FICCI_PWC_2011

8/12/2019 FICCI_PWC_2011

1/4

Saurabh Garg, Anurag Kedia and Sunil Rao were like any other youngsters from todays corporate world. Armed with

a good education, they got into high-paying jobs and the accompanying lifestyle. When these young professionals

traveled frequently for work, they noticed a common thread in their experiencesthey would have all liked to go in for

a good, relaxing massage after a hard days work. However, the hotel spas where they were staying were more often

than not too exorbitantly priced. This prompted the trio to think about an affordable spa chain. Capitalizing on this

opportunity, they launched The Four Fountains Spa in Pune in 2007.

There are clearly two sides to this story: There is huge growth potential in the Indian wellness industry, as rightly

spotted by Kedia and his co-founders, thus offering entrepreneurs a chance to scale effectively and quickly with the

right business model. But there is also a huge and burgeoning middle-class in the country with rising disposable

incomes that will fuel the demand for wellness and beauty products and services in the years ahead.

A growing industry

According to a FICCI (Federation of Indian Chambers of Commerce and Industry) and PricewaterhouseCoopers

(PwC) report of September 2011 titled Wellness: Riding the Growth Wave, wellness today is a Rs. 49,000 crore

industry in India. The report mentions that increasing emphasis on a healthy and wholesome lifestyle has been the

springboard for the wellness industry in India. Wellness today is not just a metro phenomenon. Young consumers

across tier II and tier III cities and towns and even pockets of rural India are actively seeking wellness solutions to

meet their lifestyle challenges. With increasing global and media exposure, for many youngsters today looking good

equals feeling good. The report also stresses how adjacent industries such as retail, healthcare and hospitality areassimilating wellness as a part of their value proposition, opening up huge opportunities going forward.

CK Ranganathan, CMD of CavinKare;

Jawed Habib, Hair Expert and Founder, Jawed Habib Hair and Beauty Ltd, says, Todays fast-paced life gives no

time to properly groom oneself. Peer pressure compels one to seek professional help for grooming. The hair &

beauty industry is a recession-proof one. Hence, any time you start a business in this space, it is bound to grow.

Kedia, Co-Founder and Director (Projects and Franchising), The Four Fountains Spa, reiterates Habibs view. In

context of the current global slowdown, he says, Often, it is seen that during slowdowns, healthcare and wellness

services tend to do better. We strongly believe that our growth or the lack of it would be because of our internal

efforts and external factors would play a limited role in it.

The first steps

The Four Fountains Spa started with two trial spas in Pune and, today, the company boasts of a presence in 10 cities

across India where it operates 19 spas. Habib runs a chain of two salon formats, HairXpreso, where dry haircuts are

given at Rs. 99 and the Jawed Habib Hair and Beauty salons, which offer a wider range of services. The company

has also backward-integrated to offer quality education in the cosmetology and hairdressing space and runs the

Jawed Habib training academies through both company-owned and franchise models. Habib operates 335 outlets

across 21 Indian states today.

Another player in the salon space, Naturals, was launched in Chennai in 2000 by Veena and Chinnikrishnan

Kumaravel, to make Veena self-employed and earn Rs. 60,000 per month. The couple soon realized the potential of

the business and went on a rapid expansion spree. Today, Naturals operates 167 salons of which 60 are in Chennaiitself while the rest are spread all over India, with a large presence in Tamil Nadu. Kumaravel, CEO and Co-Founder,

Naturals, says, No other salon brand has dotted any city like Naturals has done in Chennai. This is even more
http://entrepreneurindia.in/wp-content/uploads/2013/01/33.jpg

8/12/2019 FICCI_PWC_2011

2/4

significant because we have done it with a franchise model, as the first question any franchisee will ask is What is

my territory?

