How to start a franchise business in India?

BusinessCategory
15 min read
Maneka Tanwani

India is witnessing a consumption boom fuelled by its growing middle class. Roughly 300 million people in this group have disposable income, big aspirations and are looking for goods and services. If you’ve been thinking of starting a franchise business in India, now might just be the perfect time.

About 35% of Indian franchises are owned by first-time entrepreneurs.

Be it a small town or a metropolitan city, one look around the corner and you can easily spot several brands. As consumers, McDonald's or Starbucks might look similar no matter what country we’re in. However, underneath this layer resides two completely different organizations: the company that owns the brand and the business that operates the outlet. With this blog, we will explore franchise opportunities for ambitious entrepreneurs.

This is mainly because there are several advantages to getting a franchise as opposed to starting from scratch with a startup. But before diving in, you need to know what the franchises actually mean.

Related: 5 manufacturing business ideas with low investment

What is a franchise?

In a nutshell, a franchise is basically a license provided to an entrepreneur (the franchisee) by the original owner (the franchisor). This allows the franchisee to use the brand name, logo and products, etc. to operate a business under the primary business name.

Opening a business that is recognized from day one is an enormous benefit to the entrepreneur.

It can take years for a new business in any industry to build reputation. With a franchise, you inherit the business reputation, along with a business plan that’s already proven successful.

Find the right franchise for you in 3 steps

Opening a franchise is less risky than building a business from the ground up because the business model has already proven successful. Follow these steps to choose the right one for you.

  1. Evaluate your area of interest.
  2. Find the right franchisor.
  3. Come to an agreement.

Once you’ve read through our list, keep going to learn the six benefits of franchising.

How to get a franchise business up and running in India?

If the idea of a franchise business has you excited, you can explore a multitude of options online. Many groups in India today connect interested entrepreneurs with franchise businesses, assisting all the way from plan to floor.

However, the onus of making the business a success lies with you.

You need to carefully select the right partner, understand the operational and financial expectations and be willing to work diligently. Here’s how you can go about weighing your franchising options.

1. Evaluate your area of interest

Franchise Business in India Pizza on Wooden Table
You don’t need restaurant experience to start a Pizza Corner franchise.

The key ingredient to achieving success in any venture is passion. So step one in starting a franchise business in India is to make a short list of franchises that excite you.

Experience with the business is helpful but not required.

You don’t need food service experience to open a Baskin Robbins franchise or a degree in teaching to open a Kidzee centre. You could always hire people with the necessary experience and skills.

Now look at each of the franchise options on your list and ask yourself:

  • Will you be equally passionate about the idea 10 to 20 years down the line?
  • Are there opportunities for personal and professional growth?
  • Will this improve people’s lives and the community at large?

This should help you cross at least a few businesses off your list and point you towards the industry that most interests you.

What do you bring to the partnership?

Of course you stand to gain by joining a successful chain, but why should the franchisor choose you from the many other entrepreneurs who want to come aboard? Most franchisors look for a strategic ‘fit’ in terms of personality, ambition and work ethic. Everything else can be managed.

Having access to real estate is a major plus, considering the exorbitant rental costs in major cities.

Additionally, most franchisors expect franchisees to contribute a set amount of money up-front. You might be interested in this list of five low-investment franchise opportunities in India.

2. Find the right franchisor

Once you have identified the industry you’re most passionate about, start short listing businesses with franchising requirements that match what you have to offer.

Get detailed information about each business, the owner, the product/service and the franchise model.

Then speak to franchisees to get a feel of how each business works.

This is one of the best ways to learn what it’s like to be a franchisee with each business you’re considering. Here are a few questions you could ask:

  • What are the challenges to running your shop or outlet?
  • How long did it take you to break even (start making a profit)?
  • How helpful is the franchisor?
  • Were there any surprises?

Then schedule a meeting with the franchisor and make sure to have all your queries and concerns answered.

Applying

When you approach the franchisor initially, you will have to submit a franchisee form provided by the business and a letter of intent. Both will play a crucial role in your application being approved, so take your time completing them.

Your application will tell the franchisor how serious you are.

You’ll need to answer detailed questions about your experience, education, background, finances — even your aspirations. You should also be prepared to provide:

  • The intended location of the business
  • Agreement of the property (if leased)
  • A valid government ID
  • Updated resume
  • Past two to three years of bank statements
  • ITR, TIN and GST details

This article has more on what to expect in the application process.

3. Come to an agreement

Franchise Business in India Two Hands
Depending on what you bring to the partnership, you may be able to negotiate terms.

