The primary mode of entry into the supermarket industry for prospective entrepreneurs is through the franchise model, which is the process of acquiring the rights to open and manage a supermarket franchise. But with the increased number of franchisors of supermarkets, one has to choose the correct brand to match your business objectives and capacity. Selecting an improper supermarket franchise may lead to a situation where people lose their money and no desired sales are achieved, which leads to its failure. By going through these suggestions carefully, it is possible to make the right decision and invest in the right supermarket franchise opportunity as a franchisee.
Table of Contents
1. Research the Industry and Market Trends
There are certain factors you need to know before you decide to invest in a supermarket franchise and these are, the details of the entire retail franchise business particularly that of supermarkets. Identifying the current trends in the industry, growth rates, target demographic and competition level will facilitate an evaluation of how attractive the supermarket franchise sector is.
Invest time and resources too to study the supermarket retail markets in the geographic area of interest too generally. Assess your target region in terms of customer shopping behaviour, the preferred store formats and price segments, local competitors, etc. For instance, consumers in metros may have a higher tendency to shop at 24/7 small and convenience stores opposed to hypermarkets. More specific studies will assist in selecting a proper supermarket franchise brand that may be appropriate with retail shopping culture in the given area.
Also, regarding the shortlisted supermarket franchisor, analyse the competitive landscape that it occupies. For example, be aware of a store format such as in a particular city. Selecting a supermarket franchise without understanding market dynamics is more disadvantageous over the long run.
2. Verify Franchisor Reputation and Brand Standing
The track record of the supermarket franchisor holds important leads on whether or not there is merit in franchising with them. Regional supermarket franchises are generally more secure investments than those by new franchise companies.
In a similar fashion when researching various supermarket franchisors one has to identify certain parameters such as business experience, number of franchise outlets, future expansion plans, visibility through advertisements and social media presence etc. More established franchisors are also stronger in terms of marketing and promotional support but are critical for the new franchisee.
Most importantly, use your findings to engage with current and ex-franchise owners of your shortlisted brands. Obtain the real feel on their franchise management strategy, store level profitability and business sustainability. For this reason, investigative verification checks toward the franchisor’s status and brand proposition will provide confidence in the franchisor’s franchise offering.
3. Analyse Franchise Financials and Continuing Costs
In the decision-making process when selecting the potential supermarket franchise brand, it is important to consider if their financial model is viable for your investment, target profitability, and available capital. Instead of being pressured by high revenue returns, consider the gross and net economics.
For example, research franchise fees, royalties, supply chain contributions, technology fees and local marketing budgets that should be paid during at least the first five years of the operation. It is important that you understand not only the first-time costs which franchisees have to incur at the franchisor supermarket’s model but also all those periodic costs which they have to bear for its functioning.
Besides stated fees and other monetary obligations, consider critical investments such as demand for ground-leasing of retail space, equipment, inventory level, and workforce. What may look cheap to invest on may look like a supermarket franchise opportunity that may hardly demand reasonable investment for getting the adequate return and Turnover Year-on-Year.
4. Review Franchise Agreement Terms
Contracts are legal documents that contain provisions outlining the rights and responsibilities of the franchisor-franchisee relationship in a supermarket franchise system. Do not just haphazardly sign these deals, take time to debate and analyse these contracts with the help of an expert.
Some of the restrictive clauses which are included in the franchise agreements are as follows: Limited territorial exclusivity, mandatory wholesale procurement, license fee renewal clauses etc., all of which have severe business implications. It is also advisable to evaluate management control clauses, sub-leasing policies, and clauses for handling disputes before signing for it.
Specifically, regarding the aspect of legal compliance, it is important for those who wish to become a franchisee of a supermarket company in India to fully understand the terms stated in the franchise contract agreement of the brand. All the Indian laws relating to franchise agreements have provisions prohibiting certain clauses in the franchise agreement and hence such clauses require a legal opinion from experts before acceptance.
5. Understand Training Support and Operations Standards
The franchisee has to ensure the smooth running of the supermarket especially when it is a franchise outlet, which would entail going through rigorous initial and continuing training in addition to meeting franchisor specifications. When selecting a supermarket franchise, inquire on the quality of training provided to bestow necessary functional skills that include supplies handling, employee or customer interaction among others.
In addition to modules taught at a franchisor academy, training must feature significant on-job help through resident advisors. These advisors facilitate the new franchisee in managing day to day operations including ordering and billing once the store is established. It is imperative for continued supervision and assistance to address all of your location-specific concerns with the franchise in the long term.
Last but not least, confirm whether or not field support teams are willing to train the staff at your supermarket outlet each time that attrition requires the recruitment of new individuals. Such routine assessment tools used in the business, such as store audits, should also consider the lift of operation standards through positive feedback as well.
Conclusion
Choosing a suitable supermarket franchise in India which guarantees the company stable high revenues and near-perfect, long-term running is not an easy task. To avoid such occurrences, the above tips for proper selection of brands to franchise will help minimize the chances of establishing franchises for dud brands, with poor returns for the investments made in franchise fees. Of course, no franchisor partnership comes with guarantee however the above-mentioned guidelines provide an addition to get the better results in achieving the aim.