A franchisee who is successful in operating and managing his/her first franchise often looks at new opportunities for expanding the business. One of the most lucrative ways to expand further is making your outlet a multi-brand outlet. Owning a multi-brand franchise is a wonderful option to increase your profit share. As Rod Young, ED, DC Strategy says, “Proven brands usually seek to bulk up their network size by developing or acquiring a second and in some cases third or fourth brand to leverage their talent and build real enterprise value.” Due to the rising popularity of food courts in the country, the MB franchising model is quite popular and successful in the restaurant sector in India. This article covers a detailed description of why the MB franchise model is still not a popular trend among the Indian entrepreneurs in spite of its numerous advantages. As said by Kapil Prakash, Franchisee, MBO, NH-1 Factory Stores, “We are doing business from the last nine years. I entered into the franchising sector by taking up the franchise of Reebok and now I own other brands like Gini & Jony, Spykar, Numero Uno and many more. We are satisfied with the way our franchises are working and the way companies conduct their businesses. So, having a multi brand outlets is a very good experience.”
Factors favouring multi-brand franchising
Having a MBO is an ideal option to distribute the investment and lessen the risk of business failure or business loss. Moreover according to Vipin Kapoor, Managing Director, Kapsons Group, “Most Indian customers prefer to visit a MBO rather than an EBO as they feel more comfortable and at ease in the environment. It also saves time as the consumers have an array of products to choose from.” Below mentioned are few advantages of taking an MBO franchise:
- The advantage of running a multi-brand franchise is that it can be operated with the already established infrastructure of your previous franchise outlet. Multi-brand outlet helps in multiplying profits without expanding the outlet premises. For instance, you can make use of the same staff, financial resources and operations to run an MB outlet.
- A multi-brand outlet gives its customers an option to pick and choose from an array of products wherein they also have an opportunity to compare the prices with other brands on the platter. While, on the other hand, the exclusive outlets don’t have an ample choice to give to its customers.
- Owning a MBO gives a feeling of security to the franchisees especially at the time of upheaval. If one brand is not favoured by the customers, the franchisee has other brands to offer to choose from. This can counterbalance the profitability of the overall franchising business.
- A franchisee can save money for marketing its multi-brand outlet (by utilising the co-branding technique) as there are many brands that bring synergistic value to each other in terms of targeting customers.
Obstacles faced in running a MBO franchise
In spite of having many advantages, it has been witnessed that there are few franchisees who opt for this model. One of the valid reasons is that the concept is not so well-understood. A few other factors which have not allowed MBOs to gain momentum are as follows:
- Lack of variety: It’s a fact that multi-brand retail owners cannot afford to stock the entire range of any particular brand. Most MBOs face the problem of having a wide variety of every brand. In exclusive showrooms, the customers get to see the entire range of the quintessential brand, which is not possible at the multi-brand outlets. Kapoor informed, “An MBO is a good option if the franchisee has got an outlet with an area of more than 5000 sq ft for the large assortment of products.”
- Perplexed salesmen: Most of the time, the salesmen at the selling counter are not well informed about all the brands and get perplexed about the speciality of each brand.
- Maintaining quantity: MBO franchisee may have many brands under one roof but it is not easy to maintain quantity as well as quality of the service provided to its customers.
- Inventory up keeping: Having a large variety of brands and products can raise a problem of maintaining inventory. Franchisee needs to appoint a person who specifically maintains the records of every brand and its sales.
- Problem in logistic and reverse logistics: MBO franchisee may face more problems in regard with logistics as compared with an exclusive brand outlet (EBO) franchisee. He has to maintain the logistics of each brand which may further add to delay in the product availability.
- Franchise fee and royalties: It is necessary that a franchisee taking up a multi brand franchise pays the franchise fee and royalties regularly. The franchisee may face financial pressure in the initial stages.
The obstacles mentioned can easily be overcome with hard work and proper running of the outlet to reap the benefits.
If you aspire to build your empire by opting for multi-brand franchise model, then you must own an already established franchised business. One must do a thorough research of the brands one is aspiring to take franchise of. As Young says, “Multi-brand groups most often are driven by the degree of success of the initial brand.”
To conclude it can be said that the MB franchising model has been a well proven strategy for most of the franchisees. It is a great business model that needs to be explored and practiced in order to grow with time but with a lot of dedication and hard work.
