Agri-franchising more cost effective than CoCo model: IIM-A

Though relatively new, the model of agri-franchising has a lot of scope in India as it tends to be more cost effective than the company owned-company operated (COCO) outlets model, says a working paper at the Indian Institute of Management, Ahmedabad (IIM-A).

Titled 'Agribusiness Franchising in India: Experience and Potential', the working paper has been authored by Sukhpal Singh of IIM-A. While the paper calls for promotion of such a model, it suggests that franchisees may need more support and need to be treated more than just distributors.

Moreover, in order to further promote agri-franchising in the country, the paper also calls for policy for agriculture/agribusiness that can also encourage franchising channel in order to promote local entrepreneurship and build local capacities for undertaking value added services.

"It is found to be more cost effective than the COCO (company owned-company operated) outlets model but as good on delivery and quality, as seen in movement of many players to this route over time in India as well as Pakistan. What seems missing is that in some cases, franchisees may need more support as they themselves are small and hard pressed to make a living out of this venture. The franchises need to be treated more than just distributors. The franchisers need to pick up local entrepreneurs and invest in them for the longer term and bring in value added services," the paper states.

Roping in of local agencies like farmer companies or co-operatives as franchisees is also called for instead of individuals, for faster reach and scale up. "The policy for agriculture/agribusiness can also encourage this channel as it promote local entrepreneurship and builds local capacities for undertaking value added services," the paper suggests.

There have been only a few experiments in agribusiness franchising in the recent past by some corporate agencies, both private and public, in India. National Agricultural Co-operative Marketing Federation of India Limited (NAFED) has 2,000 franchisees across eight states of India for selling of inputs especially fertilizers (supplied by Indian Farmers' Fertiliser Co-operative (IFFCO)) and seeds, with 1,400 of them in U.P. alone.

For its study, the paper has taken such case studies of NAFED and IFFCO, among others to highlight the cost effectiveness and future success of the model.

"The analysis of the various experiences of franchising in agribusiness in India shows that it is possible to use this strategy for better farmers interface and resolving some of the supply chains and value chain issues like last mile reach, lower cost, better relationships, and scale. The commodities range from just input supply to extension plus and even output handling. That shows that all agribusiness activities and functions are amenable to franchising," the paper states.

According to the paper, further franchising evolves over time in developing country agribusiness situations. "The various models analysed show that it is increasingly becoming an emerging model for agribusinesses whether established or startups and does deliver the goods," it further states.