Did you ever imagine the difference between a small modern retail outlet like Reliance Fresh or Subhiksha etc. and a neighborhood store which is a typical kiryana or general store? The neighborhood store has distinct plus in terms of ability to relate to the consumer which can be possible because of the owner sitting there, ability to build in well-bonded team of assistants, servers and delivery boys sans the corporate tag, and the flexibility to take business decisions on varying price points, if the situation so demands. These issues, besides being absent in a small modern retail outlet, are almost impossible to bring in.
A small modern retailer has to have size, which cannot be replicated by the smaller neighborhood store as they mostly lack flexibility on location. Modern retail chains should appropriate the positives of neighborhood store onto itself. This is high impossible in a large elaborate corporate set up as employees are always on the move for better careers at the drop of a small compensation increase.
The best format for a small modern retailer is franchising. It could be defined as an owner employee who takes ownership of the business, has no fixed salary but whose compensation depends on his store making or losing money and with no limits. The owner employee takes a tidy share of the profits, but does not take anything home if the business shown no profit, similar to a neighborhood store.
All that is required of an owner franchisee is to run the store efficiently and without expecting any remuneration. His income comes in the form of shared profits which is agreed upon in advance. The more the profits the more he earns which is directly related to his efficiency and dedication. This retail format is a paradigm shift from the typical franchise concept in which the franchisee has to make the investments in terms of capital, location and staff. Since only a refundable security amount is required, any individual can become an owner franchisee with a franchisor’s assistance for business support.
The new format for a small modern retailer is franchising. In simple terms it could be owner employee who takes ownership of the business, has no fixed salary but whose compensation depends on his store making or losing money and with no limits. To ensure that the owner franchisee does not walk away with the capital goods or quits without notice, the franchisor may ask for an initial security deposit equivalent to the capital goods value in the store. While most retailers are open to the regular franchising model since they see it as a way to reduce capital requirement, there is also need for them to see franchising as a business model that ensures profits but not as one that reduces capital requirement. The new franchise model is ideal for both the individual as well as the retailer franchisor. In the next three to five years many neighboring stores will approve of and open to the above arrangement to benefit from the advantages of organized retailing such as better sourcing, better margins, and strong inventory control, training and marketing.