Franchise Talk

Wal-Mart’s surprise entry into India through the franchisee route may be followed by at least two more big deals, comprising of Tesco and Carrefour, early next year.

December 4th, 2006 | Author: Jack

According to industry sources, while Carrefour is giving final touches to a similar agreement with the Landmark group, Tesco will also be working out something, now that its talks with Bharti have fallen through.

However, with franchising fast emerging as the favourite India entry vehicle for international retail chains, not everyone is in celebration mode. Experts feel that for most single brands having just a 51% stake, does not make good business sense.

Particularly, when the franchisee option is available, where capital investment is not required. For foreign labels like Tommy Hilfiger, US-based VF Corporation’s brands like Lee, Wrangler, Kipling, Nautica and Jansport, and others such as Tag Heuer, Louis Vuitton, Hugo Boss, Mothercare, Chanel, Gant, Guess, either don’t have a global policy to invest in their own retail chains or wouldn’t like to change the existing franchisee arrangement and go for JVs, for lack of critical mass.

Some of the prominent brands that are in talks with Indian partners include Armani, Banana Republic, Carrera, Cerruti, Valentino and Lalique. These companies have been talking to Indian companies such as Reliance, Tata-promoted Trent and DLF.

Even those brands, which could be looking at investing in India such as Gap, Zara, Ralph Lauren, Old Navy and Banana Republic, would rather wait for the sector to allow 100% FDI, because their philosophy is to sell their respective brands strictly through company-owned exclusive retail stores.

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