Most franchisors have a master agreement for every region. This usually includes:

  • The franchise fee (your up-front cost)
  • Royalties
  • Operational guidelines
  • Renewal terms and grounds for termination
  • Inclusions and exclusions to the contract

While most agreements are ironclad, your ability to negotiate the terms depend on local laws, the size and reach of the franchisor, prevalent market conditions, what assets you bring to the table and your negotiating skills.

Doing your homework about the industry, the specific business and other franchisees will set you up well for negotiations. Even a small percentage shaved off an annual franchise/royalty fee could amount to millions in a few years for a mid- to large-scale operator.

Documentation and laws of governance

Once the association is approved in principle, you need to decide how to structure the business entity. You could choose from a Sole Proprietorship, LLC, LLP or Private Limited Company, based on the business segment, tax advantages and law of the land.

Before the contract is finalised, seek legal counsel to ensure everything is in order.

Because there are no specific laws governing franchising in India, the agreements are covered under the Contract Act, 1872 and the Specific Relief Act, 1963, which enforce the covenants of the contract and offer remedies in case of breach. For international franchisors, FEMA, 1999 and other FDI rules as prescribed by the RBI may be applicable.

Management and decision making

To be successful, a franchisee has to adhere to the standards prescribed by the business. This is why many franchisors look for franchisees who follow the rules. However, you should be able to exercise some freedom in how you operate.

This is especially true in India. Considering the cultural diversity from one region to another, the brand should be able to adapt to connect with the local audience.

Most international franchisees have to ‘Indianize’ to be successful.

The crew you hire can make all the difference to your success. Picking the right team members, providing the adequate training and developing good relationships can really help you succeed.

Related: How to write a job description to find the best employees

Benefits of opting for a franchise model

An estimated 35% of Indian franchisees are first-time business owners who see this as a way to jump-start their careers. They’re not wrong — in fact, there are a number of benefits to franchising rather than building a business from the ground up:

Proven business model

To be able to ‘franchise,’ a business must:

  • Have a robust business model
  • Demonstrate that it can be replicated in multiple locations
  • Show long-term financial potential

An entrepreneur can significantly increase their chances of success by partnering with a business that has already survived difficulties and proven itself able to adapt, evolve and grow.

Better financing opportunities

The biggest obstacle for entrepreneurs across the world is funding. A franchisor’s reputation, proven business model and financial data make it much easier for franchisees to convince a bank or an investor to fund such a venture.

Built-in goodwill

Franchise Business in India Boy with Balls
People will trust your business on day one if it has a name they recognise.

For any new business, building a reputation can take years. However, a well-known franchise can bring in customers right away thanks to the goodwill built by the parent company’s product or service, branding and advertising.

Learning opportunities

Unlike a fledgling business, a franchisee benefits from having:

  • Established business practices
  • Useful business data and technology
  • Reliable vendors/suppliers
  • A fine-tuned end-to-end operational blueprint

Access to this know-how shortens the learning curve and protects the franchise from potential damage arising out of business inexperience.

Economies of scale

The cost-benefit ratio of a franchise model is phenomenal. Because all the franchisees order from the same vendors, each enjoys savings — right from sourcing to marketing, technological development and scientific exploration/IPR.

Expert help

The brand and the franchisee have a symbiotic relationship. The franchisor is directly invested in the franchisee’s success and will therefore offer continued support on business issues, training programmes, management and business processes.

Low investment franchise businesses opportunities in India

1. Kidzee

Franchise Opportunities Child with Crayons

One of the most profitable preschool chains in Asia, Kidzee is the first on our list of franchise opportunities. To be accepted as a Kidzee franchisee, you need to have:

  • A property with 2,000 to 3,000 square feet
  • A minimum investment capacity (check the Kidzee website for details)

Franchisees receive a proven business model, marketing support to drive enrolment, help with designing interiors and complete learning materials.

2. Jawed Habib

Want to run a salon? Get a Jawed Habib salon franchise for a modest investment. Operating in 24 states and 110 cities throughout India, Jawed Habib salons provide haircuts, hairstyling, facials, manicures, pedicures and more.

No experience is required to become a Jawed Habib franchisee. You must only be able to invest and manage your own unit.

Jawed Habib handles staff recruitment and training, salon management training, salon design and all aspects of marketing.

3. Khadim’s

Considered as one of the top footwear brands in India, Khadim’s can be a profitable franchise idea. To apply for a franchise, you must:

  • Own a commercial or commercially convertible retail space in a High Street market or mall
  • Provide an up-front investment (check the Khadim’s website for details)

Khadim’s takes care of store design and 50% of the cost of marketing for the new store’s grand opening; they also provide annual marketing. The franchisee must purchase and maintain stock of Khadim’s merchandise.