Kumaravel makes an important point here. The growth route adopted by many of the players in the beauty and

wellness space is often franchising as it offers a feasible option to grow and offers manifold benefits. As Habib says,

Franchising is the best way to grow your business. Its not a lucrative idea to invest capital and open up company-

owned stores. In franchising, the local investor of that city leases your brand and runs it according to the company

standards. All you need is a good business model to scale up. Kumaravel admits that for Naturals, the franchise

model came about out of pure necessity. We didnt have much money to expand. In addition, we also experientially

realized the need for an owner-manager on the floor regularly. World over, beauty salons make for successful

businesses with an option to franchise, he says.

The CavinKare Group entered the salon space at almost the same time as Naturals. The company launched its first

salon in Chennai in January 2001 under the name Greenie. The USP here was that the salons would be using mostly

herbals products for the services being offered. Today, it operates 87 outlets under its group company Trends In

Vogue Pvt Ltd, of which 80 are Green Trends salons (the brand name was modified in 2002) while seven are Limelite

salons and spas, targeting premium audiences. Each of these players has successfully adopted the franchising route

and is today looking at a pan-India presence. As Kedia says, We realized that franchisees would bring in their time,

commitment and passion into the business and help us expand at a much faster rate than we would otherwise.

Capital has not been a problem as there are multiple ways of raising capital which are available now. Thecommitment that a franchisee brings is very important and difficult to replace in the long term. Hence, a conscious

decision wa

s made to expand through franchisees. The FICCI-PwC report concludes by saying that between 2011 and 2014,

the Indian wellness industry will grow at a CAGR of 20 percent to reach Rs. 87,500 crore.

The various models

Veena and Chinnikrishnan Kumaravel of Naturals

To become a Naturals franchisee, an entrepreneur needs to find 1,200-1,600 sq ft of space, preferably on the first

floor, with good visibility. The investment requirement ranges between 40-50 lakh. Kumaravel says, We look at the

integrity and willingness of the franchisee to be an owner-manager. His/her ability to lead a team and passion for the

beauty and fashion industry are also important. He should also have the ability to make the capital investment. A

Naturals franchisee is expected to make his/her RoI in 36 months and, after that, the revenue can vary from Rs. 1

lakh to Rs.1.5 lakh per month. The company charges 10 percent royalty to the franchise salon on an average. This

founder stresses that it is better if the franchisee has no previous knowledge of the beauty and salon industry. If you

know the technical side of a business, you can never be a generalist. So many people can cook a better hamburger

than McDonalds but it is the brand and the system which sell, not the product. We advise our franchise partners to

be generalists, he says.

An entrepreneur interested in becoming a Jawed Habib franchisee must select the format of the outlet first and act

accordingly. For a HairXpreso outlet, the franchisee must secure 100-400 sq ft area in a mall or high retail store and

invest between Rs. 10-20 lakh. The royalty charged is 15 percent per unit. For a Jawed Habib Hair and Beauty salon,the investment ranges between Rs. 15 lakh and Rs. 20 lakh while the area requirement is 600-1,000 sq ft. For a

Jawed Habib academy, the investment requirement is approximately Rs. 22 lakh (varies from area to area).

8/12/2019 FICCI_PWC_2011

3/4

According to Habib, for a HairXpreso, the operational breakeven can be achieved within three months while for a

bigger salon and the academy, it would take six months to get there. The RoI for all three would range between 30

and 60 percent in the first year. Habib says, Anybody is welcome to the franchising world. However, there are two

things every franchisee needs to keep in mind: Be passionate about the business, devote a lot of time to grow it; and

dont be a mere investor.

As far as CavinKare is concerned, the company gives a franchisee a license to operate in a particular location for a

period of five years. On every sale made in the outlet, the company charges a royalty of 15 percent. The space

requirement is 1,200-1,400 sq ft while the investment needed is about Rs. 35-40 lakh. Both visibility and accessibility

of the location are important. The franchisee is likely to earn Rs. 5-15 lakh per month on an average for the five-year

span. The RoI calculation will be about 30-40 percent per annum spread over the five years. Gopalakrishnan,

Founder and Business Head, Trends In Vogue, says, Our salons have a unique identity of being family salons. Our

franchisees get a trusted brand, which the consumer is aware of, and they can start the business from day one. They

can start making profits from the first year itself.

