Tommy Hilfiger, Swarovski & Nike may soon get a smooth run in India as govt mulls tweaking FDI rules

IKEA, Tommy Hilfiger, Swarovski and Nike could soon get a smooth run in India with the government considering significant changes in the foreign investment policy for single-brand retailing to promote ease of doing business.
Addressing long-pending concerns of foreign companies, the government will likely allow them flexibility to simultaneously operate various retail formats — franchise, wholesale and company-owned — besides clarifying on the domestic sourcing clause.
The single-brand retail FDI policy, drafted by the previous government, is seen as a roadblock for top international companies looking to invest in India. Many applications are stuck due to the complexity of the policy.
While the January 2012 policy allows retailers to run 100% subsidiaries in India, it does not allow them to operate a mix of fully owned stores and franchisees or engage in wholesale trading. The mandatory 30% domestic sourcing norm kicks in when the FDI level goes above 51%

"The concerns raised by foreign players are very valid. We will look into the matter soon. It will require tweaking of present FDI policy in single-brand retail. There are many interpretational and policy issues. We will make it absolutely simple and lucid to promote ease of doing business," said a senior government official. 
The lack of clarity on policy has led to a piling up of unapproved applications. Austrian-based Swarovski, which sells accessories, jewellery and home decor items through more than 2,350 retail outlets worldwide, has been unable to open wholly owned stores with its application of wanting to house both formats — cash-and-carry and single-brand retail — together not going through. 

It was asked to apply separately for both formats or the 30% sourcing rule would apply for the cash-and-carry operations as well. In other cases, companies have proposed to enlist franchisees in India in addition to opening their own stores. Franchisee stores are operated by third-party individuals and entities that help brands to expand their presence in a country. 
"Why should the government interfere in a company's business decisions? They should be allowed to do whatever format they want to use for retailing. If an Indian brand can sell watches through thousand different franchise outlets along with its fully owned stores, then why not a foreign brand?" the official argued.
"We will make FDI policy very simple with no confusion at all," he added. US apparel company Tommy Hilfiger hasn't been able to open a wholly owned store yet for the same reason. Sports apparel major Nike's application got rejected by the government. Experts argue that the company cannot close down 500-600 franchise stores in the country to open fully owned outlets.
Last week, IKEA asked the government to tweak the 30% domestic sourcing clause so that it is counted from the day the operations begin instead of from when the first tranche of investment is made, as an average of total value of goods purchased in five years.

"The issue raised by IKEA is quite understandable. Buying land itself is so difficult. There is a significant time gap between announcing your foray into the country and actually starting operations. This will be corrected in the policy," said the official. 
The previous government had tweaked the mandatory 30% sourcing from small and medium enterprises norm for FDI in single-brand retail to accommodate Swedish furniture maker IKEA, making it 'preferable' rather than 'mandatory'. ,
The government could also consider a plan to allow single-brand retailers to bring in sub-brands or sell under different trademarks. IKEA has announced an investment of Rs 12,500 crore in the country and proposes to set up 25 stores over the next 10 years. 
Over the past two years, over Rs 300 crore of investments have come into the single-brand retail sector. 
"The single-brand retail policy is very confusing. Why should the government even distinguish between franchise and single brand, as they are not a threat to your kirana stores? How can ownership make a difference? This policy is practically impossible for most foreign brands. Government must reframe the rules to get foreign investment," said Arvind Singhal, chairman of Technopak Advisers. 
"A clarification on the single-brand policy is required, especially the flexibility to go for franchise along with fully owned stores. It is a normal practice for any retail brand to have its own stores and also give rights to a third party. That is how you grow. The two have always coexisted and should be left to the company to take his decision," said Akash Gupt of PricewaterhouseCoopers. 

Sarovar opens Dasavatara-themed hotel in Tirupati

The hotel is conceptualized and designed around the Dasavataras of Lord Vishnu. The property has 121 rooms and suites, according to a statement from the company. 

"Tirupati is one of India's most visited pilgrimage centres. The existing demand-supply gap in this temple town offers a huge opportunity for hospitality brands. Every brand which was earlier in the luxury segment now wants to have a piece of the business here. We believe that Tirupati Yatra is no longer about an arduous journey to meet Lord Venkateshwara, it is nirvana luxe," Anil Madhok, managing director, Sarovar Hotels & Resorts, said. 

