Top Story > Franchise Opportunities that you need to be careful about
Franchise Opportunities that you need to be careful about
Valuable Insights for franchisors and prospective franchisees
I recently received a lot of emails from several franchise brokers about some German toy company that is launching in India. (Infact, I even had a meeting with the would-be-master -franchisees.) I strongly suggest you think many times before signing up for these so-called-opportunities, WHY do we say so, here is some food for thought.
Does the brand have any company owned stores? Is the German toy company or the master franchisee investing in establishing company owned stores. If they are not, you need to be vary of it, simply because, if they are not investing in setting up retail stores, they pretty much have little at stake, they are experimenting at the franchisees expense. As we have seen in several franchise fraud cases in the past, A fly-by-night franchisor would typically have nothing much at stake, wouldnt invest in stores and would simply be motivated to sell franchises and stock to them. (BTW, in a one-to-one conversation with the prospective master franchisee, on probing, I was told, that the stores may not be financially viable and the company cannot afford to take a hit).
Is selling-goods-to-the-franchisee their business or is franchising their business? Be vary of not so established companies that simply wish to sell you their stock on outright basis and ask you for high franchise fees, stock value. I wish it was as easy as this opportunity appears, then every importer would be a franchisor.
When should you franchise, established well capitalised master franchises realise that their business is not simply to franchise in a haphazard way. Similar to McDonalds, International fast food franchise has been in India since 1997, still realise that they are not ready to franchise, just like Cinnabon Rolls master franchisee, Dish Hospitality decided to, in stark contrast against those that want to begin directly with franchising.
Check if the international brand is franchising, most international brands are well funded and may not necessarily franchise, check this out. So for clarity sake, the brand has no franchising experience and neither does the master franchisee, you could make an exception should it be from a well established franchise or retail group.
Resting on laurels that dont belong to the master franchisee, the master franchisee may rightfully promote the brand as the best quality, world class manufacturer, international market leader, but how much of it, would translate to realistic returns. We have a plethora of cases where even Fortune 500 companies that have failed in India.
We also provide training, ;) Check what type of training are they providing, now the toy retailer does not franchise in his home country, the master franchisee has no retail of franchise experience and to make matters worse, has no company owned stores, so what training will be provided.
International Brands are not insured against market forces. There are many international brands that failed in India and with franchising, as an importer / distributor, you have little control over the whole process, which is an absolute recipe for disaster. At the bottom of this mail, you would find the mail, that I have received, with some of our comments.
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The mail that I received:
Dear Sir
Greetings from Sxxxxxx Consultants! (Way2Franchise Comment: Seems like generic consultants)
We would like to introduce a Life – Time, Business Opportunity to get associated with One of the World’s Largest Toy Manufacturers, (SIxxx), having Licenses for some of the most well recognized KID Brands, 3500 SKU, Strong International presence and One of the Largest MOVIE property owner. (Way2Franchise Comment: Check out the careful usage of words, “ONE OF THE”, No mention of which countries they are franchising)
This is an International Brand coming to India. (Way2Franchise Comment: I believe most Indians have matured to not simply get enamored by the word, international). And as a result, India will become part of the International Special Events Calendar - what happens in Dubai, London and NewYork. Happens here as well
(Way2Franchise Comment: Can this be explained, what is the relevance, also there is no mention of advertising)
Each Sxxxxx Store will have: Toys & Games, Educational Toys, Plush Toys, Electronic Games, and Sports Apparel & Equipments. Their Official website http://www.xyzzzz
Highlights (Life – Time Opportunity): (Way2Franchise Comment: A franchise is an investment vehicle from one point to another in a predefined time, how if it is life-time, so the franchise agreement is valid till eternity)
· Area required: 800 – 1000 SQFT, preferably on a Ground Floor
· License Fee: Rs 7.50 Lacs (Life – Time Fee) (Way2Franchise Comment: What is the license fee for, is it a well recognised brand, typically franchisors charge for the brand recall and / or their training programs).
· Store Development Investment (CAPEX): Rs 12.50 Lacs
· Inventory Investment: Rs 22.50 Lacs
· Total Investment in the Project: Rs 42.50 Lacs
· ROI: 30% (Way2Franchise Comment: How is this derived, if the brand and master franchisee has no franchising experience worldwide? Also, even if the both of them did have franchising experience, without rolling out any company stores, how would they compute it, unless it is just an excel sheet projection).
Benefits:
· International standard Store Design, created by world’s best toy store design experts
· Alliances with third parties like TV Channels, Movie properties, JetKids, etc to drive footfalls
· Exclusive Window for new products, only for a limited period (Way2Franchise Comment: What is the limited period, it seems that after the ‘limited period’ the brand would start selling through various other channels, departmental stores, shop-in-shops, online and so on, which would compete with franchise stores)
Cities Targeting: PAN INDIA (Way2Franchise Comment: Is the supply chain, logistics in place?)
We would be glad to discuss the opportunity in detail & line up your meeting with the Company Officials.
In case of any queries/ concern, please feel free to get in touch with Vxxxxx @ 093 1xxxxxxxxxx , Email: Vxxxxx@sxxxxxxconsultants.com
Please confirm your interest
Thanks
Regards
Investors Relation Team
Email: info@Sxxxxxxconsultants.com
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The wrong franchise opportunity can disrupt your financial stability and jeopardise your investments, savings, or retirement funds. The wrong franchise broker, can ruin your franchise reputation, as a franchisor, even if you decide to appoint franchise brokers, ensure they promote the business only in a pre-determined format, ensuring that your brand is not ill-perceived. The wrong franchise broker destroys more financial lives, than those that ever create wealth.
Way2Franchise is committed to preventing Franchise Fraud and in safeguarding your capital, email us before you sign the franchise agreement and help us to help you make a wiser and more informed decision.
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