Thesis: Scale is central to fast food, and franchising is central to scale in this business. Just ask any of the global majors. More than nine in ten McDonald’s outlets around the world are run by franchisees, and the proportion is even higher for Pizza Hut and KFC. This is as true of their home market—the US—as of any other country. Franchising, in other words, is the lifeblood of fast food. You get to blitzscale while not sinking millions of your own capital. What’s not to like about it?
A lot, if you ask Sagar Daryani, co-founder and chief executive of Wow! Momo Foods Pvt. Ltd. The 14-year-old company operates all the 500 outlets of Wow! Momo, Wow! China, and Wow! Chicken across India. The Tiger Global-backed entity, which has so far mopped up Rs 350 crore (US$43 million), was valued at Rs 2,200 crore (US$270 million) during its fundraise fundraise Mint Tiger Global-backed Wow! Momo kickstarts Series D fundraise Read more in September.
Daryani says Wow! Momo Foods will double its revenue in the year ending March 2023 to Rs 450 crore (US$55 million). And he sees no reason why he should give up on his business model, at least till he ventures abroad, when he can continue adding 20 stores every month while not leaving the fate of his brand in the hands of franchisees.
“If you have enough cream in your business, why do you want to share it?”
In India, the franchising business is very good if you keep it to a product or a commodity. But F&B (food and beverage) is a commodity-and-service business, which works better without franchising. By that I mean one or two groups taking over the entire country, rather than having multiple individual franchisees.
[While Indian fast-food chains like Jumboking and Tibb’s Frankie have several individual franchisees, Domino’s Pizza Domino’s Pizza The Ken How Domino’s defied the might of Zomato and Swiggy Read more has just one franchisee in India, Jubilant FoodWorks. And Pizza Hut Pizza Hut The Ken Pizza Hut finally has a turnaround recipe–with a little help from Domino’s Read more , and fried-chicken brand KFC have had just two franchisees since 2015—Devyani International and Sapphire Foods.]
When you take an ice-cream business like Baskin Robbins or a confectionery business just selling cakes and pastries, franchising can happen very well, because it’s not a service.