Dr Arvind Lal is a pathologist with ambition. The 50-year-old doctor inherited Delhi's oldest pathological laboratories from his father in the late 1980s. Today, patients can visit any of the 40 collection centres dotting the capital, including two in nearby Ghaziabad. But now, he  wants to take his pathology labs national. For good reason too. At the moment, if a patient in any non-metropolitan city like, say, Meerut, needs a complicated test done for his thyroid problem, he has no option but to travel to Delhi at least a couple of times -- first for giving his samples, and then to collect the test results. If Lal's plans of building a "national pathological grid" fructify, the Meerut patient will get his results in 24 hours, without stepping out of the city. To build his grid, he has found a simple prescription: franchising. Lal represents the new face of franchising in India. He has signed on global management consultants, Arthur Andersen. What's more, venture capitalists (VCs) have already begun lining up at his door. Even till a few months back, if you were asked to name the big franchisers in the fray, the chances are that the names would be all too common: Titan, Raymond, Arrow, Bata, McDonalds or Reebok. But now, franchising is catching on in businesses as diverse as education, healthcare, entertainment, specialised food services and personal grooming. Witness the action on the ground. Two Chennai-based technologists, V. Suresh Kumar and V. Narayan are looking for franchisees to market a novel concept: computer education for children between the age group of 4-14 years. So are Bangalore-based coffee planters and exporters, Amalgamated Bean Coffee. They are developing a franchised chain of cafes across the country, which will bring speciality coffee blends for the mass market. Clearly, foreign convenience food chains have taken heart from the success of McDonalds in India. Some like sandwich and salad US multinational, Subway is already off the block -- it  has already signed up 13 franchisees in major towns with launch slated for the middle of the year. The US-based coffee chain Starbucks too is exploring options in India. Conservative estimates suggest that at least 18 new players will be investing roughly Rs 100 crore in the next two years. Says former Cadbury Schweppes CEO Ashok Jain, and now CEO of ideasnyou, a Net-based consultancy: "It's a boom waiting to happen. As the service economy grows in the country, opportunities for franchising are going to be plentiful." That ought to chivvy up the franchise economy, which according to Prithviraj Chandrasekhar, manager, Andersen Consulting, today accounts for 4% of India's gross domestic product (GDP). In fuelling this new franchising wave, the Rs 73,000 crore healthcare sector will form a crucial link. The industry is likely to witness huge investments in the next few years (see BW, 18 October 1999), some of which will flow into franchising. Here's how: a hospital could franchise out check-up centres to various doctors across locations so that they can, in turn, reach out to patients. A healthcare group is considering spinning off the entire out-patient department in its hospital project into a separate franchised operation. 
Game parlours and bowling alleys are expected to spring up everywhere in the next two to three years. "Many corporates will set up alleys and then franchise them out," says Kapil Kaul, managing director, AMF India, the world's largest manufacturer of bowling alleys. The numbers look attractive. Consider the projections put up by AMF: a 20-lane bowling alley costs Rs 6 crore. If the alley attracts 12 persons per lane a day, payback could be within 18 months.
Even unorganised sectors like personal grooming and fitness aren't far behind in the franchising race. The Delhi-based VLCC has started expanding its fitness centres through equity-based franchising.  Beauty parlours may be next if premium cosmetic firms follow  international models -- such as Elizabeth Arden -- and  set up their own premium beauty parlours. This groundswell of activity is an early indicator that the franchise economy in India may have finally arrived. And it could just be the catalyst that pushes entrepreneurship in India to the next level. After all, a buoyant franchise economy has a direct knock-on effect on jobs and enterprise. Every new franchisee creates eight new jobs, say industry estimates. No wonder the global franchise economy alone accounts for 17% of the world's business and directly employs 25 million people. In the US alone, franchiseintl.com, a popular industry website, estimates the franchised economy to be worth over $800 billion. Yet, franchising is fraught with its own risks. When a large franchiser folds up, the effects on the rest of the network can be crippling. Then there is the tendency for a big franchiser to dictate terms to franchisees (see accompanying stories). Much of the problem stems from the fact that, unlike in the US, there is no specific law of franchise in India which demands a minimum level of disclosures and greater transparency in operations from the franchiser. Some of these risks may get obviated as VCs begin funding professional franchisers. Avers Saurabh Srivastava, executive chairman, IIS Infotech: "It's possible to get VC funding for say, a franchised call centre." Already, public sector banks like Federal Bank and Canara Bank have lent money to partners of VLCC. ICICI is also working on extending loans to Archies franchisees, if the latter agrees to be the guarantor. It will take a couple of years before franchising gets more organised. Meanwhile, Lal and many other eager beavers like him are already quietly transforming India's nascent franchise economy. It's a clever niche strategy, and I.T. Kids knows it. That's why the Chennai-based computer education firm is wasting no time in rolling out its novel concept. In less than a year since it started out, I.T. Kids' promoters, V. Suresh Kumar and V. Narayan, have already appointed as many as eight master franchisees and 74 sub-franchisees in the south and the west. (Apart from managing their own outlets, the master franchisees will also be responsible for developing and managing a downline of sub-franchisees.) Speed is of the essence simply because industry giants NIIT and Aptech haven't focused on children as a segment as yet. Most courses offered by the two majors are for students in the age group of 16-25 and above. With average enrolments of about 200 at each of the I.T. Kids outlets already, others are bound to spot the potential. NIIT, for instance, is already tying up with schools to customise its existing LEDA programme for them. I.T. Kids is, therefore, relying on franchising to roll-out swiftly -- and grab the first-mover advantage. A wide distribution reach is imperative for yet another reason. "We needed to increase our reach really fast because the age group we are addressing will not go far from home to study something outside school,'' says Kumar. Will this franchising model work? Much depends on whether parents and children find the concept interesting and educative. That will determine whether its outlets get enough traffic. For over two years, I.T. Kids has been extensively researching its mix. Today, it says it has found a smart plan to lock into the 4-14 age group. What's the best way to get children to use a computer? By letting them learn on it. So, I.T. Kids has been researching ways to align its school syllabi. While NIIT and Aptech are positioned as undisputed leaders in computer education, I.T. Kids is about education through computers. So, to make studying fun, it has introduced computer-based courses with modules like Young Adventurer, Junior Doctor or Young Engineer. Says Narayan: "Our curriculum is a crucial differentiator." 
There's yet another distinction. The curriculum, which is divided into one-year modules, covers 42 sessions and costs an affordable Rs 6,200. This gives the franchisee a good chance of retaining the same customer for many years. For example, retention is already close to 90% in most I.T. Kids outlets.  At one go, it obviates the need for heavy promotional budgets. Moreover, the focus on a specific target group makes it easier for the franchisee to enlist customers. To induce trials, I.T. Kids also plans shorter duration programmes that tie in with summer breaks. The revenue model works as follows: to pull in a sufficiently large number of sub-franchisees, their minimum investments have been pegged at Rs 10 lakh. The sub-franchisee gets to keep 80% of the fees generated by the outlet, whereas I.T. Kids picks up 15%. The master franchisee gets 5% of the course fees, so that there is sufficient incentive for him to recruit new sub-franchisees in his region and thereby maximise his earnings.  

Almost 59% of customers with personal Net accounts have accessed the Net earlier through cyber cafes. What's more, 24%  of users today connect through cyber cafes. For N. Arjun, CEO, Mantra Online, these recent findings of an INFAC report are conclusive: cyber kiosks are his best bet to grow his Internet service provider (ISP) business. So last week, he transformed a cyber cafe in Vikaspuri in the capital into a Mantra Online franchised outlet. It will be one of the first of the 8-10 cyber cafes that the ISP hopes to set up in every major city. These franchised outlets will sell start-up kits and form an important part of Mantra's gameplan to grow its ISP business in the next 11 months.
Arjun knows it isn't that simple. In the West, Net start-up kits are available online. If technology permits, an Indian customer too will be able to download the software from the Net. When that happens, the utility of Mantra's franchising network will be reduced. So, instead of waiting for technology to dictate its moves, Mantra is doing the next best thing. It is entering into a loose alliance with a selected bunch of cyber cafe owners.  The way it works is simple: Mantra provides the cafes connectivity at low rates. It also takes the onus of driving customers to the cafes through mass-media advertising. In return, the cafe owner allows Mantra to brand the cyber cafes through its own glowsigns and posters, create a corner for itself, display its products. Mantra is being selective, by focusing only on cyber cafes in prime locations, with at least three computer terminals. More importantly, the cyber cafe owner doesn't have to share a part of his revenues with Mantra. With its toehold in distribution, Mantra will continue to play a waiting game. "We aren't looking at immediate monetary returns. What we hope to get from this is a first-mover advantage," says Arjun. In due course, Mantra is betting that e-commerce opportunities will emerge as an important revenue-stream for its Net-related businesses. That's where cyber cafes will play a key role in attracting trials. Customers will then use pay-and-play game sites available at the cafe. Mantra's experience so far suggests that customers hate dealing with a faceless ISP. Given that Internet connectivity remains a new concept, most customers prefer to deal directly with the company to solve their queries. So, Mantra isn't merely relying on widening its reach through the franchised cyber cafes. It is planning to appoint another tier of master franchisees, who will offer the full bouquet of services. So far, there's one master franchisee in Mumbai. "It could be used to increase your mail-box capacity, add more mail IDs. A Mantra customer has the option of walking into these master franchisee outlets," says Arjun. In the mid-1990s, Seattle-based Starbucks busted the myth that successful coffee cafes were only situated on the banks of the Seine river in Paris. Today, the $1.5-billion