Big Brands have changed their retail sales model and are assuring minimum brand guarantee OR a share of revenue for franchisee stores, whichever is higher. This means lesser risk and lesser working capital for the franchisee. Why have they taken this step ? The retail revolution has just begun in India and every brand wants a big pie of market-share. Additionally, Real Estate is expensive in prime localities, where old retailers were sitting with their old outlets. Thus the retail sales design team came up with this new model.
The Big Brands offering this new model of business include Reebok, Wills Lifestyle, Lee, Cooper, Givo and Koutons. Nearly 20% of Wills Lifestyle stores are running on this model. Koutons has 300 stores of its total 1,000 stores under the minimum guarantee arrangement. Subhinder Singh, MD of Reebok India said,
The minimum guarantee deal must be structured in a way that it doesn’t blunt the entrepreneurial edge in the franchisee.
So the next time when you are offered a franchisee, look for the minimum guarantee or part of revenue share.