Restaurant and cafe sector hold prospective growth in this sector

Food & Beverage Sector – Overview Eat Out Market – Growth in India

Restaurant Franchising

v1

New Outlets venture through franchise model


INR bn

n g

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9

SAMPLE 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


10

Impact

20--e 20--e

r15

20--e

r16

mn

g

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r17

r14

20--

r13

20--

r12

20--

r11

Total Internet Subscribers – India Number of Broadband Subscribers – India

Point 1

mn

x

y

z

20--e

r10 r9

20--e

r8

r7

20--e

r6

r5

20--

r4

r3

20--

r2

r1

Urban Subscribers Rural Subscribers

• Internet access has opened avenues towards enlightening Indians about the global trends and brands

•As more and more internet population grows, people are more aware of the latest trends that happen across the global platform

•Growing knowledge in people about products have led to the emergence of ramification of the same across boundaries Consumers are getting more brand conscious and are lured to procure those products

•Rising awareness stems from heightened penetration of internet among masses which inadvertently leads to consumers devoting more money for luxury means even if it implies shelling out for international brands

• Further, internet is also making it easier for international companies to gain an understanding of the cultural milieu of India and its local preferences

Internet acts as a window that enables consumers to have a view of the wide array of products

Access to internet


11

Government Regulation – Summary

Participation

Franchising laws in India

Indian Franchise Association

Franchising Association of India


12

SAMPLE Though there is no particular law franchising law …

Franchising laws in India

• There is no specific regulation that pertains to franchising sector in India or even regulates franchise agreement • Complexity and vast areas of law which such relationships involve have been explained as the reasons behind

not categorizing it under any law • Moreover, franchising as an industry has not been recognized as a sector by the Indian Government which also

states the reason behind why no legal framework has not yet been constituted

Laws regulating franchising in India includes f1, f2, f3, f4, f5, f6, f7, f8, f9

•However, there are certain regulations that are also factored when franchising is considered

•These are laws that are generally applicable to all parties that come into an agreement

•The applicability of laws depends precisely upon the modes of franchising which may be domestic or even trans-border


13

SAMPLE Trends – Summary

Key Trends

E-newsletter as a latest promotional technique

E-franchisees Business model

addressing rural-urban divide


14

SAMPLE Unique business model in franchising ecosystem expected to reap benefits …

Business model addressing rural-urban divide (1/2)

• E-commerce is gradually penetrating into rural sections as retailers start using this model to expand their presence into non-urban and tier III cities

• This business model aims to bring together retailers, brands and consumers on a single technology-enabled platform and thereby create ample opportunities for franchisors and franchisees

•xxxxxxx

•xxxxxxxxx

•xxxxxxx

•xxxxxxxxxx


15

SAMPLE Public: Domestic Company – Company A (1/5)

Key People

Products and Services

Company Information Offices and Centres – India

Corporate Address Company Address

Tel No. +91-xx-fefhdgfjkb

Website www.companyA.com

Year of Incorporation 19--

Ticker Symbol ----

Stock Exchange Exchange Name

Category Products/Services

c1 P1, p2, p3

c2 P4, p5, p6

c3 P7, p8, p9

Name Designation

Person 1 Designation




Head Office


16

SAMPLE Financial Snapshot Key Ratios

Financial Summary

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

• The company reported total income of INR - mn in FY 20--, registering an increase of x1% over FY 20--

• The company earned an operating margin of x2% in FY 20--, a decrease of - percentage points over FY 20--

• The company reported debt to equity ratio of - in FY 20--, a decrease of x3% over FY 20--

Key Financial Performance Indicators

Indicators Value (dd/mm/yyyy) Market Capitalization (INR mn) z1 Total Enterprise Value (INR mn) z2 EPS (INR) z3 PE Ratio (Absolute) z4

Particulars y-o-y change

(2012-11) 2012 2011 2010 2009

Profitability Ratios Operating Margin -0.77 8.95% 9.73% 9.98% 7.14%

Net Margin -1.02 4.72% 5.74% 5.64% -0.78%

Profit Before Tax Margin -1.57 6.91% 8.48% 8.57% 1.34%

Return on Equity -1.17 4.87% 6.04% 5.57% -0.76%

Return on Capital Employed -1.48 14.92% 16.40% 15.61% 10.15%

Return on Working Capital -4.01 42.79% 46.79% 34.46% 20.15%

Return on Assets 0.19 12.33% 12.15% 11.86% 7.66%

Return on Fixed Assets -2.93 27.20% 30.13% 28.56% 20.45%

Cost Ratios Operating costs (% of Sales) 0.79 91.03% 90.24% 90.01% 92.86%

Administration costs (% of Sales)

1.52 43.60% 42.08% 40.86% 41.81%

Interest costs (% of Sales) 0.40 1.40% 1.00% 0.85% 1.17%

Liquidity Ratios Current Ratio 33.00% 2.66 2.00 2.43 2.55

Cash Ratio 38.99% 0.06 0.04 0.12 0.13

Leverage Ratios Debt to Equity Ratio -55.37% 0.03 0.07 0.06 0.09

Debt to Capital Ratio -53.67% 0.03 0.07 0.06 0.08

Interest Coverage Ratio -34.42% 6.39 9.75 11.77 6.11

Efficiency Ratios Fixed Asset Turnover -1.78% 3.03 3.09 2.86 2.86

Asset Turnover 10.47% 1.37 1.24 1.19 1.07

Current Asset Turnover 24.15% 2.98 2.40 2.03 1.71

Working Capital Turnover -0.53% 4.77 4.80 3.45 2.82

Capital Employed Turnover 1.92% 1.00 0.98 0.93 0.89

Improved Decline


Public: Domestic Company – Company A (2/5)