"Marasa Sarovar Premiere Tirupati is India's first theme hotel inspired by the 10 incarnations of Lord Vishnu. It aims at providing luxurious and affordable accommodation. The newly completed hotel ensures that a visit to Tirupati no longer entails compromising on personal comfort. Till date many visitors to the temple and otherwise opted on a day trip to Tirupati due to the limited choice and quality of existing accommodation. This is no longer the case with the opening of the Marasa Sarovar Premiere as the hotel sets the standards in not only accommodation but also offers choices of dining options, spa, health club, swimming pool," Yogesh Prajapati, director, Finance, Marasa Hospitality and owner of the hotel, said. 

Sarovar Hotels & Resorts is a hotel management company which manages and franchises over 70 operational hotels in 48 destinations in India and overseas, under Sarovar Premiere, Sarovar Portico, Hometel, Radisson, Park Plaza and Park Inn brands. The brands cover the 3, 4 and 5 star spectrum. 

The Madhvani Group, which was also part of the project, is a private sector conglomerate in East Africa. It owns a portfolio of business interests in several countries particularly in East Africa and India. 

Dubai-based Fmart opens first store in India at Kochi

Fmart, a Dubai-based convenience store chain, today opened its first outlet in India in the city.

Kochi Mayor Tony Chammany inaugurated the country's first F-mart at Panampilly Nagar.

Yoonus Mohamed, Managing Director, Fmart Specialty Retail Concepts, said Fmart is a chain of contemporary convenience stores offering a wide range of FMCGs and other ethnically traditional branded foods.

"We are planning to open 25 Fmart stores in Kerala alone in 2015, mostly on franchised model," he added.

Kareem Abdullah, Director, said at present Emaco Investments, the holding company of Fmart, collectively runs 11 stores in various prime locations while it continues its accelerated growth by expanding in the Middle East and Asia.

"In India, each new Fmart outlet will require an investment of approximately Rs 30 lakh to start a franchise model store. Fmart offers four flexible franchise models with different investment plans to cater to different segments of society', Dr M A Babu, Director, said.

"Our franchise model is a low investment business opportunity along with premium margins, brand recognition and quality service', Yoonus Mohamed said.

Asics starts India sales operations

Japanese sportswear major Asics will not renew its exclusive distribution pact with Reliance Retail and is setting up its own sales operations with plans to open up to 35 mono-brand stores in India to tap the growing market here.

The company that has been in India through distribution partnership since 2009 has launched its own wholesale operations under Asics India Pvt Ltd from this month to work with franchise partners.

“We have an exclusive distribution agreement with Reliance Retail (Footprint) which will be finished by end of March 2015,” Asics India Director Rajat Khurana said.

He said although the company would work with various trade partners directly “Reliance will be our preferred partner for retail operations in India.”

The company said: “The change is intended to bolster sales of Asics products in the country.”

Bullish on the Indian market, Khurana said: “First year’s sales target is Rs 28 crore. We aim to triple the sales in three years. Our plan is to open 30-35 mono-brand stores, mainly in metro cities through our franchise partners.”

In the first year, the company plans to open 4-5 mono-brand stores, he added.

Currently, the company has one such store in Kochi operated by Reliance Retail.

Commenting on Asics’ plans in India, Asics Asia Pacific Division Senior General Manager and Asics India Director Dae Chul Kim said: “India is a promising market and has a huge potential.

“We plan to expand our sales network and bolster marketing support for retail shops in order to establish Asics’ value and image as a true sport performance brand.”

Kim further said: “Running is the fastest growing category in sports in India. So, we will be focusing on popularising the sport…”

The company’s products, priced between Rs 5,000 and Rs 12,500, will compete with the likes of Nike and Adidas.

To promote its products, Asics has been sponsoring events like the Mumbai Marathon for which it is the official sponsor.

“We will build our brand image as true sport performance brand among consumers. We will directly reach to consumers through services such as running clinics.

“Also, we will increase brand exposure, seeking opportunities in cricket, the national sport,” Khurana added.

Pizza chain Sbarro to add 20 outlets in India by 2016-end

US-based pizza chain Sbarro is planning to add 20 'New York style pizza' restaurants in north and east India in two years as part of expansion plans in the country.

