06 January, 2009

Solo Outlet or Multiple Franchisee?

The Signage :

आमची कुठेही शाखा नाही (We have no other branches) said a board in a food enterprise . Why would someone want to say it and then hang it for the world and her brother to see? . There seemed a huge pride evident in the displayed signage. This certainly did not fit into the conventional business wisdom in the world of today. Or did it?

Conventional Wisdom and Dynamics
In the B-School dynamics this logic simply may not be taught in fact it may be frowned down upon. If a product is replicable then it should be replicated and reach increased. Standardization is the name of the game. How soon can you scale up and then take it to the capital markets before someone else is what one is more used to witnessing.

Lets just skim the surface and check out the concepts and the value that each one brings to the table. Namely a business that proudly says it has no branches compared to one who is completely amoebic in its reproduction, the Franchise.

The Franchise
Let’s take Franchising as a business and look at it simply. A franchisee is an outlet of a manufacturer/creator/provider of a product and service which will at any location deliver the same product or service as efficiently as the parent company itself. Even the look and feel of the franchise outlet will be standardized to make the experience similar. In terms of delivery a baseline performance standard is defined to meet norms. Classical franchising example is the Big Mac or Mac Donald’s the Hamburger Franchise.
Practically though individual franchisees seldom seldom just stick to the baseline as defined. One thing is definite that standardization is never ever achieved in toto.

This in effect changes the experience of purchase, consumption and service across various geographies and it’s not the same anymore. Does this make the Franchisee model itself bad? Every model has its inherent advantages and so does this. Processes and support being standard, systems are largely in place in a franchising model which is its greatest advantage. As an entrepreneur it may restrict the margins because the parent sets prices and demands a fee but it also provides support. This enables an easy entry into the world of business for aspirant entrepreneurs. Taking it from that point on is the individual’s skill in systemizing and growing. Even in the ultimate symbol of franchising Mac Donald’s this is evident. For the consumer its an easy decision based on Branding association of the deliverable. One goes to a Mac, stands in the line checks the menu and orders her burger and coke, gets served on a plastic tray and searches for a table to have it. The ketchup dispenser is at the corner everything has a place and everyone including me knows it. It is the convenience .

Single Store Outlets
Single Store enterprises , those who display the boards as above are often very old in the business cycle as they have earned their goodwill and made their mark in time. When they started off, It was extremely risky as the enterprise may have failed because it was untested. The entrepreneur creates his own system. Funding to start off can be an issue as credit worthiness is non-existent and hence they often are seen as ventures before they become businesses. In contrast, Franchises are easily set up and once finance and logistics are addressed the business kicks off from day one.

Now let’s look at the board which sparked off this thought. One can see this board in its unique form in Kayani Bakery Pune, Chitale Bandhu Mithaiwale (now one hears the second generation is considering the franchising route. obviously they must be B-School pass outs here), MTR in Bangalore and even Strand Book Stall in Mumbai amongst many others. Are these successful businesses or not? They are not just successful they are spectacularly successful businesses. Now can these businesses be franchised or replicated across geographies? Of course they can be and are. For every Chitale Sweets we have a Haldiram or Shri Krishna sweets that have multiple outlets. For every Strand Book stall there is a Landmark or Crossword. For a Kayani we have bakeries galore like Kwality, Mongini’s, in every city.

But yet, when it comes to eating a solid mawa cake or maska khaari ( puf ) people still stand in a queue early in the morning outside Kayani. The quality of sweets and a unique taste to it at Chitale Bandhu has created a hallmark that makes people stop to buy from there. Give me browsing books in a Strand Book stall any day of the week while talking to staffers who by themselves are book lovers, who knowledgably guide you, suggest authors and discuss subjects. Contrast this then with the brightly lit pristine precincts of a Crossword or a Landmark where the young staffer would at best tell you the title availability and smile a lot but little else beyond that. Yes in a Landmark/Crossword the layout is not hard to figure out and one has space to sit and browse at leisure, one can even enjoy a coffee as one does this. As far as subjects go the titular breadth is large in expanse but not deep in its understanding or content.
We can safely infer that when quality becomes an issue of pride, a business becomes a work of art. The experience of being unique and its associated deliverables can become a marketable asset, and can be leveraged as can be seen from these enterprises. The experience simply is as different from purchasing a rare handicraft to buying a factory made product. Both co-exist successfully and grow equally as is seen in a few of the representative names taken above.
There are times when convenience outweighs the joy of the consumption or purchase and it is here, that a franchisee business scores in spades. Then one would go to a Hyper store, take the stuff from the shelves, drop them into a shoppingcart , pay and drive out. But when the objective is to experience something unique then one would not mind standing in a line for a mawa cake and shrewsbury biscuits at Kayani or browsing books in the crush at Strand.

Experience and enjoy the difference; why should one bother, we the customers always win anyways ;-)


dotcomgirl said...

I disagree with your last line... so many times I have talked to the salespeople at these so called multiple franchisee outlets and they don't bother to know their products at all. Most of the times they don't even know where the required item is kept in their store. They have never heard of that particular author or title or whatever item it is you ask for. They then key in the name into their precious computers with you standing behind them spelling the words out! Its so irritating, I feel like tearing my hair out in frustration. I often wonder why the hired employees at such places are not trained. At a solo outlet, the customer is God, the salesperson has good experience with both handling customers as well as the product he/ she is selling and the experience is satisfactory for both.

Kau Kau goes the Crow said...

I can understand your irritation and have had similar experiences myself.I have written the same thing that u tell me here.

But also have met people who are mall and multiple store fans. Maybe they are not so particular. To each his own.And that line is for them.

I experience both the formats for different reasons.. for Convenience i go to Crossword but when i want a title and thats my objective then its Strand or a few choice stores i have discovered around, So also the footpaths at Flora Fountain.

For food i dont compromise it has to be the individual outlet always, there no franchise outlet for me. ;-)But thats me, I am quirky.