Franchising is a method used by many brands to grow their business. It enables the parent company to outsource retailing, management and investments and gives access to prime properties for the brand.
The benefits of franchising to the franchisee are:
1) An opportunity of be entrepreneurs
2) Growth supported by and driven by brands.
3) A low risk method of utilizing prime retail spaces
4) Support and training in running the business
5) Promotion of the showroom at a local and national level.
At Titan the franchisee is a part of the family an extension of the organization. However, the underlying philosophy is that each store must be independently viable.
The choice of the franchisee is seen as critical and many a times, a more important factor than the location of the retail store itself.
The qualities desired in a Titan franchisee are:
3) Open mindedness
4) Family / personal involvement
5) Financial capability
The usual arrangements between Titan and the Franchisee are as under:
1. Franchisee has to purchase products directly from Titan and sell these at the recommended prices (MRP).
2. Titan provides a healthy margin on the retail price of all products.
3. Typical investments required from the franchisee are:
a) Investment of Rs 20 – 30 lakhs for interiors of the store, as per the company’s standard specifications.
b) Investment of about Rs 20 to 30 lakhs, (depending on sale) to keep stocks equivalent to two months sales.
4. Showroom operations
a) Drawing from its experience in retailing. Titan has set specific standards for service, manpower, computerization, maintenance of outlets etc. A franchisee is expected to operate the showroom as per these standards
b) Operational costs of Titan showroom are Rs 75,000 – 100,000 per month, depending upon the city ad size of showroom.
Sales analysis and review of various developments at the town or the market level are the main factors that influence the identification of the market. Prospective towns are identified on the basis of sales per ‘000 metric. Field staff validates this and the corporate and the field executives identify priority markets.
The work of initial prospecting and short listing of the franchisees and the properties is done by the field staff, which in urn sends a proposal to the corporate office. The corporate team handling market development then makes sites visits and evaluates the location on the basis of various predefined criteria. Projections on Return on Investments for a period of five years are made and the appropriate sites selected.
Once a site has been selected and a franchisee decided upon the legal agreement is signed. The cost that would be involved and the time period considered are determined. The inauguration of the showroom and a press conference to announce the same is then scheduled. Once the store is operational, monitoring and tracking its growth becomes important. Promotions for the store and the brand are planned and executed and reviews are held on a six monthly or an annual basis.
Titan believes that aware and motivated people make a large difference to the retail chain. Hence, a great deal of emphasis is laid on training. Front line staff training comprises of product knowledge and selling skills. A special training module is conducted for the store managers which deal with various aspects of ownership of the business and attitudes. Training is also imparted on visual Merchandising. Regular training for the up-gradation of skills is provided to the persons employed at the retail store, in order to deliver value of the customer.
In order to be able to build a retail chain through franchising uniformly of policies and services across the chain is necessary.
Titan has also instituted very strong review systems that are integrated with the sales processes to ensure a profitable growth. The key measures of store profitability are Return on Investments and Return on Space. Retail, audits are a regular feature at the sources and the key inputs for the retail audit are:
3) Store hardware / imagery
4) Quality of people
The first elements of the audit are evaluated through customers’ satisfaction surveys, customer feedback mailers, customer contact and grievances .the quality of people is evaluated by way of people audits and their manner of interaction with the customers by mystery shoppers.