The world’s second-largest retail chain with presence in more than 30 countries, Carrefour intends to open the first cash and carry or wholesale store on its own by the second half of 2009, the officials added.

“Carrefour WC&C India is our 100-per cent subsidiary and will set up the cash and carry business in India. We are planning one or two stores by the second half of 2009 and add more as the business grows,” said Managing Director Herve Clec’h.

“Master Franchise Company, also 100 per cent-owned by Carrefour, will appoint the franchisee for retail trade business. We are talking to five-six Indian groups for this,” Clec’h, who recently took charge of India operations, told IANS.

Carrefour hopes to finalise the Indian franchisee for the multi-brand retailing business, in which no foreign equity is permitted in the country, over the next couple of months, added Gerard Freiszmuth, general manager for Carrefour India.

“We have not finalised the investment plan yet,” Clec’h said, when asked for the amount his group intends to invest in the country,” he added, “We are here for the long haul, so money will not be a constraint.”

India presently permits up to 51 per cent foreign equity in single-brand retail trade business but disallows foreign equity in multi-brand stores in a bid to protect domestic stores, predominantly run as neighbourhood mom-and-pop shops.

The policy, however, permits 100 per cent foreign equity in cash and carry or the wholesale business, as also in the area of extending technical know how, supply chain management and general support services to Indian retail companies.

Carrefour WC&C India will also enter these areas where the Indian franchisee can get the same technical expertise that go into running the retail trade stores of the French company across the globe, the two officials explained.

“The Indian retail stores will also have access to our global brand. They will all be Carrefour stores, even though we will have no equity participation in them, in line with present policy,” Clec’h said.

“But we see the franchising option as a transition to partnership,” he said, adding his group will be interested in acquiring equity in the Indian retail trade venture as and when the Indian government gives permission.

Freiszmuth, who expanded Carrefour’s sourcing operations in India from virtually nothing to a few years ago to a $450-million business today, said his group was more keen on the hypermarket segment of retail trade in India.

“These are stores spread over 5,000-8,000 square metres. The Indian customer can get the same experience of shopping in any of Carrefour’s stores be it Milan or Kuala Lumpur – but with lot of local flavour,” he said.

The two officials said the entry into India’s merchandise trading business does not mark an end to the group’s global sourcing operations from the country. “At present garments account for 90 per cent of our sourcing operations. But fruits and vegetables are also catching up fast,” Freiszmuth added.

The past year has seen keen interest from global players and domestic companies alike to enter the retail trade business in India that is estimated at over $340 billion at present and projected to touch $520 billion by 2010.

Currently, more than 70% of the mobile retail sector is unorganised and market analysts believe there is a huge potential for the franchise model. “The return on investment (RoI) for the franchisee is somewhere around 60-65%.

It will allow us to expand our presence and enter deep into the cities,” says HotSpot CEO Sanjeev Mahajan. HotSpot has recently adopted the franchise model with 25 stores operational in Delhi alone and has plans to expand to 100 such stores besides the 400 company-owned, company-operated (co-co) stores across the country.

“Customer experience and pricing is the crux of this business. Therefore, we provide stock management, professional training for the in-store sales team, and an after-sales customer support at all our franchised stores. The role of the franchisee is restricted to the operational level,” says Mobile NXT CEO Vijay Menon.

Mobile NXT adopted the franchise model in tier-II and tier-III cities across India in 2007. The company operates more than 55 stores all over the country.

Mr Menon, however, concedes that the franchise model in mobile retailing is difficult to adopt since there is no uniqueness in the product and the return on investment is not very attractive.

That is why players like Subhiksha and Mobile Store are refusing to join the bandwagon. They believe the franchise model is not profitable at this stage, given the low profit margins and low market penetration.

“We are concentrating on a co-co model based on pricing. We don’t think franchise model is the way to go, since the business already accounts for low margins; expanding through franchise would dent the margins further,” says Subhiksha president-marketing Mohit Khattar. Subhiksha operates the largest chain of mobile stores with around 1,300 stores all over the country.

Mobile Store CEO Rajiv Agarwal also feels that the franchise model in the current scenario does not hold much ground. “There is the risk of our brand value being diluted. This is a business where you cannot allow your service proposition to get diluted,” says he. Mobile Store has significant presence in the country with more than 800 stores.

However, RPG Cellucom head-marketing Biswajit Pandey feels that with improving margins and marketing strategies, the franchise model may take the front stage in future. The company currently operates over 25 stores.

“It’s a win-win situation since it allows rapid expansion and presence in local areas for the franchiser and an opportunity for the traditional retailer to enter the newfound trend of organised retail. Moreover, the operational costs in case of franchise model is low in comparison to co-co model, giving both the parties a better RoI,” says global management consulting firm Technopak chairman Arvind Singhal.

Several American and European retail brands in segments as varied as fashion, cosmetics, lingerie, food & beverages, among others, are preparing to make their presence felt in the Indian market through franchise route, as a result of sharp drop in sales in these markets following economic slowdown. Certain brands from countries like the UAE, Brazil and Thailand are also eyeing Indian market.

