Why Some Franchises Go Downhill While Others Stay Great in India

Franchising has emerged as a popular business model in India, providing opportunities for entrepreneurs to leverage established brands and business systems. With over 4,600 franchise brands operating in sectors like food & beverage, retail, education, and wellness, the Indian franchise market is growing at an impressive CAGR of 30% and is expected to reach $140-150 billion by 2025 (Franchise Asia). However, while some franchises, like Domino’s and McDonald’s, have become household names, others have stumbled and even disappeared from the market. What causes this divergence? Why do some franchises succeed while others fail? Let’s explore the critical factors.

1. Quality Consistency: The Defining Edge

Consistency in product or service quality is the cornerstone of successful franchising. Customers expect the same experience across all outlets of a franchise. Failure to deliver this can result in customer dissatisfaction and a damaged reputation.

Fact: According to a KPMG survey, 72% of Indian consumers value consistency in their buying experience.

Example of Success:
McDonald’s has over 315 outlets in India and thrives due to its stringent quality standards. By ensuring that the taste and quality of its burgers and fries remain consistent across locations,

McDonald’s has built unwavering customer loyalty.

Example of Failure:
An Indian bakery chain faced a decline after multiple outlets served substandard products, resulting in poor online reviews and reduced footfall.

2. Understanding Local Markets

India is a country of immense diversity, with significant regional, cultural, and economic differences. Franchises that adapt their offerings to cater to local tastes and preferences tend to succeed, while those that adopt a one-size-fits-all approach struggle.

Fact: Domino’s, which operates over 2000 outlets in India, generates 75% of its revenue from localized menu items like Peppy Paneer and Chicken Tikka Pizza.

Example of Success:
Domino’s introduced pizza flavors tailored to Indian tastes, such as Paneer Makhani, which resonated with local consumers.

Example of Failure:
A global fried chicken chain shut down 50 outlets in South India after failing to offer options that appealed to the region’s palate.

3. Robust Franchisee Support

Franchisors that provide strong support to their franchisees create a foundation for long-term success. This includes training, operational guidance, marketing assistance, and ongoing support. Without it, franchisees may struggle with operational inefficiencies or mismanagement.

Fact: According to the Franchising Report 2023, only 34% of Indian franchisors offer comprehensive franchisee training and support.

Example of Success:
Amul’s franchise model has become a favorite among small investors due to its low initial investment (starting at ₹2-5 lakh) and robust support system. Amul ensures profitability by handling supply chain logistics and marketing.

Example of Failure:
Some global fashion brands failed in India due to inadequate franchisee training, resulting in poor customer service and inventory mismanagement.

4. Financial Mismanagement

One of the most common reasons franchises fail is financial mismanagement. This can occur due to over-expansion, unrealistic royalty structures, or poor financial planning.

Fact: The franchise failure rate in India is over 20% within the first three years due to financial issues (Assocham, 2022).

Example of Failure:
A global coffee chain overestimated the spending power of consumers in Tier-II cities, leading to the closure of 30 outlets in 2019. Poor location choices and high operational costs contributed to its failure.

5. Customer Experience: The Make-or-Break Factor

In a competitive market like India, where consumers are spoilt for choice, customer experience can be the differentiating factor. Poor service, outdated interiors, or lack of innovation can quickly drive customers away.

Fact: A Statista survey (2023) revealed that 96% of Indian consumers check online reviews before visiting a franchise outlet.

Example of Success:
Burger King’s “Flame Grilled Weekends” campaign emphasized affordability and superior service, contributing to double-digit growth in India.

Example of Failure:
Several regional restaurant chains lost market share due to slow service and outdated menus, even though they offered competitive pricing.

6. Leveraging Technology

Technology is no longer optional; it’s a necessity for franchises in today’s digital age. From online ordering to digital marketing and data analytics, technology enables franchises to stay competitive and relevant.

Fact: With 70% of franchise transactions now happening online (Franchise Market Trends, 2024), brands that embrace technology see higher growth.

Example of Success:

Domino’s India generates 68% of its revenue through its app and website, thanks to features like delivery tracking and personalized offers.

Example of Failure:

Brands resistant to digital adoption struggled during the pandemic. For instance, several retail franchises saw a steep decline in revenue due to their lack of e-commerce platforms.

7. Marketing and Brand Perception

Strong marketing strategies and a well-maintained brand image play a crucial role in franchise success. Without effective marketing, even the best products can go unnoticed.

Fact: Franchises that allocate 20-25% of their revenue to marketing report a 15-20% increase in footfall annually.

Example of Success:
KFC India’s marketing campaigns, such as introducing vegetarian options, resulted in a 13% revenue increase in 2023.

Example of Failure:

Several mid-tier food franchises failed to connect with young audiences due to outdated marketing strategies and minimal social media presence.

Conclusion: The Recipe for Franchise Success

India’s franchising industry is filled with opportunities, but navigating this competitive landscape requires careful planning and execution. Franchises that consistently succeed share these common traits:

• Quality Consistency: Ensuring uniform experiences across outlets.
• Market Adaptability: Catering to India’s diverse regional preferences.
• Franchisee Support: Empowering partners with training and operational assistance.
• Financial Discipline: Expanding sustainably and managing costs effectively.
• Customer-Centric Approach: Prioritizing superior service and innovation.
• Technology Integration: Embracing digital transformation for operational efficiency.
• Effective Marketing: Staying relevant through creative campaigns and strong branding.

India’s dynamic and rapidly growing market presents immense potential for franchises. By learning from successful examples and avoiding the pitfalls of failed ventures, aspiring franchisors can ensure sustainable growth and long-term success.