Tuesday, May 27, 2014

Risk free business opportunities for HNIs

Risk free business opportunities for HNIs
Franchising today is no longer a small business play and there are one too many opportunities present for large investors who want to do business at a big scale and also don’t’ want the startup phase scuffle. High net worth investors (HNIs) would typically fall in the category of business; looking at an investment of a crore and going on upwards to hundreds of crores and would typically be interested in master franchise, multi-unit, area development route for a particular region or country for specific period of time.

The sectors which are hot for HNI’s

Today the best suited sectors to make such investments are F &B (food and beverage) covering Fine-dine Restaurants, Entertainment Lounges, Fashion and Lifestyle (Multi-brands outlets or designer studios), Education (K-12 Segment), Retail ( Jewellery, Luxury brands), Hospitality (Hotels), Automobile (Auto dealerships/Pre-owned Car market), Real-Estate, health & Wellness(Salons/Spas ,Gyms and Fitness equipment).

High Net worth Individuals in India – A growing community

Leading business Reports suggest that India is home to as many as 7,850 high net worth individuals whose collective net worth is $935 billion. A city-wise analysis shows that more than 90% of India’s Ultra-High Net worth Individual (UHNW) population lives in top 10 cities including Mumbai, Delhi, Bangalore, Kolkata, Hyderabad, Chennai, Ahmedabad, Pune, Gurgaon and Jaipur. Despite India’s modest 1.6 percent population growth, the country added more UHNW individuals (120) than any other BRICS nations in the past 12 months.  Further ,The number of Ultra High Net worth Households, with a minimum net worth of Rs 25 crore is expected to triple to 2.86 lakh in next five years with a five-fold increase in their net worth to INR 235 trillion. And the HNIs will be double in number by 2015 to over 4 lakh with a collective wealth of USD 2645 billion. If we go by the statistics, India has a rapidly growing HNI segments across the world that currently contributes approximately 1.2% to the global HNI wealth.

Business in the Fast lane

When equity markets were strong, Indian HNI’s parked more than 31% of their savings in equities. But today, when dividends are lower, Indian millionaires are parking their funds in novel, lucrative consumption projects. The vigorous entrepreneurial activity by HNIs in India in the last 4-5 ears, has not only taken the Indian economy to the next level but has attracted global Brands to seek partnerships to enter Indian market with HNI Business owners. Given the diversity of Indian geography and strict FDI regulation in sectors like Retail, The businesses model usually focus on taking the master franchise rights for a country or a specific region or rely on multi-unit franchise investments

On one hand large net worth investors like to exercise a great degree of caution when it comes to their investments but on the other hand, they are also pro-growth and it is also many matter of year or two the Brand flourishes across the Indian market.

Master franchising and multi-unit franchising is playing a big role in business alliances in India and now forms almost 10% of the deals of the franchise industry. This development is also supported at ground level by investments by Indian franchisees, progressing from a single business unit to becoming multi-unit franchisees by acquiring a second, third or even more outlets in the same network. Many master franchisees that started out owning just a single franchise are now controlling whole regions and have become a mini corporate in their own right, generating seven figure incomes. A few successful early movers with multiple franchise brands in their portfolio have even taken their business public.

Forming lasting partnerships

The HNI investor has much to gain and much to lose in this high growth- high investment partnerships. The foundation is sound groundwork and making the relationship worthy for both the parties. A thorough market analysis ,research to understand the market trends, consumers’ consumption patterns, demographics, with an eye on real estate rentals and looking at preferred retail distribution channels is the first key to getting the relationship right. Definite and clearly defined legal agreements, growth blueprints, investment cycles and relationship dynamics are what make the business partnership lasting.

Big Rewards: PE Investors –HNI game

The Master franchise or multi-unit business model are highly capital intensive because funds are needed to achieve continuous growth. From restaurants to retail to consumer services, all large franchise companies are tying up with private equity are creating next level of mega business growth ,going on to an IPO . Successful large franchisee owned companies, particularly large territorial operator offer both well-advertised brand names and predictable revenue streams. This is why many franchise acquisitions typically carry high multiples often bring multiples of six to eight times EBITDA.

Franchise India, a leading franchise consulting company assists HNIs through its multiple business streams, which are looking for high investment, high-reward business growth opportunities. Right from exploring national and international Business opportunities that are spread across sectors and to the last mile connect of getting a beneficial deal for both franchisor and investor.

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