Home / Opinion / Online-views /  Franchising offers promise to start-ups in F&B space

The mushrooming of restaurants of varied hues, in nearly every corner of urban India, attests to the ease of starting these businesses. As other experts in this paper have written about, Indians are eating out at least once a month and appear to have a great preference for Indian food. Moreover, while fine dining restaurants are doing well in pockets, it is quick service restaurants that are doing roaring business, given the value for money that they offer. The good news for such businesses is that this opportunity is by no means confined to the metros alone but stretches to smaller cities.

File Photo

These still, however, constitute a small fraction of the F&B industry in India and even the global giants’ footprint in India, compared with other emerging markets such as China, is quite small. All of which is good news, pointing to the immense potential and the opportunity for growth in the Indian F&B business.

The roadside tender coconut water seller, tea shops, lassiwalla and liquor bars have long been the primary beverage-only purveyors in the Indian retail scene. State milk boards such as Aavin in Tamil Nadu, Nandini in Karnataka have over the years opened and operated reasonably successful chain of branded retail outlets selling milk and milk products with emphasis on the sales of milk-based beverages. Then came the onslaught of the Indian and overseas coffee chains—Cafe Coffee Day, Barista and Lavazza, with rumours of the mother of all coffee purveyors Starbucks set to enter India.

As with restaurants, the beverage-only outlets have only begun to scratch the surface of the opportunity that presents itself in the Indian market. The rise of speciality outlets such as Jamba Juice in the US or sugarcane juice chain Canola in India points to a still wide open field that presents a potential opportunity as big or even bigger than the coffee chains, with their positioning of being healthy alternatives.

For all the opportunity this beverage or speciality food retailing presents, of course it comes with its share of challenges—the perishable nature of goods requiring refrigeration onsite and possibly in the logistics chain, the cost of real estate, varying regional tastes and preferences, standardization of service and product quality, manpower retention—everything the big boys face and have the money and manpower to deal with, start-ups will have to face with few resources.

One of the most promising ways to build a successful business in this space is through franchising. Franchising is still at a nascent stage in India, despite its widespread adoption in the developed economies.

According to the Franchising Association of India, franchises account for less than 3% of the retail revenues in India, compared with 35% of retail and service revenues in the United States.

The major US food brands such as McDonald’s and Yum Brands operate in India on a franchising model.

F&B and education are the top two prospects for growth through franchising in India. Franchising as Melting Point has done with Aavin initially and with Lavazza more recently is a way to mitigate the risks inherent in the F&B business while building a strong business in a still nascent market.

K. Srikrishna is executive director of National Entrepreneurship Network and a Mint columnist.

Respond to this column at feedback@livemint.com

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout