Ask these 5 questions before finalizing a Pizza Franchise

Pizza business is worth more than Rs. 50,000 Cr per annum in India (a Market estimate). Most of these is driven by Pizza franchise. And the business is growing by more than 15% every year. It is one of the top 10 food items consumed in India.

And you could set up entire pizzeria by practically just one product. Pizza. And limited raw materials to deal with. That means a lean and agile supply chain.

Single product, One page menu, Specialty food business – come on, the business can’t get simpler than this.  

The core product is easy to consume, one dish meal, and has unlimited varieties.

And, Pizza commands a price premium over other products in the same category (Try selling biryani for Rs. 1,000 a plate!!!).

So, if you are thinking of entering the food business (either full time or as an investment), Pizza is your perfect go-to food category.

You can start this business with Rs. 5 lacs investment, or can go on a splurge Rs. 3 Crore+ for a single restaurant.

And because this business sounds too easy, everyone wants to jump on this opportunity.

Therefore, you see a lot of pizza players around. As per a statistics, every 6^th restaurant in the world is a pizzeria. In the World, YES.

Amongst all these pizza players, how many of them are actually successful? Less than 20%.

Welcome to the industry with one of the highest failure rate. You have just about 20% probability of success if you are trying to launch on your own. Because you need to figure out

• The final product and the recipe
• Raw material and sourcing
• Kitchen Design and Equipment
• Restaurant Design, layout and construction
• Manpower sourcing and management
• Launch marketing and hype creation
• Regular marketing and loyalty building
• Sales channels and optimization
• Leveraging IT for efficiency and Profits

And so many other parameters. 

There is a good chance that eventually you will figure it all. But that comes at a heavy expense of time and resources. Another smart ladder to success is by taking up a franchise.

Please understand, franchise is not a fool-proof formula for success. A lot of franchise operations also fail. Partnering with an existing brand only gives you a jumpstart. It reduces your chances of failure and improves your odds for success. Ultimately, it is your execution capability and a genuine sense of customer sensitivity which will determine your success in the marketplace. 

Nonetheless, a franchise set-up significantly improves your success probability.

Read about our Franchise Program here.

If, and only if, you partner with the right company. The question is, how do you select the right franchise? On paper, all of them look good. All of them promise you a dreamy business beyond your calculations. All of them seem to be the industry experts, with the best tools and technologies to succeed in the market.

How do you separate men from the boys (ignore the pun)?

I am giving you some clues. Some set of questions and follow-up questions to help you arrive at your own conclusion. The conclusion will differ from person to person because your objectives and circumstances are different. Your answers and conclusions will be vastly different  if you are in a metro city vis-à-vis in a small town.

And I am not providing any ready-made answers. It is your hard earned money. So, you do a proper due diligence and arrive at the conclusion. I am just giving you the right pointers, so that you can take a better decision and avoid sand-traps in the market.

So, here we go.

1. Product Strength:
   1. Do you have a unique product?
   2. Why should a customer pay for your product?
   3. Are you priced at premium / value for money / economical? Why?
   4. How do you decide your future products (Pipeline)?
   5. What is your strategy for side items (starters / desserts / beverages etc)?
2. Return on Investment:
   1. What is the net profit per month (Realistically)? Not in terms of percentages, but in amount? (Note: A lot of false promises happen at this stage. Please understand that successful pizza units make about Rs. 80K – 150K net profit per month. If your company is offering you some astronomical value, double check your numbers).
   2. How much total money to start this business? (Note: calculate everything, including the civil works in your premises, advance rent deposits, launch marketing expenses, stocks everything. It should be calculated as entire expenses which is needed till launch day.  Whether it is investment or operating expenses, it doesn’t matter. Cash outflow is cash outflow. Simple.)
   3.  % ROI on a monthly basis – Monthly Net Profits / Total Investments. (If you have to compare, please understand, Banks give you roughly 0.6% monthly ROI, Mutual funds give you 1%, Risky loans to friends generate 2% and so on.)
   4. Is the % monthly ROI worth it? Considering the investments and monthly return?
   5. How much of initial investment can you salvage in an unfortunate case of shut down?
3. Company Track Record:
   1. Who are the owners / Promoters? How is their profile and experience?
   2. Have they run any retail unit themselves?
   3. What is their vision and long-term plan about this business?
   4. Are they open in sharing their franchise contact details should you want to talk to them? Both successful and failed ones?
4. Marketing Ability:
   1. How do they market their products?
   2. How much role technology plays in it and who runs it? Is it In-house or outsourced agencies?
   3. Do they have any app / own delivery platform or any other tech enabled platform for customer service?
   4. How has their marketing changed after Covid?
5. Location and Catchment area:
   1. How do they select / finalize a location?
   2. How will they help you in finalizing a location?
   3. Based on location, will they offer any customized menu or product?
   4. How much time will be required to launch the operations? Can they help with any sort of project plan?

The areas and questions are indicative in nature. These will help you in engaging in a meaningful dialogue with the brand owners. Answers to these questions will provide a good 360 degree assessment of your prospective franchiser.

Taking a franchise is a critical business decision. You will be expected to pay anywhere between Rs. 3 lakhs to Rs. 20 lakhs as franchise fee for a successful brand owner. Plus, 3% to 10% of Sales to be payable to Franchisor as Royalty and recurring monthly payments. While we are at this subject, please also get clarity on all additional charges, as and when applicable. Look out for all hidden charges and unravel them before you make your final calculation sheet. Whether the answers are convincing or not, is your decision. After all, it is your hard earned money.  

See you Soon

Randheer

P.S. For a 30 minute video session on Pizza Industry analysis and franchise business model, visit our franchise page here and submit the form.