“Drop in retail sales in Europe and the US markets are leading to this phenomenon. Retail brands that built great amount of manufacturing capacities are under pressure to offload excess inventories and are therefore entering into alternative sales practices by setting up their franchise in large-sized markets like India,” Gaurav Marya, franchising expert and president, Franchise India Holding, told ET.

Following the collapse of the international retail markets, several brands like Beverley Hills Polo (USA), Spa Siam (Thailand), Taman Gang Restaurants (UK) and others entered Indian market through franchise route.

Others like Revive Juice Bars (UK), Mrs Fields Cookies (USA), Jamba Juice (USA), fashion brand Jules (France), cosmetics brand Mikyajy (UAE), lingerie brand Nayomi (UAE), car-wash service brand Moly Company (Thailand), food & beverages brands Habibs (Brazil) and Herfy, BBQ Chicken (Singapore), Pizza Company and Spicchio Pizza (both Thailand), Marina Furniture (UAE), and Alto Cafe (France) are learnt to be at various levels of negotiation to start their services in India. Companies that have long nurtured ambition to enter retail-friendly markets like India and China are finding this a convenient time as sales in their own countries have tapered. They are trying to convert this as an opportunity to taste Indian waters, which they plan to do for 2-3 years before they decide on their future plans in these countries, says business strategy specialist Harish Bijoor.

“Several brands are looking for green pastures, and India having a decent GDP growth of 4.3% holds lots of potential for them. They are taking up franchise route as they cannot risk coming on their own at this juncture. This also means a big chunk of business coming in for entrepreneurs,” Mr Bijoor said.

Several brands are targeting grade B and C cities rather than expanding in metros, as smaller cities are more brand hungry and retail is not much hit here, say experts.

With the presence of limited brands in India markets, the country holds big opportunity for these brands as this would also help them re-route inventories and orders to new markets and keep their sagging sales volume intact. At the same time, their Indian counterparts are finding this a right opportunity to strike negotiations to their advantage,” added Mr Marya.

The purchase "is a continuation of our relationship with BP and the strength of working together," Kelly Kroll, director of marketing for Atlas Oil, told CSNews Online. "[The stores] overlay attractively with the current market space logistics and operations."

As reported in a CSNews Online news flash yesterday, the purchase will bring Atlas’ total BP station count in the region to 113, and is scheduled to close in June. Atlas will supply the locations with fuel, and will operate the stores initially, but in the future, may give dealers the opportunity to purchase sites from Atlas or employ another operational model, depending on the location, Kroll said.

The company’s focus on Chicago has come from its acquisitions strategy, which over the past several years has brought its from southwest Michigan to Indiana and farther west, Kroll said.

"There’s clear operational efficiency for transportation and logistics," he said. "Chicago is still a forward moving market space, and we are behaving like most other organizations and we follow the money."

With the completion of this deal, Atlas will manage the supply of nearly 400 retail locations in total throughout the U.S. In addition, Atlas’ annual distribution of BP fuel will top more than 300,000,000 gallons through this acquisition, making it one of BP’s largest distributors, according to the company.

"Atlas Oil Co. has proven to be a great business partner for BP," Sean Daley, vice president Midwest Sales of BP Products North America, said in a statement. "Atlas’ distribution, supply management and operational capabilities have given us considerable confidence and trust in their ability to manage these BP branded retail assets in one of the most important Midwest markets for BP and the ampm franchise offer."

But Atlas’ growth will not stop soon. By 2015, the company has a distribution goal of 5 billion gallons. Meanwhile, it continues its expansion through purchases such as this, which is the third from BP in a year. Previous transactions include 23 sites in September 2008, and 57 sites in January 2009.

"Despite challenging economic conditions nationally and in our home state of Michigan, we continue to meet our growth objectives in the Midwest market," Mike Evans, executive vice president of business development for Atlas Oil, said in a statement. "Each acquisition expands the markets in which we can prospect for new opportunities, and we look forward to being able to further develop our relationship with BP by converting additional locations to the BP brand."

Kroll added: "In general, recessions are bad for everyone’s growth plan, but it does provide some opportunities on the acquisition side, where some costs do go down. When the market is depressed there are bargains to be had."

By Mehgan Belanger

The Connecticut headquartered brand is present in 50 Indian cities with 263 franchisee-run restaurants across the country. Commenting on the potential of the market, Subway President and Cofounder Fred DeLuca said: “India is a promising business destination with a young, educated population having growing disposable income.”

Subway will continue to evolve and adapt its product offerings to suit the Indian taste and plans to grow here through franchise route, he said in a statement. While the investment of $58 million (over . 300 crore) to set up the planned number of stores will be made by franchisees, Subway will invest in providing training and technical know how to its partners.

The brand is aiming to expand aggressively in tier-II and tier-III locations. The planned expansion will generate employment opportunities for another 15,000 people, the statement said.— PTI