Starbucks' network is spread over a dozen countries. And if the market buzz is to be believed, India is next on its list. Even as Starbucks formulates its India strategy, a home-grown rival has already unveiled a desi version of Starbucks cafes -- branded as Cafe Coffee Day -- and is swiftly rolling them across the country. The Rs 200-crore Bangalore-based Amalgamated Bean Coffee, India's largest exporter of coffee, has already set up 10 outlets in Bangalore so far, with plans to open 25 more in Hyderabad, Chennai and Pune by end 2000. By the end of next year, it will have 100 outlets in all major cities. It is a smart imitation strategy. The ambience of the Cafe Coffee Day outlets are just the same in look and feel to Starbucks and Seattle Coffee House, another successful Seattle-based chain of cafes. The ambience, according to R. Murali, director at Amalgamated, is to make Cafe Coffee Day "just a place to be", especially for young people. "The outlets are cosy, and a place to hang loose," says a 24-year-old, who has already become a regular at the Brigade Road outlet in Bangalore. There are regular in-store promos and attractive merchandise like T-shirts and caps to give a sharper brand identity to the outlets. And like Starbucks, Cafe Coffee Day has a limited menu of snacks like sandwiches, pizzas and pastries, focusing instead on the variety of coffee it serves. Would Cafe Coffee Day's model work in India? Murali's strategy hinges on clever value pricing. "We need to alter the perception that coffee is a premium product, so we have kept our prices fairly low," he says. For instance, cappuccino, which normally costs Rs 75 at five-star coffee shops, costs Rs 15 and a takeaway version costs just Rs 8. The results so far? The nine Cafe Coffee Day outlets in Bangalore attract more than 30,000 customers every week. Cafe Coffee Day wants to position itself on the variety of coffee blends, instead of an expanded menu. To make it easy to manage the logistics of sourcing, Amalgamated is making sure that it selects food that is inexpensive, can be readily packed, and most importantly, for which a quality vendor is easily available. Since Amalgamated takes on the onus of finding vendors in each city, a potential franchisee is spared the trouble. As part of its growth strategy, Amalgamated has decided to partner with big corporate houses that would act as master franchisees, in unknown terrains such as the Delhi and Mumbai markets. Its efforts have so far worked well. It is close to signing on three industrial houses in Mumbai, Pune and Delhi. If it doesn't want to be left far behind, Starbucks would do well to press on the accelerator. First build a brand, before you're ready to franchise operations. It is a model most retailers plump for -- and not without reason. Without a salient brand to pull in traffic, it is too risky for a franchisee to jump into the fray. The Connecticut-based $3.4-billion convenience foods major Subway thinks otherwise. It guns for franchisees from the word go in every market it operates in. In the last 11 years, Subway has added 11,000 stores, taking their total to 13,800 in 70 countries. "That's the only way we know how to work," says Dan Vermilya, the head of Subway's operations in the Asia-Pacific region. By the middle of this year, Subway's 12 Indian franchisee outlets will make their debut in the four metros, as well as in Ahmedabad and Chandigarh. Its entry into franchising is worth looking at. Unlike most global franchising models which rely on fixed formats, Subway has built-in flexibility in its business proposition. Its franchises are entirely scaleable. Individual franchisees have the option of choosing three sizes, measuring between 500 sq ft and 1,500 sq ft. The franchisee doesn't have to own a large piece of land to make the grade. This means more people are likely to be interested, and Subway can then grow faster in India. Of course, franchisees must have at least Rs 42 lakh to invest. But that's relatively a lot less than the Rs 7 crore that American restaurant chain, Thank God It's Friday (TGIF), demands from its franchisees. Subway is clear about the profile of its potential franchisees. Franchises will be handed out to only individuals, and it isn't necessary to have experience in the food and beverages business. As long as a potential franchisee has money to invest and is willing to work hard, Subway will bring him into the fold. Every short-listed franchisee will be put through an intensive two-week training period in the US. After that, if the franchisee doesn't have the right location, Subway helps him find that as well. 
Interestingly, Subway focuses heavily on even non-traditional locations like colleges, petrol pumps and hospitals. For Subway, the benefits are many. "These non-traditional locations represent a great opportunity for building store density and awareness in new markets,'' says Vermilya. Subway, on the basis of its experience, found that these outlets often attract people to become new franchisees. Of course, these stores will come up in the next round of expansion in India. Now, given the fact that Subway is an unfamiliar name in this part of the world, how did the company enlist the initial list of franchisers for its Indian foray? Simple enough: relatives of the large non-resident Indian community. "These people are aware of the Subway brand and the opportunities it offers," says Vermilya. But will Indians find Subway's menu -- sandwiches, salads, and, in some cases, soups -- appetising? Subway has successful outlets even in countries like Uruguay and Pakistan, so Vermilya is expecting it to work here too. "Convenience is important to fast-food consumers when deciding what and where to eat." But then before McDonalds, Pizza Hut and TGIF entered India, who would have thought that burgers, pizza and all-American meals would capture so many palettes?