Net Profit/Loss

Total Income INR mn

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SAMPLE Key Business Segments Key Geographic Segments

Key Recent Developments

Description News

Overview • p1 is India’s market leader in the social expression industry with the maximum market share in the

organized sector

• It exports its products to p2, p3, p4

Collaborations • p5 has entered into a license agreement in Jan 2011 with p6, Inc the global market leader in p7, to open

up exclusive p8 across India

• It also has exclusive tie-ups with many other global majors such as p9, p10, p11

Expansion Plans • Has plans to double its revenue to INR - by the end of 20-- as also to open - stores every year



20--

j1 i1 h1

g1

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Product 4

Product 3

Product 2

Product 1

e

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l4 k4 j8 i8

h8

g8

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l3 k3 j7

d

h7

g7

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l2 k2 j6 i6

h6

g6

20--

l1 k1 j5 i5

h5

g5

i7

Region 6

Region 5

Region 4

Region 3

Region 2

Region 1

18

SAMPLE Investment Details

• xxx

• xxx

• xxx

• xxx

Date of Operation

Franchise Requirements

Rights

Supports Offered



19

SAMPLE

S W

T O

• Strength 1 • Strength 2

• Weakness 1

• Weakness 2

• Threat 1

• Threat 2

• Opportunity 1 • Opportunity 2



20

SAMPLE

Key People

Products and Services

Company Information Offices and Centres – India

Registered Address Company Address

Tel No. +91-xx-hgfruhighjij

Website www.companyB.com

Year of Incorporation 19--

Name Designation




Registered Address

Category Products/Services

c1 s1

Private: Domestic Company – Company B (1/6)


21

SAMPLE Shareholders of the Company Ownership Structure

Name No. of Shares held

Y1 Y8

Y2 Y9

Y3 Y10

Y4 Y11

Y5 Y12

Y6 Y13

Y7 Y14

Total Y15

z1

z2



22

SAMPLE Financial Snapshot Key Ratios

Financial Summary

• Company incurred a net loss of INR - mn in FY 20--, as compared to net loss of INR - mn in FY 20--

• It reported total income of INR - mn in FY 20--, registering a decrease of z1% over FY 20--

• Earned an operating margin of z2% in FY 20--, an increase of z3 percentage points over FY 20--

• The company reported a debt to equity ratio of z4 in FY 2010, a decrease of z5% over FY 20--

Particulars y-o-y change

(2010-09) 2010 2009 2008 2007

Profitability Ratios Operating Margin 42.61 -0.75% -43.36% 21.26% 100.00%

Net Margin 31.55 -1.78% -33.34% 22.52% 8.64%

Profit Before Tax Margin 43.03 1.27% -41.77% 25.54% 100.00%

Return on Equity 9.24 -0.47% -9.71% 7.92% 6.63%

Return on Capital Employed 11.84 -0.19% -12.03% 7.47% 76.28%

Return on Working Capital 15.05 -0.25% -15.30% 8.45% 239.10%

Return on Assets 11.84 -0.19% -12.03% 7.46% 76.28%

Return on Fixed Assets 1336.40 -30.15% -1366.54% 834.39% 1796.69%

Cost Ratios Operating costs (% of Sales) -43.47 100.77% 144.24% 77.76% N.A.

Administration costs (% of Sales)

N.A. N.A. 49.53% 35.81% N.A.

Interest costs (% of Sales) -0.37 0.02% 0.40% 0.14% N.A.

Liquidity Ratios Current Ratio -13.95% 7.15 8.30 7.07 1.85

Cash Ratio 185.11% 0.32 0.11 0.07 0.10

Leverage Ratios Debt to Equity Ratio -5.98% 0.047 0.049 0.00 0.01

Debt to Capital Ratio -5.71% 0.04 0.05 0.00 0.01

Interest Coverage Ratio -69.74% -33.76 -111.55 158.54 N.A.

Efficiency Ratios Fixed Asset Turnover 26.76% 39.16 30.89 37.51 17.97

Asset Turnover -10.27% 0.24 0.27 0.34 0.76

Current Asset Turnover -9.07% 0.28 0.30 0.33 1.10

Working Capital Turnover -7.00% 0.32 0.35 0.38 2.39

Capital Employed Turnover -10.53% 0.26 0.29 0.34 0.77

Improved Decline



Net Profit/Loss

Total Income

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SAMPLE Key Recent Developments

Description News

Overview

• Is a wholly owned subsidiary of the z6 with an aim “xxxxxx”

• It is working at establishing a standardized network of z7 across the country with over --clinics operating in India

• Is considered to be positioned to be the largest corporate player in the z8 in z9

Services

• It addresses z10 • It offers complete range of services in the likes of consultation with specialists, latest

medical equipment, well stocked 24-hour pharmacy Consultations are provided in diverse fields such as z11, z12, z13, z14 Boasts of having laboratory that are equipped to handle investigations related to z15, z16 Moreover, it also processes health check-ups in order to detect onset of diseases in early stages and

thereby prevent them



24

SAMPLE Investment Details

• xxxx

• xxxx

• xxxx

• xxxx

Date of Operation

Franchise Requirements

Rights

Supports Offered



25

SAMPLE

S W

T O

• Strength 1 • Strength 2

• Weakness 1

• Weakness 2

• Threat 1

• Threat 2 • Opportunity 1 • Opportunity 2



26

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market research report : franchise market in india 2013

Business

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company information

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