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Anurag Kedia Director The Four Fountains Spa on Franchise Expansion

Anurag Kedia Four Fountain Spa

1.How you have started your journey , as an entrepreneur ?

As manager employed with multi-national companies (I worked for 3 years with KPMG Consulting and Tata Administrative Services), I was in fairly stressful jobs. I would travel frequently and stay in hotels. However, despite being reasonably well-paid I could not afford regular relaxing massages at the hotel spas due to the exorbitant prices, and soon realized that if India had to be made stress-free, spa therapies would have to be made more affordable. That common experience provided the inspiration to start a chain of spas that would put spas within reach of more people.

2.Brief us on the growth strategy and franchise expansion of Brand.

Our first two spas were set up in Pune at Koregaon Park and Aundh. We chose Pune as a city because it had a fairly diverse mix of customer profile ranging from students to businessmen to professionals and a large segment of fairly traditional population. This allowed us to test our offering against different set of customers and gauge their response. It also allowed us to experiment with different media vehicles at a lower cost compared to any other metro. Since the time we launched our first spa, we have had an active interest from potential franchisees. In the beginning, we were a little skeptical whether franchisees would be able to maintain the right brand standards. However, we realized that the profile of franchisees who were expressing interest was extremely good and we could trust them not to cut corners. We also realized that the franchisees would bring in their time commitment and passion into the business and help us expand at a much faster rate than we would have otherwise. Capital has not been a roadblock since there are multiple ways of raising capital which are available now, however the commitment of franchisees is very important and difficult to replace in the long term. Hence a conscious decision was made to expand through franchisees

3.What is the specialty of Brand services?

We are India’s first chain of affordable health spas. Spa therapies that cost upwards of Rs. 3,000/- at five-star spas are available at The Four Fountains Spa at surprisingly affordable prices. The spa category is relatively unorganized and there are few branded players in the market. The proposition we offer to our consumers is quality spa services at surprisingly affordable prices. Most other known spas operate in the luxury segment and often charge a price which is difficult to justify. Apart from affordable pricing, our spas are equipped to take holistic care of our guests. We have a doctor at each spa who does stress assessment and recommends lifestyle and diet changes depending upon the guests requirements.

4.What are the company’s future plans?

Our vision is to de-stress India by launching 300 spas by 2016 across the top 50 towns in the country. We expect to be present in all the metros and semi metros by the end of 2013 and plan to have more than 100 outlets by 2014.

5.How many do outlets you have as of know and where you see your Brand in Next 5 years .

We currently have 20 operational outlets and there are 10 more in the pipeline, We are looking forward to launching 300 spas by 2016 across the top 50 towns in the country. We expect to be present in all the metros and semi metros by the end of 2013 and plan to have more than 100 outlets by 2014.

6.What are the strategies that your brand adopted?

There are three basic strategies in running a spa business:

1. Educating the target audience about the benefits of a taking spa therapies so that the size of the market increases as well as the frequency of taking a massage increases
2. Attracting and retaining quality manpower – there is a dearth of good training academies in the country and awareness levels are low about opting to become a spa therapist as a career. We work with several NGOs and partner with them to reach out to a wider audience
3. Ensuring brand standards are being met on a continuous basis across the several branches the brand operates – We adopt ongoing training and monitoring practices which helps us achieve consistency in quality across the entire network of our spas

7.What are the qualities and qualifications that you seek for in your franchisees? How much investment is required by aspiring franchisees?

We do not believe in advertising for our franchisees in a big way. Most of our franchisees are known to us as customers, business partners or their friends. Our franchisees are typically in their 30s and have had experience of working in a corporate for a few years. Several of them also happen to be women where they want financial independence without having to be bound by the corporate work culture and timings. We like them to have a passion for the customer service industry and be willing to commit 4 to 6 hours every day.
The investment that is required by aspiring franchisees is in the range of 50-60 Lakhs ( varies from location) including working capital and rental deposit

8.Share with us the challenges that can be faced by your franchisees? How can these be overcome?

