The Indian beauty and wellness industry is a good

opportunity to scale quickly

Starting a franchise in the business of beauty is a good bet for entrepreneurs
By Team Entrepreneur

|
5 January 2013

Jawed Habib, Hair Expert and Founder, Jawed Habib Hair and Beauty
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 are assimilating 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 Chennai itself 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 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. The commitment 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 ownermanager. 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). 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. 3540 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 work together for the rewards.
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 Fountains Spa 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.