Sameer Patel, Founder and Chairman, talks about the franchising journey of the brand in this exclusive interaction.
Tell us about your franchising journey in 2018. How many new outlets have you added? Have you repositioned any of the previous ones?
Deal Jeans has established its brand equity with MBO trade partners over the past 15 years and has then embarked on the EBO journey in the year 2015. Within a span of three years, the franchising model has helped Deal Jeans grow at a much faster rate casting its presence through 23 exclusive outlets across India and internationally. Having a strong hold on
MBO market with our expertise and experience, we have joined hands with our distributors and retailers who have strong presence in their respective regions and this has helped Deal reach in smaller towns having a huge buying potential and vast reach. We started in the year 2018 on a high note with our first exclusive outlet in the Northeast region at Imphal followed by Surat, Goa and Patna. We have also refurbished and restructured the look and feel of our outlets at Bilaspur and Jodhpur with upgrading in-store designing, façade and fixtures to maintain uniformity inbrand positioning across India.
Based on your experience and expertise, what do you have to say about the understanding of franchising in India, especially if you have to compare it with the system seen in European or Western countries?
Some of the key differences as compared with Indian and Western countries are: Lack of a Single Legal Framework:
India does not have any specific laws on franchising. When franchisors enter India, they are governed by a number of different national and regional statutes and codes rather than a single comprehensive statute.
Tax Consultants: A tax consultant whose aware of global regulations and system, to come in terms of a profitable franchising contract Due Diligence: It is also vital to conduct thorough financial and legal due diligence a prospective franchisee, along with a feasibility study. Linguistic/cultural Differences:
Understanding local culture and tastes and innovative strategies like “Indianization” of products is vital to a franchise’s success. Expensive Real Estate:
In the large cities of India, retail space continues to be expensive and the quality is relatively poor. As compared to international market, the favorable credit schemes make the process easier also tighter. Resistance to Fees & Cap on Royalties:
Indian Franchisees also face stiff resistance toward the franchise fees/royalty payments, which are considered higher than some parts of eastern and western countries
Tell us about the franchising business of your brand, highlighting the key milestones that are dear to the company’s journey.
In 2017, Deal Jeans outlet located at Ghumarmandi, Ludhiana and operated through franchisee model clocked a sale of ₹50 lakh in a day’s operations, an average of ₹7000 in billing every minute on the launch day. The outlet is spread across an impressive 1,600 sq.ft. area. The store extended its operating hours to midnight that day making a record-breaking sale of 2,346 apparels in 12 hours – 1,139 garments in bottom category and 1,207 in the top category. This has been by far an incredible achievement accomplished by Deal Jeans.
What are the challenges associated with franchising in India?
Many businesses fail due to under capitalisation as the cost of creating the franchisee system and the cost of supporting new franchisees usually exceeds royalty revenue. The franchisors has the set SOP shared to the franchisee joining onboard. But these procedures aren’t prioritized by the franchisee often failing to achieve set ROI in the intention of saving on capital. Franchisees need to understand the importance of following these set guidelines for a long-term association. Also number of foreignowned brands have now been incorporated into the local market. While this has a positive economic impact and gives consumer more choice, it also increases competition and puts pressure on the home-grown brands.
What makes your brand a favorite with franchisers - things that you do for relationship and business building for them.
Our franchising policy helps the franchisee to keep the store fresh and stock the latest merchandise because of the end of season sale support and stock correction mechanism. Our EBO policy ensures a level playing field for all sales channels.
What do you expect from the franchisers?
While location of the property remains the most important criteria, we appoint retailers who have expertise in retail, so that they can achieve the desired ROI.