Experts Point out The Important Reasons Why Restaurant Franchises Fail
The industry which was valued at USD 39.71 billion in 2017 is set for a huge growth and by the end of 2018, at a CAGR of 11%, will touch USD 65.4 billion
The Food and Agriculture Organization of the United Nations (FAOSTAT) report is a clear indication that the food industry in India has changed the way people used to eat, spend, and think about food. The industry which was valued at USD 39.71 billion in 2017 is set for a huge growth and by the end of 2018, at a CAGR of 11%, will touch USD 65.4 billion.
Indian food industry is one of the most promising franchise business sectors, which has a place to hold everyone with a business idea, yet we see a lot of food franchises failing.
Here are some of the reasons given by the experts from the industry:
Keep the Model Economical
Karan Tanna, Founder & CEO, Yellow Tie Hospitality, said, “To be able to franchise out is to ensure a unit level economy. Without this and a full proof model in terms of economics, then this is the major reason for the failure of the franchise. And for the model to be economical, you need to be a clear-cut idea about your brand positioning. If you are a ‘me too’ outlet then there will be competition across your neighborhood which will spoil your unit level economics on scalability. If you have a clear-cut brand positioning and you are in a market where there is a gap and if your unit level economics is well understood, then the chances of failure reduces.”
Tanna adds, “Of course after that, you need a very strong back-end like recipes, SOP and the entire ecosystem around franchising. The first and foremost thing to start with is a good design of your brand.”
Greed to “Satisfy Anyone and Everyone”
Deepankar Arora, Chef and Partner, TAWAK, said, “Unlike the Indian restaurants, the restaurants abroad have a very lean menu. In any Indian restaurant, there are almost 200 items, trying to satisfy anyone and everyone walking in, thereby flawing the consistency in service. Whereas in abroad the menu has only 15-20 items and their quality also is maintained for the same. This is one thing to learn from the West and incorporate it in our industry. Reducing the number of our menu items.”
This article was originally published on Franchise India by Nibedita Mohanta.