There are occasions where franchisees would like to deviate from the standard processes, and customize something for their spa. However, we help them see through the long term consequences and why it is important to follow processes. An example which I would like to share is where a franchisee wanted to discount our services heavily to cater to a corporate client, which is against our policy. We spent time with her and shared our previous experiences regarding how it can lead to sales in the short term but have a negative impact in the long term.

9.What are your further expansion plans? How lucrative is the franchise opportunity offered by you for the prospective investor?
We plan to set up 25 new locations in 2013 and work towards our target of having 300 spa locations by 2016. All the new spas would be franchised out, however, we expect most of our franchisees to have multiple locations in the long term. Hence, for 300 locations, we would perhaps have 150 franchisee partners who would operate on an average 2 locations each.
The norm in the industry is to charge a franchisee fee ranging between Rs 5 L to 25 L , wheras we operate on a zero franchisee fee model. Our investment ranges between 50 -60 lakhs ( varies from location ). Most of Our franchisees are typically in their 30s and have had experience of working in a corporate for a few years. Several of them also happen to be women where they want financial independence without having to be bound by the corporate work culture and timings. We like them to have a passion for the customer service industry and be willing to commit 4 to 6 hours every day.
All recruitment and training for employees during the launch and later on is managed completely by the brand. The franchisees also undergo a structured training programme to learn the business even before the spa is operational.
The franchisee training programme is around 15 days, around 3 days are spent in class room training and the rest of the time is spent on the job. There is a lot of study material which is available separately for the franchisees to study and learn about the business.

Support is available on different aspects of the business –

1. Sales & Operations – The operations team does regular visits to a property for ensuring that the quality parameters are being met and the franchisee is able to handle the business in an effective manner. There are also audits and other feedback mechanisms to help the franchisee assess the weak points
2. Marketing – Marketing responsibilities are shared with the franchisee. The brand focuses on doing central tie ups and marketing while the local tie ups are done by the franchisee. Even for the local tie ups, all planning is done centrally for the franchisees for ease of execution.
3. Recruitment & Training- All recruitment and training are handled by the brand on an ongoing basis

10.Kindly provide brand’s franchise facts. How does the brand train and support its franchisees?How was the idea of ‘BRAND’ conceptualized? How has been the journey so far?

Investment: Rs 45 lakhs (may vary by location, includes rental deposit)
Area: 1200 sq ft carpet area
Break-even: 6 months
Return on investment: 40 to 50% / year
No. of franchisee: 13 / Company Owned: 7
USP: The Four Fountains Spa offers high quality spa services at prices less than half of our competitors which is our USP.

All recruitment and training for employees during the launch and later on is managed completely by the brand. The franchisees also undergo a structured training programme to learn the business even before the spa is operational.
The franchisee training programme is around 15 days, around 3 days are spent in class room training and the rest of the time is spent on the job. There is a lot of study material which is available separately for the franchisees to study and learn about the business.

Support is available on different aspects of the business –

1.Sales & Operations – The operations team does regular visits to a property for ensuring that the quality parameters are being met and the franchisee is able to handle the business in an effective manner. There are also audits and other feedback mechanisms to help the franchisee assess the weak points
2.Marketing – Marketing responsibilities are shared with the franchisee. The brand focuses on doing central tie ups and marketing while the local tie ups are done by the franchisee. Even for the local tie ups, all planning is done centrally for the franchisees for ease of execution.
3.Recruitment & Training- All recruitment and training are handled by the brand on an ongoing basis
As managers employed with multi-national companies (Anurag had worked for 3 years with KPMG Consulting and Tata Administrative Services. Saurabh and Sunil had worked for 3 years with Hindustan Unilever), we were in fairly stressful jobs. We would travel frequently and stay in hotels. However, despite being reasonably well-paid we could not afford a relaxing massage at the hotel spas due to the exorbitant prices. We realized that if India had to be made stress-free, spa therapies would have to be made more affordable. That common experience provided us the inspiration to start a chain of spas that would put spas within reach of more people.

