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Rod Young is rated among the best five franchise experts in the world

In your presentations, you often stress on the challenges of converting a business to franchise. Why?
An owner have three major barriers in this transition - creating a proven concept by moving from concept to reality; and the ability to reproduce that business, therefore demonstrating he has a business others can manage with some training.

Finally, he must have the desire and the need to grow. People often say that F&B is one of the toughest businesses. In reality, it is not more difficult that the others. The best companies are those which have hardened to competition, which is one of the essentials of franchise.

What is the normal gestation period for an F&B franchise?
There is no fixed rule. We have seen overnight successes due to the latent demand, provided it is not a fad. This again calls back to the proof of concept.

There is a certain trend in India, that lends itself to large claims in short timeframes. Does this have anything to do with the first mover advantage?
The first move advantage is important but not essential, especially in franchise. We have seen bigger brands create demand for smaller, niche players.

The second rung can be profitable so long as it is not a ‘me-too’. Starbucks educated the US market on the espresso; now there are many niche coffee brands capitalising on this.

Are multi-formats of the same concept viable?
We have found that the multi-format is not more profitable, because for all the work done, the returns are marginal or sometimes not better than the primary concept. The express format is essentially flawed because the fringe products needed for the star products to succeed are missing. Each format must be assessed for its own merits.

The mall format is not too successful because it has lower footfalls than the food court. So do the math first.

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What about multi-unit franchisees?
This is interesting, because multi-unit franchisees will soon emerge. When a brand has many multi-unit franchisees, the owner must ask himself why he does not have more co-op units.

If a franchisee can see value in your business and reinvest many times, then a well managed co-op store should also succeed.

What about multiple brands by one company - we see that a lot here?
A large brand basket by an emerging company is not advisable because it drains precious resources. Many want to tap the entire spectrum, but all brands never get the same attention or have the same potential.

The best ones get the best resources - the laggards get the worst. It is an issue of husbanding management and assets. We do not recommend applying limited resources to an underperforming brand.

How can F&B companies attract venture capital (VC) funding?
To attract VC funding, you need to prove a growth rate of 40% on investment over a three year period. Most VCs are out by the fifth year. You have to show a profitable business, which is scalable, and has good management. VC’s are not gamblers but investors who have a lot of options. You have to show yours is the best.

Can you name one key challenge for Indian F&B?
It is IP protection - IP has a seminal value to success. India owners have not appreciated the value of the brand and have almost taken it for granted. You must be willing to protect it, which includes a show of force and putting it in the contract.

What is your view of the future of Indian F&B?
In ten years, 80% of brands will be of Indian origin. Strong local concepts are the normal trend, just as in Brazil, which is fairly similar to India.

The ratio of US to Brazilian brands is 1:9. KFC, Pizza Hut, and McDonald’s, are normally the first signs of a maturing market, because these companies have perfected entering developing markets. India has to learn from the KFC’s of the world, that is, give customers what they want.