franchising for apparels

8/8/2019 Franchising for Apparels

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A Report onFranchising forApparels


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Chapter 1

What Is Franchising?

Franchising is one of three business strategies a company may use in capturing

market share. The others are company owned units or a combination of company owned

and franchised units.

Franchising is a business strategy for getting and keeping customers. It is a

marketing system for creating an image in the minds of current and future customersabout how the company's products and services can help them. It is a method for

distributing products and services that satisfy customer needs.

Franchising is a network of interdependent business relationships that allows a number of

people to share:

1) A brand identification

2) A successful method of doing business

3) A proven marketing and distribution system

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Chapter 2

Why do Companies Franchise?

For a company with a product or service to sell, franchising provides an excellent

opportunity for rapid expansion without an enormous outlay of capital. It is a distribution

system that allows a business to conserve capital, and at the same time achieve fast

market penetration making it a very attractive proposition to most business owners. One

of the greatest advantages to them is that they get 100% commitment from their

franchisees who have a stake in the business rather than staff or managers who simply

work for a salary and may be less motivated. Franchising enables them to utilize theentrepreneurial skills of the franchisee network to achieve better results than might

otherwise be achieved.

For any company franchising their business it is important that the business

model has been carefully researched and refined. It needs to be simple enough to be

capable of being replicated and the business system itself has to be clearly set out into an

operations manual that covers every aspect of the business.

The Franchisor has to understand that this is not a quick way for him to make

money, but a sensible way to expand and get on board people that are equally committed

to the business success.



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Chapter 3

Foreign Direct Investment:-

a) The Department of Industrial Policy & Promotion issues the guidelines

for Foreign Direct Investment in India.

b) FDI up to 51% has been allowed in retail trade of single brand products

with prior government approval and under certain condition:

Products to be sold should be of a single brand only

Products should be sold under the same brand internationally

Single Brand product retailing would cover only products that are branded during

Manufacturing

c) For example: an umbrella brand likes Christian Dior would not be allowed to

stock different brands like Pure Passion , Jadore and Dior Addict in one store.



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Franchising

Rights are granted by one party to another for some stipulated amount of money

Franchisee is allowed to conduct business using Franchisers know how and brand

name.

Cash & Carry (Wholesale Trade)

Allowed 100% FDI under the automatic route by FIPB, model is designed in a way that

the wholesaler deals with small retailers.

Joint Venture

International brands provide equity and support to a local Indian entity.

Share of the foreign player is restricted to 49%.

Distribution

International Player sets up a distribution office in India and supplies products for sale

to local retailers.

Can also set up franchised outlets for brands.

Manufacturing

International Player sets up an Indian company to manufacture its product and also gets

the right to retail in India.



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Chapter 4

Distribution Channels:-

Owned Stores / Exclusive Brand Outlets

Advantages:-

1) Direct medium of selling apparel.

2) High realization for the garment sold.

3) End-user feedback and knowledge of their

preferences.

Disadvantages :-

1) Requires greater advertising

expenditure.

2) Greater fixed costs.

Multi-Brands Outlets or Shopping Malls

Organization sells apparels to multi-brand outlets, which in turn sell them through large

retail space.

MBOs are located in prime locations of the various cities and towns ensuring

maximum reach.

MBOs are chain of

shopping malls having a presence in more than one location. Realization from this channel is lower than those earned by selling to the retailers; as

MBOs keep higher margins because their costs are higher.

Distributors



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This channel involves two middle agencies between the seller and the end-

user.

Organization sells it to the distributor, who in turn sells to the Retailers or

MBOs.

Realization from this channel are low.

Discount Stores

For selling apparels at lower prices to attract larger volumes.

Used for selling apparels with minor defects or for selling slow moving

stocks.

Low realization from this channel as garments are old-fashioned or sold at low prices

for gaining big volumes.

Retailers

Company sells garment to Traders or Commission Agents.

Greater reach of the distribution channel.

Creation of a middle agency between the organization and the end-user.

Lower realizations from this channel.



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Chapter 5

Major Franchising Industry:-

The Major Franchising for Apparels in the Indian RMG Industry are profiled as follows:

1) Shoppers Stop:-

Background

Established in 1991 by the K. Raheja Group.

The group is a well known player in the construction sector.

It is a Public Limited Company.

Principal Fascia Shoppers Stop, Crossword, Home Stop, Mother

Care, MAC.

Retail sector activity Departmental Stores, Specialty Stores (books, home products,

cosmetics, F&B, Baby Care).

