Franchising – opening new vistas of opportunities
In the gems and jewellery business, franchising is win-win for both – the franchisee as well as the franchisor. While it allows new players to make safe landing in the world of gems and jewellery, the traditional jewellers too multiply their outlets and profits within a few months to impressive numbers. Amazed by this hit formula, Floroscent decodes the franchise model with the help industry’s who’s who.
Franchising seems to have become the buzzword in the gems and jewellery industry. More and more jewellers are taking this route to expand their business. From ORRA, Senco Gold and WHP Jewellers to JewelOne, Birla Jewels, TBZ – The Original and Tanishq, businesses of all ages and sizes are following suit. Earlier this month, even PNG Jewellers Pvt. Ltd. that was until now purely a family business, made an announcement about its plan of inviting franchisees. By doing so, PNG has become another major jewellery retail chain in the market that has adopted the franchisee model.
Saurabh Gadgil, Chairman and Managing Director, PNG Jewellers, stated: “Initiating a franchise model is indeed a big step for us but we believe in moving with time. So in a way, this is a natural progression. The franchise model will expedite our expansion drive which would have otherwise been difficult, as ours is a heavily capital-intensive and labour-intensive industry. This will be mutually beneficial. While we provide our collaborators with decades of industry expertise, an inventory of unique designs and the trust and credibility that PNG Jewellers has been earned over the years, we will in turn benefit from their deep knowledge of the hyper local market.”
Launching Initial Franchise Offer (IFO) initiative, the retail giant aims to open at least 20 new outlets in next three years under FOCO and FOFO formats and claims to have already received tonnes of applications from India as well as abroad. Under FOCO, the investor will get a specified return (about 28-30 per cent in three years, according to Gadgil) for investing in the franchise.
As we extend our best wishes to PNG Jewellers, let’s take a detailed view of franchisee model and how well it fares in gems and jewellery.
Family to franchising – a fast-growing trend
In the past, family jewellers refrained from involving anyone outside of their bloodline into the business. However, in an age where visibility of the brand has become most important to reach out to the larger customer base, jewellery brands have to shed this old-school approach. Realising this, today most of the legacy jewellers have started giving franchise rights of their family business to new players. As a result, the trend is growing fast and so are the profits with it.
Kolkata-based Senco Gold and Diamonds explored the franchisee route early on. Note that, this one move has helped the brand to grow by leaps and bounds. However, Sankar Sen, Managing Director, Senco Gold Ltd., had to ensure that the brand equity and credibility is not diluted in any way. For this, he travelled all over India and vetted the idea with people who he felt might be interested in it. “While some liked it, most mocked the idea,” he recalled. But he was persistent and the first franchisee outlet opened in Durgapur, West Bengal in the year 2001 and more followed.
The franchise model has its own advantage. It helps the brand cut down on its operational costs as well as create a better distribution network. With any initiative, ORRA builds expertise ahead of plans. A team has been formed with very strong franchising experience including with some of the global majors. – Mr. Vijay Jain, CEO ORRA
“We are one of the few jewellers who have a successful franchise model. With one franchisee from 2001, the business has grown to 40 franchisees with a sizable turnover of 550 crores in FY 2017. Senco Gold treats its franchisees as respectable business partners with equal stakes and as a part of its expansion plan, it is continually working towards multiplying the franchisee business further in the coming couple of years. Through this asset light model, Senco Gold Ltd. has substantially grown its scalability,” he shared. At present, out of the 75 outlets, 40 are franchisee-owned. The retailer is also aiming to open around 109 new stores in the next five years, taking its total store count to 200.
The rate at which franchisee is being adopted by the fraternity one after the other, it shows jewellers are definitely taking note of the benefits of a franchisee model and Maharashtra-based WHP Jewellers is one of them too. “While it helps a brand expand and increase its reach faster, emerging entrepreneurs also get a platform to venture in this line of business. So far, we were using the traditional retail method and have spread across 21 locations with the company-owned-company-operated format. With IZAARA on the other hand, we will be using the COCO model and shop-in-shop concept by being present at places like Shoppers Stop to ensure more and more consumers have access to our brand,” shared Aditya Pethe, Director, WHP Jewellers.
With one franchisee from 2001, the business has grown to 40 franchisees with a sizable turnover of 550 crores in FY 2017. Senco Gold treats its franchisees as respectable business partners with equal stakes and as a part of its expansion plan, it is continually working towards multiplying the franchisee business further in the coming couple of years.- Mr. Sankar Sen, MD, Senco Gold Ltd.
How to go about it?
Jewellery franchising has emerged over the years as a brilliant option for investing money in. High rentals definitely push up the operational cost. So, franchising is an apt way to balance the money.