The chain, which has around 900 Sbarro outlets in more than 40 countries, operates in northern and eastern parts of India through its master franchise Jyoti International Foods

"We plan to open 20 new restaurants by end of 2016 and will be investing up to Rs 30 crore for this," Jyoti International Foods Pvt Ltd Chief Executive Officer Akhil Puri said.

In the first phase of expansion, the company is primarily looking at areas in Delhi and NCR, followed by outlets in Punjab and Gujarat. We currently have two restaurants, Puri added.

"We plan to follow different type of models at different locations. In some places we will have flagship restaurants and in some we will have inline stores. We are also aiming to focus on opening home delivery stores," Puri said.

Speaking about the size of outlets he added: "The flagship outlets will have a space of around 2,000 sq feet. Inline outlets in malls would be between 1000 to 1,200 sq feet while in food courts and kiosks it will be between 400 to 600 sq feet."

As part of their agreement, Jyoti International Foods Pvt Ltd (JIFPL) pays development fees and royalty on revenues to Sbarro.

"We are also offering pizza-by-slice in our restaurants and it is very popular with our customers as they can order only a piece of pizza and not a full sized one and enjoy different flavours," Puri said.

AaramShop to launch services in East Africa, South-East Asia

Delhi-based AaramShop, which allows customers to shop at local neighbourhood stores via the internet, is planning to enter East African and South-East Asian countries.

The company will find local partners and launch services in these markets through the franchise model.

Last year, AaramShop had launched its services in Pakistan by tying up with Red Bucks Grocery, a company promoted by an ex-Unilever employee in Pakistan.

“We would test the limits of our technology in new markets such as Nairobi (Kenya) in East Africa, Vietnam and Indonesia in South-East Asia and even the UAE through the franchise model. There would be no equity participation and it would be an asset-light model run through franchises,” said Vijay Singh, CEO & Managing Director, AaramShop.

“Like in India, goods are sold on MRP (maximum retail price) in Pakistan and not on recommended price like in the more developed markets. In the past year, we have got 7,000 grocers on our site in Pakistan and have a franchise partner since we cannot own equity in this country.”

In India, it currently has 5,000 grocers registered on its site.

The company is providing them with technology-based solutions to reach out to their neighbourhood consumers.

“We should have 60,000 grocers with us by next year,” Singh said

AaramShop does not charge the grocers for its services, instead its revenues come from consumer goods companies and brands that sell through its site for services such as analytics and advertising.

“We get our money from most of the big FMCG companies such as HUL (Hindustan Unilever) and P&G (Procter & Gamble) for providing services like coupons and advertising on our site,” he added.

AaramShop’s services are mainly restricted to the local neighbourhood ‘kirana’ stores and general trade outlets, not modern trade retailers.

The three-year old home-grown start-up is now planning to raise funds through private equity players.

“We have been waiting to get our business model right and generating funds on our own in the past. But now, we hope to raise ₹36 crore in our first round through PE players,” said Singh.

Apart from grocers, AaramShop has also added local pharmacy outlets on its site.

Orkin Establishes Three New International Franchises

Rollins Inc., a global services company, announced today that the company, through its wholly-owned subsidiary Orkin, has established its first franchise in India and expanded its presence in Mexico with the addition of two new franchises located in Jalisco and Aguascalientes/Guanajuato.

"We are excited to launch our first franchise in India and believe this emerging country provides a great opportunity for us as we continue to grow our Orkin brand internationally," said Tom Luczynski, Orkin group vice president of global development and franchising. "The franchise is headquartered in Bangalore, the capital of the Indian state of Karnataka with a population of over 8 million. They will also provide pest control service in three additional cities - Delhi, Chennai and Mumbai. We are also pleased to continue to expand our presence in Mexico."

Each franchise offers commercial and residential pest control and termite services.

Upon completion of their initial training at the company's award-winning training center, franchisees will receive follow-up training in their respective countries.

Atlanta-based Orkin is an industry leader in essential pest control services and protection against termite damage, rodents and insects. The company operates more than 400 locations with almost 8,000 employees. Using a proprietary, three-step approach, Orkin provides customized services to approximately 1.7 million homeowners and businesses in the United States, Canada, Mexico, Europe, Central America, South America, the Middle East, the Caribbean, Asia, the Mediterranean and Africa. Orkin is committed to studying pest biology and applying scientifically proven methods.  The company collaborates with the Centers for Disease Control and Prevention (CDC) and eight major universities to conduct research and help educate consumers and businesses on pest-related health threats.