Do passouts from IIT or IIM turn out to be entrepreneurs, in most cases they dont. However, that didnt stop Anurag Kedia and his batch mates to come together to set up Four Fountains Spa. Four Fountains Spa has 13 spas and many more in the pipeline and is poised to be the # 1 Spa Franchise in India. Anurag shares his vision for Four Fountains Spa and Franchising in India with Way2Franchise correspondent Mansi Parekh.
Mansi Parekh: What is the your Franchise Concept all about?
Anurag Kedia: At Four Fountains Spa, we believe that the Franchisee-Franchisor relationship is like a marriage. If the marriage is successful it has to be successful for both and if its not, it cannot be successful for either. It has to be a partnership where both partners work together for the rewards and bring their capabilities to the table.
There are certain practices which are being followed across the board by brands across categories, which we think should change. Most brands charge a franchisee fee – which we are against as a philosophy. We think the brand should not try to make money even before the operations for the franchisee have begun. Hence, we do not charge any franchisee or sign up fee.
Also, the royalty which the brand charges for the business has to be of the “right quantum”, it should not be high, just because the brand is known in the market. At the same time, if the franchisee is managing operations efficiently, the franchisee should be rewarded for it.
Our Four Fountains franchisee model and concept works on the above fundamental principles and works towards creating a win-win partnership for all our franchisees.
MP: Who are your competitors and what differentiates your franchise concept from theirs?
AK: The spa category is relatively unorganized and there are few branded players in the market. The proposition we offer to our consumers is quality spa services at surprisingly affordable prices. Most other spas operate in the luxury segment and often charge a price which is difficult to justify. So to begin with, our business model is fundamentally different and well proven across several outlets in different cities.
We do not charge any franchisee fee which is unique to our business model and the royalty is also the lowest in the category.
The above differentiates our franchisee concept from other brands in the business.
MP: How much time, typically, would the franchisee spend on running the Four Fountains Franchise Business?
When we launch the Four Foutains Spa business, it takes typically close to an year to reach a stable state of operations. The first year time commitment for franchisee is close to 7 to 8 hours a day. After the business has stabilized, it can come down to 4 to 6 hours a day. However, time commitment is important and critical in the long term for the business to generate optimal returns. Some brands mislead franchisees by saying that once the business is set up, no time commitment would be required. However, that is not the case and the franchisees are disappointed later on due to a mismatch in expectations.
MP: Who is the target market for your products?
AK: We are in the business of de-stressing people. So the stressed urban population of India is our target market. In terms of demographics, it is 25 to 45 year old, male-female, SECAB. It consists of a mix of young professionals, house wives and businessmen.
MP: What profile of franchisees are the best fit for your franchise business?
AK: Most of our franchisees are in their 30s and have had experience of working in a corporate for a few years. Several of them also happen to be women where they want financial independence without having to be bound by the corporate work culture and timings.
MP: Which parts of India as well as International markets are you considering for your franchise expansion for 2011-12?
AK: We are looking to expand our presence in Mumbai, Bangalore, Kolkata and Delhi. We already have spas in Mumbai and Bangalore, while we are looking to launch in Kolkata around December and Delhi around March 2012
MP: Beyond the intial investment, required to start your franchise, how much additional capital would a franchisee need, before he / she is able to generate enough sales to cover his monthly expenses?
AK: Working capital requirement varies form city to city. It could be anywhere between 5 to 10 lakhs before the operational break even starts happening for an outlet.
MP: Besides financial qualifications, what other qualifications do you require to be awarded your franchise? Do you assist a franchisee to awail of bank loans / funding?
AK: We like our franchisees to have a professional background and who have preferably worked in the corporate sector for a few years. This provides them a good background to quickly learn our processes and appreciate the importance of following them.
Since our business does not entail purchase of any land or equipment, normally banks are slightly hesitant in lending. However, we are happy to support the franchisee with any documents they might need for a loan processing.
