The numbers might add up, but franchising in this dense sub-continent isn’t a walk in the park. Rich cultural variation, intrinsic religious beliefs, and the risk of copycats make India a market quite unlike any other
On paper, franchising within India is a match made in heaven. For franchisees, low fees mean easy access into a potentially lucrative business strategy; according to Gaurav Marya, chairman of Franchise India Group, 53 per cent of brands in the country offer an investment cost of less than $60,000. For franchisors, a population of 1.4 billion and a young average age of 29 allows plenty of choice for master franchises. The Indian food and beverage industry alone is placed at around $400bn, and the contribution of franchising to the Indian GDP is set to rise to five per cent by 2025.
So why is it proving difficult for franchises to penetrate the country – and why is it seemingly impossible for Indian franchises to flourish abroad?
Culture shock
It’s often said that every 100 miles in India, culture and cuisine are reinvented. There are very few national truths that unify the entire sub-continent, besides perhaps dietary preferences – over 50 per cent of the population is vegetarian. India also has the largest Muslim population in the world, who don’t eat pork.
There’s also a considerable Hindu following, who don’t eat beef. Already, it becomes clear that even the titans of franchising – names like McDonald’s, Pizza Hut, and Domino’s Pizza – would struggle to transpose their successes in America, Europe, and Australia.
“Indianization”
As we know, though, the giants of the F&B industry have managed to break into the elusive Indian franchising market. Their method? They altered their menus and services through what some refer to as “Indianization”.
You won’t find a regular Big Mac on any Indian McDonald’s menu, nor spicy ground beef at Pizza Hut. The prices of chicken nuggets will also be considerably cheaper in several restaurants, when compared to the offerings in the West. The western franchises that have thrived in India are those that can successfully adapt their set-up to the specialized and often cheaper preferences of Indian culture. Meat is still consumed across the country, but it would be ill-advised for a popular U.S. steakhouse to try and market their franchise nationally.
Adaptations can be broad (no pork in the menu, for example), or notably restrictive: Gujarat, a state in west India, is primarily – not quite wholly – vegetarian. A universally-appealing franchise such as Dr. Bubbles, a bubble tea bar, would outperform a general western fast-food chain, whose food menu is entrenched with meat options.
Areas in East India, such as Kolkata, have low discretionary income. This means that expensive brands may not be viable whatsoever, and more affordable franchises will have to revise their fees to reflect the local market.
Low fees, high opportunity
With the right approach, the successes that the Indian franchise industry brings could greatly outweigh the challenges. It’s just about taking a different tact to other global markets. Not only will international franchises have to cater to India’s vegetarian population, but they’ll have to compete with the thousands of cheap, local kiosks and chains that populate India’s busy streets.
80 per cent of the food and business market in India is what Joel Silverstein, CEO of East West Hospitality Group, refers to as the “unorganized market”. That is, affordable, non-franchised street food. It’s cheap to purchase, and even cheaper to produce. There are also hundreds of local variations of popular U.S. restaurants, which severely undercut their international counterparts.
Changing the menu and lowering cost is a great first step. But businesses need to go beyond this; they need to study their specific market intensely, and pinpoint exactly what local or regional consumers are looking for. This is naturally a key stage in any global franchising effort, but it’s especially important for India, where local flavors can change just down the road. Because of this, India could be a very challenging market for first-time franchisees. Finding a savvy master franchisee who is immersed in local zeitgeist would be advisable for international brands looking to enter the market.
ABOUT THE AUTHOR
Kieran McLoone is the deputy editor for Global Franchise magazine.
