Tony White shares his vision for Australian Franchise Gloria Jean in India

Australian cafe chain Gloria Jean’s Coffees, which forayed into the Indian market through the Dubai headquartered Landmark group’s hospitality 

Tony White, regional general manager, Gloria Jean's Coffees

arm Citymax in 2008, has grown at 23% year-on-year. With 917 cafes globally, the chain expects to brew its way into the Indian market with 100 stores by 2013. Gloria Jean’s Coffees regional general manager Tony White speaks about its lessons from this market and how it is using India as the node to serve countries from Africa to the subcontinent. Excerpts: 

Where does Gloria Jean’s position itself and what has been experience like since its 2008 entry? Gloria Jean’s operates at around 10% premium over the two main cafe players in India, offering 100% arabica beans. Although we position ourselves at the upper end of the mainstream cafe market, we do not want to operate at the price points of international players as it would prevent us from achieving scale. We have grown to a presence of nine stores across Mumbai, Bangalore, Hyderabad and Chennai. Gloria Jean’s India broke even at the retail level two months back and is targeting company-level profitability by 2012. By then the Citymax would have 40 stores in place.

Is there a possibility that your tie up with master franchisee Citymax be extended to subfranchised growth? Sub-franchising is definitely an option to grow. But we will look at branching out into sub franchisees only once we reach a 50 store presence. Although most of our outlets are franchised in Australia, it is usually owned by a couples for whom it is a means of livelihood. They’ve got their skin in the business and are focused on driving sales. But in India, the franchisee does not necessarily run the business. Although we may train him, a lot of factors may get lost in translation when he reaches out to the staff. Consistency of experience is essential to not dilute the brand. 

What is the progress on your roasting facility in Bangalore on stream? We have a long term commitment to this market and are setting up a roaster with a capacity to manufacture up to 12,000 cups per batch by the calendar year end. Being situated in the city, the fresh beans can be easily distributed to our outlets which are largely metro specific. Import tariffs have forced us to source locally and this facility is expected to become a hub for Asia. It will also allow us export to 11 countries across the subcontinent, Middle East and Africa, which were earlier importing beans from Australia. By 2012, 80% of the in house production will serve India while the remainder will be exported.

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Franchising Begins to Bite in India By Rod Young

FORMER INDIAN Finance Minister P Chidambaram's policies of economic deregulation and general reform during the early '90s have proven not only the catalyst for consistent and sustained world-leading GDP growth rates, but also a change in the psyche of the swadeshi (home-grown) business community and educated middle class in India. From the centuries-old Indian tradition of family-owned and operated organisations content with generating enough to support the extended family, the prevailing attitude has undertaken a shift towards conducting business as a science - a process of thorough planning, execution and refinement. Whereas growth was previously a phenomenon of chance and the grace of God, it is now the mantra for even the most modest business.

An increased willingness to explore all avenues of growth has led to the increased awareness of business models that will propagate a founder's vision, maintain the quality of products and services and standardise the customer experience across the network. Particularly for retail businesses, franchising is increasingly viewed as the model through which to achieve these goals in India. Since its beginning in the early '90s, franchising in India has grown in leaps and bounds and there is still much to explore, based on the successful growth of many franchised brands already present. The future of franchising in India will continue to show a rapidly increasing trend line. It is estimated that India has over 25 million businesses operated mainly by individual proprietors or family members. Of these, over 14 million are retail businesses and the vast majority fall into what is described as the unorganised retail sector.

The emergence of branded chains, (organised retailing) is just beginning. At the same time, an emerging aspirational consumer middle class, fuelled by the socio-demographics of India with 54 per cent of India's population under the age of 25, is looking for opportunities and a retail experience. As a result the opportunities for franchise networks to grow in India are enormous. For the uninitiated, a franchise is often just seen as fried chicken and hamburgers. This impression has been created because the likes of McDonald's, KFC and Subway are some of the more renowned examples of global franchised businesses.

Australian franchises in India 
However, the concept and essence of franchising can be applied to almost any business in practically every industry. In Australia alone, businesses as diverse as ANZ Mortgage Solutions (home loans), Jenny Craig Weight Loss Centres, Life Resolutions (professional psychology services), Terry White Chemists, Forty Winks and RedClean (commercial cleaning services) have implemented franchise models in their quest to become the number one brand in their category. Australian franchise companies are only just emerging in India. A pioneer of Australian franchising in India is Cookie Man. This company had discovered that there is a well developed demand for sweet biscuits across India, and it has been operating in India since January 2000 as an Indo-Australian joint venture establishing both company owned and franchised locations.

Cookie Man now has 19 stores across India and is the leading branded retailer of fresh baked cookies. Some of the highest volume Cookie Man stores in the world are now located in India. Newer entrants such as Gloria Jean's now have five stores established under a master franchise arrangement to Citymax, a leading Indian hospitality, leisure and food retail company, and they expect to have 10 stores trading in India by the end of 2009 - just 18 months after opening their first store. Just Cuts has granted a master franchise to an Indian lifestyle and leisure company and established its first location in 2008 with several more to follow as the concept is proven in the Indian market.

While this may seem a modest beachhead for Australian franchising, the opportunities are evident. EXPORT INDIAIn spite of its 1.1 billion inhabitants, business success in India is not a birthright. A dilettante will always miss the forest for the trees. The apparel retail, food and beverage retail, education, health and beauty and real estate sectors are likely to witness a lot of activity in the form of a significantly increased presence of Australian franchised businesses. Even during these early stages of franchising in India, many successful Australian franchised businesses such as LJ Hooker, Fernwood Women's Health Clubs, Boost Juice bars, Cookie Man, Just Cuts and Gloria Jean's Coffees have selected growth in India as a pillar of their international expansion strategy.

The Indian business environment poses challenges similar to those faced domestically by Australian businesses, among other things: high rents, complex customer preferences (it took Domino's three attempts before its pizzas became popular in Australia) and geographical challenges. It is commonly noted that Australian businesses which overcome these challenges are some of the better managed brands on a global basis. With this in mind it would appear that Australian franchised businesses that include international expansion as a vital component of their growth aspirations, will find it easier to gain market share in India, compared to many of their American and European competitors. Over the previous decade many global brands have sought to grab the first mover advantage by rushing to India. During the early stages of this gold rush the common perception was that the owner-operator effect, when combined with the local knowledge of franchisees, would guarantee success. However, inadequate consideration of complex cultural and social dynamics and supply chain issues served to thwart many initial forays. Yum Brands, with its KFC outlets, was one of the more prominent early failures due to a combination of the above factors as well as the selection of an inappropriate Master Franchisee.

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