Anurag Kedia of Four Fountains Spa

The Four Fountains Spa has brought about some innovation in the franchising space based on the beliefs of its

founders. Kedia elaborates, There are certain practices which are being followed across the board by brands across

categories, which we think should change. Most brands charge a franchisee fee, which we are against as a

philosophy. We think the brand should not try to make money even before the operations for the franchisee have

begun. Hence, we do not charge any franchisee or sign-up fee.

Kedia also firmly maintains that the royalty which the brand charges for the business has to be of the right quantum,

it should not be high just because the brand is known in the market. At the same time, if the franchisee is managing

operations efficiently, he/she should be rewarded for it. We charge a royalty of 10 percent of revenues, which is one

of the lowest in the category, he claims. To become a franchisee of The Four Fountains Spa, the initial investment

requirement is around Rs. 45 lakh and minimum 1,200 sq ft carpet area on the main road of a posh residential

catchment is needed.

A helping hand

Naturals helps franchisees in all areas starting from location identification to project work, interior decoration,

sourcing equipment and products, recruitment, training, launch and getting the first 3,000 customers in the first three

months. In phase II of operations, the company does re-training, promotions and gives HR support on a need basis.

Kumaravel says, Our franchisees are our partners and our job is to make them win.

At the Four Fountains Spa, support is offered to franchisees on the sales and operations, marketing and HR front.

The companys operations team conducts regular visits to a property to ensure the quality parameters are being met

and the franchisee is able to handle the business. There are also audits and other feedback mechanisms. Marketing

responsibilities are shared with the franchisee. The brand focuses on doing central tie-ups and marketing while the

local tie-ups are handled by the franchisee. Even for the local tie-ups, all planning is done centrally for franchisees to

maintain ease of execution. On the HR front, all recruitment and training are handled by the brand on an ongoing

basis. Kedia emphasizes that the franchisor-franchisee relationship has to be a partnership where both partners worktogether for the rewards.

8/12/2019 FICCI_PWC_2011

4/4

The CavinKare Group also extends support on the lines of Naturals to its salon franchisees, helping them right from

location identification to interior design and follow-up with the vendor on the execution front to ensure timely

execution of the project. Recruitment and training is also handled by the brand and the outlet is thus made ready for

a soft launch. Training to the franchisee is offered in the areas of IT, HR, audit and accounting procedures. The

company has invested in Salon Iris software for meeting its IT needs.

The Jawed Habib brand also offers support in the areas of staff recruitment, marketing and promotion planning, loan

procurement, salon designing and artworks, salon management training and staff upgradation and training. Regular

audits are conducted by the company to ensure hygiene and quality standards.

The game plan

It is clear that just as providers have evolved in the beauty and wellness space, so have consumers. When

CavinKare launched its first salon Greenie, it was targeting only men. The second offering from the company was

only for women. Eventually, the company evolved to build its niche in the family salon space. Today, its salons offer

everything from hair treatments to facials to manicures and pedicures and even special bridal studios are included in

the set-up. As Habib says, Some 10 years ago, grooming was limited to haircuts for men, and hair and a few beauty

services for women. Now, with the emerging cosmopolitan culture, consumers are exploring more hair and beauty

services. Now our salons have an equal ratio of men and women who seek multiple services. The rising disposable

income has made the wallet heavier, resulting in increased ticket size at our salons.

Most players in the space are looking at rapid expansion and growth over the next few years. The Four FountainsSpa is expected to reach 25 centers (from the current 19) by the end of this financial year. Jawed Habib is open to

targeting small pockets in tier I and tier II towns. CavinKare is targeting capital billing of Rs. 100 crore for the current

financial year with an aim to reach 200 outlets. Naturals aims to create 1,000 women entrepreneurs, 3,000 salons

and 50,000 jobs by December 31, 2017. All growth is going to come primarily through the franchise route. There cant

be a better time for entrepreneurs to enjoy this ride. As Kedia concludes, The franchisee-franchisor relationship is

like a marriage. If the marriage is successful, it has to be successful for both.

(With inputs from Shonali Advani)

Documents

FICCI_PWC_2011