We started by testing our concept of an ‘affordable spa chain’ with over 300 first-time as well as frequent consumers of spa services including a cross-section of working professionals, housewives and businessmen. We found that apart from high prices, lack of availability, lack of awareness and privacy concerns were major reasons why many people did not try spas. We used that input to refine our concept and eventually launched 2 spas in Pune in 2007 to test our model.

The response has been overwhelming and we have scaled up from 2 to 20 spas across 7 cities are expecting to launch 25 new locations in the calendar year of 2013.

11.What is the brand’s potential in Indian market?

A study conducted by FICCI and E&Y projects that the sector is expected to grow at a rate of 30 to 35% year on year. We believe that the market is ready for an offering of this kind and it is up to players like us who will really define how fast the sector grows and how fast we can grow as an organization. While no definite numbers are available, our internal estimates suggest that the day spa market is between 800 and 1200 crores. We believe that the rate at which spas have been growing, the industry has a potential to cross 5000 crores in 5 years from now.

12.What factors motivated you to opt for franchise route for expansion?

Since the time we launched our first spa, we have had an active interest from potential franchisees. In the beginning we were a little sceptical about whether franchisees would be able to maintain the right brand standards. However, we realised that the profile of franchisees who were expressing interest was extremely good and we could trust them not to cut corners. We also realised that the 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 since there are multiple ways of raising capital which are available now, the commitment of franchisees is very important and difficult to replace in the long term. Hence a conscious decision was made to expand through franchisees.

13.What is the scope for aspirants keen on taking the franchise for your BRAND?

We believe that the Franchisee-Franchisor relationship is like a marriage. If the marriage is successful it has to be successful for both and if its not, it cannot be successful for either. It has to be a partnership where both partners work together for the rewards and bring their capabilities to the table.
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.
Also, 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, the franchisee should be rewarded for it.
Our franchisee model and concept works on the above fundamental principles and works towards creating a win-win partnership for all our franchisees.
The initial investment requirement is around 50-60 ( varies as per location) property of 1000 to 1200 sq ft carpet area.
Most of our franchisees achieve an operational break even within 6 to 8 months of launch. The ROI can be very attractive with an average payback period of 3 years, since the first year is the time spent in establishing that particular center. The ROI can be as high as 70 to 80% after the second year onwards.

14.What are the brand’s expansions plans?

Our vision is to de-stress India by launching 300 spas by 2016 across the top 50 towns in the country. We expect to be present in all the metros and semi metros by the end of 2013-14 with more than 50 spas operational on the ground and have more than 100 outlets by 2014-2015.

15.What are the basic franchisee fundamentals that you look for?

We do not believe in advertising for our franchisees in a big way. Most of our franchisees are known to us as customers, business partners or their friends.
Our franchisees are typically in their 30s and have had experience of working in a corporate for a few years. Several of them also happen to be women where they want financial independence without having to be bound by the corporate work culture and timings.

16.How much is the initial investment and area requirements by aspiring franchisees?

The initial investment requirement is around 50-60 Lakhs (varies as per location) property of 1000 to 1200 sq ft carpet area.
17.Tell us about the challenges that can be faced by franchisees? How can they be overcome?

There are occasions where franchisees would like to deviate from the standard processes, and customize something for their spa. However, we help them see through the long term consequences and why it is important to follow processes. An example which I would like to share is where a franchisee wanted to discount our services heavily to cater to a corporate client, which is against our policy. We spent time with her and shared our previous experiences regarding how it can lead to sales in the short term but have a negative impact in the long term.

17.Are you also looking up for the International expansion , in which all country,s?

At present , we are focused on a PAN India expansion.

18.Any advice for the coming up and potential Entrepreneurs .

Being an entrepreneur is extremely satisfying and professionally enriching experience. It is important that as an entrepreneur you are hands on with the business and not view it as an investment opportunity. If the entrepreneur is a team player and keeps the employees motivated to perform their best, the standards will be maintained with less effort. It is important to have a long term vision to establish a business, drive revenues and ensure profitability.

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