Website: www.shopperstop.com

Business Area

The store offers a wide variety of international and Indian

brands



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Stocks private labels like Stop, Kashish, Vettorio Fratini,

Elliza Donatein

The store also offer concessionaire space to brands, whereby the counters are arranged

by the employees of the concessionaire

Business strategy

Primarily catering to the Lifestyle Retailing segment through

Departmental Stores

a) Offers a gamut of products apparels, accessories, footwear, cosmetics, music,

books, leather products, furnishing etc.

Ventured to the Value Retailing segment with inception of

HYPERCITY

Apart from these stores, the company also has presence in Niche Retailing format with

the brands such as:

a) Crossword a lifestyle bookstore; these are run in 3 formats Corner Store,

Brand Stores and Flagship Stores.

b) MAC its a tie-up with a cosmetic major, Estee Lauder.

c) Home Stop its a specialty store, caters exclusively to home furnishings andfurniture.

d) Mother Care - its a franchise agreement with a UK-based Mother Care

marketing baby clothes, toys, baby care products and maternity clothes.

Future Expansion Plans

The company plans to form a JV with AGROS of UK to start

Catalogue Retailing Business in India. Plans to diversify into airport retailing, for which also signed

An MOU with the Nuance Group of Switzerland.



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2) Tata Trent Ltd:-

Background

Established in 1998 as a part of Tata Group.

Started operations by acquiring the UK-based Littlewoods departmental stores in

Bangalore.

The company owns a chain of department stores across the country& is also increasing

its foothold in the high volume hypermarket sector.

The company has initiated a new retail venture called Infinity Retail Limited dealing

primarily in electronic consumer durables.

Website: www.mywestside.com

Business Strategy

Westside stores

a) Primarily apparel stores comprising a mix of clothes,footwear, and accessories for men, women and children.

b) Established its outlets in Mumbai, Pune, Bangalore,

Hyderabad, Chennai, New Delhi and Kolkata.

Landmark

a) Company acquired a 79 per cent stake in this Chennai

based books and music retail chain.b) The chain has its presence in Bangalore, Mumbai,

Vadodara and Chennai.

Star India Bazaar

http://www.mywestside.com/http://www.mywestside.com/


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a) First store opened in Ahmedabad (Gujarat) with which

company entered the Value retailing segment.

b) Store offers wide range of products like staples,

perishables, health and beauty products.

c) The company is planning to open such stores in Mumbai

and Bangalore as well.

Infinity Retail Limited

a) The company has set up a new store Croma which sells

electronic consumer durables.

b) For this a sourcing agreement has been signed with the

Australian retailer Woolworths.

c) Company plans to set up around 100 more such stores in

coming years.

3) Madura Garment:-

Background

Established in 1988 as the garment division of the Indian subsidiary of Coats Viyella

(UK).

In 1999, Aditya Birla Group acquired Madura Garments and is now a part of Aditya

Birla Nuvo Limited.

Focuses on mens shirt and trousers and has also diversified into jeans and westernwear for women.

The company owns several brands like Louis Philippe, Van Heusen, Allen Solly, SF

Jeans and Peter England.



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Website: www.adityabirlanuvo.co.in

Business Strategy

Plans to strengthen its portfolio in womens wear, premiumclothing and accessories.

Has tie-up with ESPIRIT , an international lifestyle brand.

Expanding its retailing network by marketing womens wear under the Van Heusen

brand.

Recently the company acquired Trinetra , chain of 174 convenience stores in South

India.

Chapter 6

Conclusion:-

Report suggests that the Franchising for Apparels in Indian Market has the largest

growth potential in comparison to the Other Market and is expected to grow to 4 to 5

per cent a year in volume and 13 per cent in value.



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Franchising enables you to become involved as part of a company that has established a

tried and tested system and has achieved some market share and name awareness.

When starting a business as a self employed person you will make mistakes which can

be costly if not catastrophic. An established franchise will have ironed out those

problems. They will have a written system contained within the franchise manuals as to

how operate the business so as to achieve maximum sales and profitability from day

one. It is effectively the name awareness and the system that you are paying for.

If you decide to buy a franchise, do not relax and wait for the Franchisor to do all the

work, that simply won't happen. Franchising can provide a structure and a proven

system but it is still your hard work and effort that will be decisive in making it work.

Chapter 7

Bibliography:-

www.gaebler.com

www.franchisemart.in

www.allbusiness.com

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www.wisegeek.com


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