That people in India love eating and spending on branded clothes is well known, but the fact that they continue to do so despite salary cuts and layoffs has raised the expectations of the franchisee industry, which is estimated to grow at almost 50 per cent in the next few years.

According to a report by Ficci and Confederation of Indian Food Trade and Industry (Cifti), food expense constitutes 51 per cent of consumer wallets and thanks to this the franchisee industry is set to grow by 48 per cent in the next two years. The report notes that at present the size of the franchisee market is $7.2 billion, which is set to reach $20 billion by 2013.

“There are 1,200 active franchise concepts in India and over one lakh franchisees. Education and retail are important sectors where franchising is prominent,” a Ficci release said.

The Indian franchisee story is intact and is set to grow by leaps and bounds, said Safir Anand, senior partner and head of transactional practise Anand and Anand, and co-chairman, legal committee, Franchising Association of India. “At present, the US has the largest franchisee market in the world. India is aiming at the number 2 slot in a few years,” he said.

The franchisee business in the world is based on leveraging intellectual property (IP) and since China’s IP is “very poor”, India stands to gain, said Anand, adding that he was working with six clients who were looking for franchisee opportunities in India.

Franchisees are also very buoyant on hiring. “Today, the total number of people employed in business format franchise systems is estimated at 9.5 lakh,” the report said. Job placement firm Headhunters agrees. “The report is right. Companies are adopting the franchisee model to grow, as they hand over the risk to a set of clients by lending their brand name. It is a smart way of doing business,” said Vivek Ahuja, managing director, Confiar Global.

However, Ashok Reddy, managing director, Teamlease, said, “I am not too sure how franchisees would grow, because they are tagged to specific industries such as retail, hospitality and fast moving consumer goods. Since most of these are going through a rough phase, return on investments during these times will also be very low.”

Airing similar views, Pinakiranjan Mishra, partner and industry leader, Retail and Consumers Product Practise, Ernst and Young, said. “Though there is a potential for franchisees to grow by 50 per cent, in terms of ground reality it is going to be very tough, especially with a credit crisis,” he said. He added that in India most franchisees did not think long-term because of which they were not able to generate profits.