“The franchise model has its own advantage. It helps the brand cut down on its operational costs as well as create a better distribution network. With any initiative, ORRA builds expertise ahead of plans. A team has been formed with very strong franchising experience including with some of the global majors. Over the last two years, we have mapped not only the cities that we would like to see ourselves in but also possible locations. Each location has already been visited at least a couple of times. We are positive that through this model, we will continue to see growth,” hoped Vijay Jain, CEO, ORRA.
Now that PNG Jewellers too has taken the plunge, it is looking for entrepreneurs who will be able to relate to their business so that they can uphold their legacy of trust, purity and commitment and can bring in investment of Rs. 5 crores to Rs. 10 crores for stock, assets and furniture fixtures. “Investment will depend on the location and size of the showroom. Also, the franchisee has to own or should be ready to either lease/ rent a good showroom on a high street, in a mall or any market area. Those who tick all the above boxes, have two options to pick from — FOCO and FOFO models that opens the scope for those who already have business experience as well as looking to start a business venture,” he revealed.
Another jewellery brand – JewelOne has an even more unique business model. “Our model is not a franchise model but Business Associates (BA) model. The main idea is that Emerald products which are well-known for designs, purity and good finish should be made available to all people who are interested to buy. Since JewelOne whose stock is invested by BAs and operated by Emerald Jewellery Retail Limited – a subsidiary of Emerald Jewel Industry India Ltd. which is operating through B2B, its identity is not there. Hence, we entered into the Business Associates model,” shared K Srinivasan, Managing Director, Emerald Jewel Industry India Ltd.
Targeting new frontiers
Franchising can accelerate growth, bringing large players to new regional markets across the country. These operating partners not only have local knowledge but many also boast of business experience that can help a fledgling brand spread its wings in tier 2 and 3 cities.
In case of certain players, the demand for their brand of jewellery is observed in the cities where they do not have their physical presence. Taking cognisance of this unique opportunity, brands have adopted the franchisee model to expand. By setting up their franchisee model division, they have opened their door to the likeminded partners.
Saurabh Gadgil too has set his eyes on certain markets. “Initially, the focus will mainly be on Maharashtra, especially areas around Pune such as Talegaon, Pirangut, Undri and Chakan; areas around Mumbai such as Navi Mumbai, Mira Road-Bhayandar, Thane and Goregaon; Akola; Daund; Barshi; Gondia; Yavatmal and Malegaon. There are plans for further expansions in the Konkan region of Maharashtra as well as international markets such as the Middle East, UK, USA and the Far East,” he informed.
K Srinivasan’s brand ‘JewelOne’ too has grown in terms of reach through his unique business model. “Currently, we have 12 Business Associates stores and two of our own stores in Tamil Nadu and one Business Associate store in Vizag. Our plans are to have 200 stores pan-India. However, the expansion depends on the government and bankers’ policies. Now we are working on a different model of Business Associates also where the store is fully financed and managed by the Business Associates by sharing the agreed percentage of profit with us,” he shared.
‘JewelOne’ too has grown in terms of reach through his unique business model. “Currently, we have 12 Business Associates stores and two of our own stores in Tamil Nadu and one Business Associate store in Vizag. Our plans are to have 200 stores pan-India. Mr. K Srinivasan, MD, Emerald Jewel Industry India Ltd.
We launched the franchise model with a core focus on targeting tier 2 and tier 3 cities along with metros and mini metros, said Nikita Rattanshi, Director, Birla Jewels Ltd. “The franchise model has opened a channel for us to present the customers in the remote regions with a state-of-the-art retail ambiance. Following the company-owned-company-operated and franchised-based model, Birla Jewels Ltd. will explore opportunities with various partners across the country for the expansion of BJEWELZ. Recently, the company has opened its franchise-based store in Madhya Pradesh and is looking forward to expand its reach to the larger set of customers in the retail market,” she added.
The franchiser can expand its reach by investing almost no money and capital, while the franchisee is almost sure of success as he is working in a tested area. Good franchisers will help you get your business rolling and to keep it that way. But one has to offer complete guidance and support in operating the store to the franchisees.- Jugal Choksi, MD, Bariki
Why go in for franchise? The simple answer is to mitigate risk. If a franchisee is willing to take the leap and invest in a jewellery franchise, this investment is benefitting the franchisor as it is crores of rupees that the franchisor does not need to spend on creating new locations. They can begin a nationwide expansion without necessary capital, since it is paid by the potential franchisee as start-up fees.
“The franchiser can expand its reach by investing almost no money and capital, while the franchisee is almost sure of success as he is working in a tested area. Good franchisers will help you get your business rolling and to keep it that way. But one has to offer complete guidance and support in operating the store to the franchisees,” says Jugal Choksi, Managing Director, Bariki. His company works like a franchise model with its partner retailers and apart from jewellery, it provides packaging, display, certification and booklet support to the retailers. At present, Bariki has a strong presence in India covering 10 Indian states with 750 stores built as per the shop-in-shop retail model.
