Hoskote is a rural town in Karnataka with less than 60000 inhabitants who mostly depend on agriculture for livelihood. It was low on priority for phone makers, but now it is not so for Xiaomi. Xiaomi’s market share in India has exceeded that of Samsung by 2.4 percentage points within just 3 years of entering the market and is seeks to increase its sales by reaching out to remote areas in India.For growth in India Xiaomi has taken 3 approaches to supply their products: MI homes, electronic retail chains and MI preferred partners. Of these three approaches MI homes is proven to be the best because it has adopted the franchise model for growth and expansion. It is similar to the Apple store franchise where the store is owned by the franchise partner but is operated by the company.
Amid rumors that Samsung is unhappy with two major retail chains for promoting Xiaomi, a Samsung industry executive without wanting to be named said “Samsung is trying to sort out the issue with the two retailers ahead of the festive season.”
Samsung’s Drawback: Not Choosing the Franchise Model
Samsung recently boycotted more than 200 retailers who entered into an agreement with Xiaomi as preferred partners. For the first time Samsung has stopped supplying their handsets to these retailers for preferring another brand. Several retailers are approaching Competition Commission of India (CCI) to take legal action against Samsung. A Xiaomi executive said, “Xiaomi is helping the affected retailers with advice and additional business support. This is a good opportunity for Xiaomi to get retailers’ confidence, now that it is betting big on brick-and-mortar retailers to grow in India,” A retail chain CEO said that Xiaomi will support them by changing its business strategy to launching their new phones offline first.
Boycotting retailers is never a healthy strategy for competing. Samsung’s dependency on retailers proved to be a major drawback. Samsung had built a great brand and people trusted its name for the quality of its products. It had the largest market share in India until Xiaomi overtook.
Choosing the right channels of supply for sales and services can help your firm compete with better priced products and even better-quality products. If Samsung had adopted the franchising strategy to set up stores that sell Samsung phones, it would not have been threatened by Xiaomi’s entry into the market. Much like an Apple-franchise store, people who went to a Samsung store would not find a Xiaomi alternative, So Samsung would not have felt the need to boycott retailers.
Choosing the right strategies for competition will help business succeed without any conflict with the rules and regulations set by CCI. At Sparkleminds we can help you compete in the market without any legal obligations and more importantly we will help you win.
Selling your brand as a franchise can enable your business to realize its full potential. Such a deal can be focused on a particular market alone. Partnerships with the well-established business in a new market can be a great strategy for entry into that market.
A win-win for Eric lifesciences and Strides Shasun.
Sashank Sinnha, Managing Director of Strides Shasun said that their focus always has been building a B2B portfolio. Strides Shasun, he said has scaled up its operations in Australia as one of the top two players. As their international operations scaled up, they decided that Strides Shasun in India will achieve its full potential under an India focused company.
Eris life sciences entered into a definitive agreement to acquire marketing and distribution rights of Strides Shasun in India. It acquired the rights along with the employees of the business at an aggregate cash consideration of RS 500 crores.
Amit Bakshi, Managing Director of Eric lifesciences intends to expand it as more of a franchise. This could help build more number of brands. He said that the gross margins of Strides Shanun will increase from 70% to 75% in the next three to four quarters because of the deal.
Your interests in continuing your business can be protected even while you sell your brand away. Contact us at Sparkleminds to know the expansion strategy that best suits your business.
The right time to consider an exit strategy is when your business is developing. The best value for your brand is realized when you start franchising development with exit strategies in mind. There is a significant investor interest in the franchise industry. Beginning from 2010 dozens of mergers and acquisitions franchising transactions have closed and the trend is increasing. Private equity groups have more than 800 billion in cash and strategic buyers have more than 4 trillion to invest. It creates a potential demand driving prices to rise. Small business financing may be problematic at times but the availability of bank financing for large acquisitions enables private equity firms to use leverage while paying high prices for best quality franchisors.
Havmor is an ice cream shop that started in 1994 in Karachi. It moved to Ahmedabad within 3 years following the partition of India. A large number of ice cream shop owners and small entrepreneurs tied up with Havmor as franchisees. It grew to be a prominent brand with more than 40000 outlets across India by 2016. The brand has been growing at a CGAR of 23-25%. It had a turnover of about 250 crores in 2012 and its turnover was about 450 crores during FY 2015-16. In 2016 Havmor had expected its sales to double by 2020. It had aimed to increase its sales to 1000 crores.
Lotte confectionery is taking a lion’s share in Korea’s ice cream market and its’ turnover has been constantly increasing. Lotte confectionery was looking to enter the Indian market for expansion. This turned out to be the right opportunity for Havmor. Havmor signed a deal by selling 100% of its homegrown ice-cream brand for Rs 1020 crore in an all cash deal. The deal values Havmor at more than 2.5 times its 2016-17 turnover of Rs 400 crore. Ankit Chona will continue as the CEO advisor to the brand and will see through its merger with the maker of Lotte Choco Pie.
Configuring the best strategy has proven to increase the value of the brands significantly. It is important to consult experts to choose the right deal and get the best benefit from it. At Sparkleminds we can help you find the best exit strategy to suit your needs.
The franchise industry in India is growing by 35% every year with close to 5000 new brands adopting the franchising model. International franchisors prefer to appoint a master franchisee and the local franchisors usually do direct franchising. It is necessary to understand the parties’ rights and obligations carefully while entering into a franchise agreement. Hence if you are a brand looking for a franchise agreement format india, then you must make sure that it is done through the experts and with professional help.
Why is it critical to ensure that you have a strong franchise agreement draft built at the onset of developing your franchise model?
Unlike many other countries India sets a maximum limit for prices; Products cannot be sold above the maximum retail price. The laws governing each state is different. International brands seeking to enter the Indian markets might be unaware of the laws pertaining to competition, pricing, royalties, and so on.
The Contract Act 1872 and the Competition Act 1999 prohibit agreements that can hurt competition within India. The CCI (Competition Commission of India) had admitted petitions against NIIT under competition act. There were also allegations that NIIT increased its share of revenue from 42.67% to 48% between July and April. However this month, the CCI totally dismissed all allegations against NIIT with regard to franchise agreements. The CCI said that “the OP (NIIT) is not the dominant player with presence of large players like Jetking, Aptech etc in the market. In order to improve efficiency in the market and to add value for the consumers, almost all the services including professional training are imparted through online mode rather than through the traditional classroom mode to meet growing requirements of the consumers. This signifies that the OP’s conduct is not contrary to the dynamics of competition in the relevant market.”
It is always advisable to approach attorneys and consultants for reviewing the terms carefully and configuring the right agreement to mitigate the business risks involved in making a franchise agreement.
In addition, ensure that you build your franchise model first and never copy paste any existing draft franchise agreement india sample template which you come across. Each business is governed by its own dynamics and hence your agreement must also have its own uniqueness and protect your brand adequately.
India is set to become a $5 trillion economy by 2025. Small and Medium Enterprises (SME’s) are going to probably play the biggest role in this growth. The initiatives from the Government of India through Make in India, Start up India, Pradhan Mantri Mudra Yojana, and Public Procurement Policy are all aimed at strengthening the fastest growing segment of the economy.