MP: Describe an incident, when franchisees were not quite satisfied with your brand and how did you address that particular issue / challenge? (This could be something as simple as not achieving enough sales to non-compliance)
AK: There are occasions where franchisees would like to deviate from the standard processes, and customize something for their spa. However, we help them see through the long term consequences and why it is important to follow processes. An example which I would like to share is where a franchisee wanted to discount our services heavily to cater to a corporate client, which is against our policy. We spent time with her and shared our previous experiences regarding how it can lead to sales in the short term but have a negative impact in the long term.
MP: Is a Franchisee required to manage the daily operations of the business or will he be able to empower his employees to manage the business?
AK: Let me try and draw an analogy here. Most working women today have a cook who does the cooking for the family. However, the lady of the house still has to oversee to ensure the kitchen is being managed properly and that the cook is doing his or her job. Similarly, while the employees can be empowered to manage the business over a period of time, however, keeping a close supervision on the business will help drive better profitability.
MP: During what times, do the franchisees generate the highest amount of sales, how seasonal is your business? DO you provide a plan for profitability in slow months?
AK: Our business is not very seasonal. Though there are certain times of the year where we see an upturn or a downturn. Whenever there is a bank holiday because of a festival or an important date, we see a higher amount of business. Hence, months where the number of holidays is higher, we see a higher business. We see a lower volume of business in monsoons especially in places like Mumbai where the downpour can be so heavy that normal life gets disrupted.
We run special promotions in times when we see the business as low.
MP: Can a franchisee continue to increase his earnings, without purchasing another store?
The projections we share with our franchisees are for a base case. It is possible to earn several times more if the spa does well.
MP: What are the next milestones that are keeping you and your team motivated?
AK: We have 5 franchisees signed up and waiting to be launched in the next 6 months time. This would keep us occupied for the next few months. The next financial year we are looking to launch close to 20 spas for which we have already started working on capacity building to support these spas.
MP: What are possible short and long term threats to the business?
AK: Short term threats are usually unknown and unforeseen. We had a bomb blast near one of the spas around an year back and this impacted that particular outlet for a few days. Similarly when swine flu spread across the nation, all retailers including us had got impacted.
I do not see any long term threats. The category is in a nascent stage. So if more players enter the market, it will help us increase the size of the category at a faster pace. The need for the service is fundamental and hence we do not see any issues from the demand side in the foreseeable future.
MP: What territories are available, or if non-geographic territory system exists, what is the market available to you?
AK: We have presence in seven cities currently – Mumbai, Bangalore, Pune, Goa, Aurangabad, Bhopal and Manali. We are looking to expand our presence in Bangalore and Mumbai and at the same time launch in Kolkata and Delhi. We have opportunities available in these cities.
MP: How do franchisees co-exist, and how do they support each other or work together?
AK: The franchisees co-exist in several ways. Marketing costs get spread and optimized because there are multiple outlets. Even if the promotion is being led by one particular outlet and most of the benefits of the particular promotion are expected to accrue to that specific outlet, the promotion will still carry details of the other outlets. This when spread over a large number of outlets creates a significant positive impact. Also, multiple outlets allow us to rotate staff between outlets and take care of any exigencies.
MP: What initial training is provided and how is it structured?
AK: All recruitment and training for employees during the launch and later on is managed completely by the brand. The franchisees also under go a structured training programme to learn the business even before the spa is operational.
MP: How long does the training last, how many of the days are ‘classroom’, correspondence, online, self learn?
Training for different job roles have different durations. The therapists undergo a training programme of 60 to 75 days, 9 hours every day which is a combination of theory and practical. The front desk and managers undergo a training programme which is 30 days long.
The franchisee training programme is around 15 days, around 3 days are spent in class room training and the rest of the time is spent on the job. There is a lot of study material which is available separately for the franchisees to study and learn about the business.
MP: What support is available on an ongoing basis?
AK: Support is available on different aspects of the business –
MP: What ongoing training is available?
AK: There are regular visits from the operations and marketing team to plan, strategize and train the team on a regular basis.
MP: What are the marketing methods used to gain new customers?
We follow a 360 degree approach to marketing which includes traditional mass media and below the line activities. Recently our online efforts have also multiplied several fold and we are gaining significantly through our online efforts.
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