That’s not all! “We also design attractive schemes for our franchisees, participate in local exhibitions and plan promotional activities to enhance their sales. It is a must, as we generally observe that there would be various products available in the market but there are no takers for them. For instance, in smaller cities, very high-end designs are not acceptable. So, we focus on studying our customers, understanding what exactly they are looking for and accordingly, localise our offerings,” he explained.
Vishwas Shringi, CEO, Voylla, has similar views on franchising. “The main aim of entering the franchise business is to expand our operations and business all over the country. Our franchise stores are self-sustained and also provide good returns on investment to the franchise owners. The Voylla franchise model is specially designed for ease-of-use with a robust support system at their disposal. It includes on the ground and operational support, apart from marketing and PR support. It offers autonomy with a resourceful network. Voylla is planning to open a hundred more franchise outlets in the next five years,” he divulged.
Franchising helps a brand expand and increase its reach faster, emerging entrepreneurs also get a platform to venture in this line of business. With IZAARA we will be using the COCO model and shop-in-shop concept by being present at places like Shoppers Stop to ensure more and more consumers have access to our brand.- Mr. Aditya Pethe, Director, WHP Jewellers
Upholding the legacy
Franchise is considered to be a model which can provide brands with profits in a short span of time. But they also need to ensure that standards are maintained, as franchising does entail a loss of control. When properly executed, it invites more stakeholders into the decision-making process, which can alter the original vision of the founders. Similarly, once franchise growth ramps up, it becomes harder to slow down should the brand wish to course-correct or reassess its goals.
Another drawback faced by franchisees is the fast changing reputation of the franchise among consumers. Poor performance by one franchisee at a different location will affect the consumer’s opinion of all franchised locations, not just that particular one. All franchises can be greatly affected by negative experiences at another location.
So how are the current franchisors overcoming such drawbacks?
“We prefer our business associates are transparent and reputed individuals locally who should be in a position to invest approximately Rs. 15 crores in one store. Finance for the stock is made by the associates and so, there is not much financial burden on us. Also, our sale increases due to these stores. Since the entire operation is controlled by us and the brand promotional activities are done by us, I don’t think our brand image is harmed in anyway,” shared K Srinivasan.
“It is important that the franchisor enforces strict rules and policies onto their franchisees. When all franchisees follow the same guidelines, the product and experience is uniform across all locations which eliminate the chance of ‘one bad apple ruining the barrel’. Thus, franchisees should be enthusiastic to run the show and should be able to connect with us not as a business owner, but also as a family member to understand our brand, jewellery business at large and its nuances. Moreover, all stores of PNG will have the same iconic modern look and feel of a heritage brand and one can be assured that they uphold the high standards that PNG Jewellers stands for,” assured Saurabh Gadgil.
Established brands are guiding the organised market and are opening opportunities to grow. Franchising is the best possible model to increase the penetration in the market. Mr. Saurabh Gadgil, Chairman and Managing Director, PNG Jewellers
The new order
Things are changing for the franchising models with time. Initially, they were just focussed on finding the investors for their franchise so that they can expand their brand. They almost took independence from the franchisees by applying all the ideas by themselves. But things are becoming more mutual now. Franchisors are trying to make the franchisees comfortable with their ideas and cultures.
A Tanishq Partnership brand, CaratLane started its journey in 2008 and now is one of the biggest names in jewellery franchising. Atul Sinha, Senior Vice-president – Marketing and Retails Sales, CaratLane said: “With our franchise partners, there is much more co-ownership of business. Gone are the days when franchisees would listen to corporate brands and do as they are told. Today, they are an equal partner in building our brand and expect and deserve a much higher degree of transparency and trust.”
He goes on to add, “Franchisees come with a strong entrepreneurial spirit which helps us grow the business well. They also often bring in a lot of local knowledge that is crucial in choosing the right location and building a good clientele for the store. Apart from these two benefits, franchisees also bring in their own capital and hence it helps us expand our business more quickly. Some of our most powerful consumer insights have come from our franchise stores.”
As attractive as it seems, franchising is quite an interesting choice. It not only results in expansion and profits but also is a proven way to reach out to masses and develop brand name easily. The jewellery industry is the next trillion-dollar industry and one can be a part of this through franchising. It rewards in more than one way and is also taken up by many big brands to compete in the market.
“In the coming years, growth in gems and jewellery sector would be largely contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Franchising is the best possible model to increase the penetration in the market,” Saurabh Gadgil summed up.