2022 will see greater adoption of franchising
Several forecasts about ‘paradigm shifts in consumer habits’ were being discussed during COVID-19. Let us first acknowledge that a majority of the pre-pandemic habits are back; simply because these are fundamental and driven by man’s social needs.
The one perceptible shift one can see in consumers is a shift to ‘value’, ‘efficiency’ and ‘trust.’ At the risk of repetition, the words ‘value’, ‘efficiency’ and ‘trust’ converge into what we call A BRAND. Several brands, across industries are going to relook their own proposition and make themselves more accessible to larger audiences.
2022: The opportunity
There’s no denying that COVID sent culture shocks that permeated the social and economic fabric of nations and communities alike. The prolonged exposure to stress and the acceptance that the world is changing in newer ways- has had three major consequences-
- More and more people want greater ownership of their future.
- Brands have no choice but to offer greater ‘value, efficiency and trust’. Hence, they will have to innovate and grow prudently.
- Each brand will unlock the potential to be amplified million-fold. The familiarity offered by a brand is a soothing balm for a world that is recovering from what has been an ambiguous two years.
The business model that can facilitate the above shifts is franchising. And India in particular is uniquely suited for the same because
- 1) We are an entrepreneurial country: The next generation wants to run their own business and franchising will give them a balance of being their own boss and benefiting from the systems of a larger organization.
- 2) Lucrative jobs will demand upskilling: Thanks to several digital-first initiatives and greater automation, the good jobs are moving to higher skilled folks. There is a large employee pool, whose administrative and people skills will be unlocked in a far more profitable way through franchising
- 3) Resilience is more valuable than risk: With proven franchise opportunities available more people will see the merit in becoming part of an organized system rather than trying to do everything on their own.
- 4) Efficient unit economics are critical: Skilled labor is and always will be expensive, especially in the food space. Franchising helps power ‘unit economics’- the cost of running the store is kept under check thanks to centralized manufacturing and investments in technology at the backend. Besides, for an individual franchise, good unit economics and good fundamentals will allow for scaling up.
- 5) Shift from commodities to brands: 2022 will see consumers move from commodities to brands in the QSR space. As competition increases, it is the discipline of systems and processes to maintain the distinctiveness of the brand that will produce results. A good franchisor invests heavily in training- this will in turn translate into greater differentiation. Individual franchisees will benefit from easier discovery.
The whole is greater than the sum of parts
This is very apt for franchising. It turns out that there is safety in numbers. What we saw during COVID- a mad unsustainable race of ‘buy 1 get 1 free’ among QSRs, destroyed several promising start-ups in 2021. This has made people realize that running individual stores is not easy. Unforeseen crises and market movements tend to over-stretch the business to breaking point.
Franchisees are far more resilient. As the parent company drives margin protection via efficiency improvements u0026amp; cost cutting, every franchisee takes care of their own payroll and balance sheet. Several elements of cost are simply not theirs to bear.
Summing up, the Indian mindset is ideally suited to franchising; whatu0027s more, early adopters of franchising will benefit greatly in 2022.
By Dheeraj Gupta, Founder of Jumboking
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