4. Career Launcher

Career Launcher is a famous franchise in India that operates in the field of education. The company prefers its franchisees to be:

  • Alumni of IITs, IIMs, NLSs and other top institutions
  • Ready to embark on their own entrepreneurial journey

You can easily get a Career Launcher franchise for a low investment (check the Career Launcher website for details).

5. Firstcry

Promoted by Amitabh Bachan himself, Firstcry is a popular kid apparel brand in India. To get a Firstcry franchise, you would need:

  • Retail space with an area of 1000 to 2000 square feet
  • To invest a minimum fee (check the Firstcry website for details)

Firstcry provides help choosing an appropriate location, setting up the showroom and marketing support.

How to choose the right franchise business in India?

Franchise Opportunities Retail Store Display

If you plan to invest in a franchise business, the very first step is to choose the right option.

You can easily Google about franchise opportunities to explore a list of top 50 — or even top 100 franchises in India. However, choosing the right one is the trickiest part here.

Here are a few practical tips.

1. Go with your interest

Though it's not necessary to know what goes into making a hamburger, love for food production can work in your favor. When it comes to running a franchise, you can easily hire a bunch of people with interest and experience in your niche.

However, a successful business is one that incorporates both: how well you work on the business and how well you work in the business.

So before making a choice, ask yourself whether you're compatible with the idea or not.

2. Do you have the money to invest?

Before going ahead with any franchise idea, the next thing to consider is the total investment a franchise would need. The budget should include:

  • The franchise purchase costs
  • Cost of opening inventory
  • Amount of working capital it will require

Getting an estimate of a budget is pivotal because you don't want to be running out of cash on the brink of success!

3. Understand the time required to run it

Despite the differences between building a business from the ground up and running a franchise, they do have some similarities. In both cases, you need to put time and effort as much as possible.

The idea here is to understand how much you need to be involved. For example, there are seasonal franchises that require you to work harder at certain points of the year. So, in order to successfully run a franchise, you need to devote ample time for your business.

4. Digging about the franchisor

Researching the company is as important as researching the franchisor. Your research should be able to tell you:

  • How long has the franchisor been in the industry
  • Its average success rate
  • What franchisees say about the company

Never jump the gun. Research adequately before you conclude.

5. Speak to other franchisees

It is always a great idea to learn from someone else's experiences. Make sure you speak to at least a few franchisees who have survived or thrived with the business for a few years.

Here are a few questions that you should ask:

  • What are the common challenges and how did they overcome them?
  • What are the key success factors?
  • What would they advise to someone who's just starting off?
  • How much time did it take for them to start making profits?
  • What are the most important parts to take care of — e.g. marketing, sales or management?

It’s also worth asking if the franchisor responded to the owners in the time of need or they were left on their own?

6. Understand the level of support provided by the franchisor

The biggest perk of opening a franchise over starting a business is that here you’re not alone. The brand’s reputation stands right behind you.

Make sure you know what kind of help your franchisor can provide at every step.

Franchise Opportunities Empty Classroom

Every business goes through tough times and the best thing that could happen at that moment is to get instant help. If you know that someone's got your back, then everything will get a lot easier.

The final step?

Last but not least, have you thought about your final step? An experienced entrepreneur mostly starts off with the last step in mind.

The last step could be:

  • Handing over the business to your kids
  • Selling it to someone else
  • Simply running it for a few years and then stepping back

Whatever it is, it is good to have a complete vision for your business. The better you understand your last step, the better the decisions you take while choosing the right franchise opportunity.

It’s a good time to start a franchise business in India

India is already the second largest franchise market in the world after the U.S. and the segment continues to grow manifold. With rapid economic growth and a billowing middle class, there is still tremendous untapped potential to franchise local and international businesses.

The Indian franchise industry is expected to grow four-fold over the next four to five years.

There’s no doubt that this is a fortuitous time to start a franchise business in India. Entrepreneurs should weigh all aspects that affect success — the reputation of the franchise, use/need for the product or service, financial prospects, feasibility and plans before they make the leap. The franchisor provides the tool, but you still have to build the business.

Ideas for low investment franchise businesses in India are plenty but you need to choose the one that fits you the best.

While opening a franchise can be a great way of starting a business, you need to question its purpose, what would it require and what your exit plan is. Once you have these answers, you'll be ready to choose the right franchise option.

All the best!

UPDATE: This post was first published on 8 October 2019 and updated on 9 January 2024. It also contains content written by Charu Mitra Dubey.