PRE-SCHOOL FRANCHISING – THE ROAD AHEAD

Pre-School industry has made giant strides since over a decade now. It caters to the
need of providing education, care and welfare to children in the age group of 1.5 to 5
years. Pre-Schools are also popularly referred to as Playschools, kindergartens and
preparatory schools. The Pre-School landscape in India is presently very fragmented and
unorganized with numerous ‘aunty-next door’ Pre-Schools spread across the geographic
span of India. Lack of government regulations in this segment has augmented the growth
of the unorganized sector which presently accounts for more than 92% of the total
market share. The organized sector, comprising of chain level Pre-Schools which have
national/regional footprints, is just about a decade old but increased affluence among the
Indian population is driving a shift to the organized sector. Pre-Schools till recently were
largely a metro/Tier I phenomenon, but of late there has been an increased penetration
of this concept in Tier II & III towns. Few key factors can be attributed to the growth of
this industry such as: increased awareness among parents about the benefit of quality
education, peer pressure, free pricing and low penetration.

Despite a vast potential this segment remains untapped because of low penetration. The
population in the age group of 2-6 years is 10-11 crores i.e. about 9 to 10 % of the
population in India. But a low enrolment ratio limits the current size of the segment. In-
spite of this, the size of the Pre-School industry would be around 6000-7000 crores
presently. The industry faces the following challenges: a lack of regulatory mechanism
for this segment augments the mushrooming of a lot of unorganized players; the
vastness of the country limits reach; spreading awareness amongst parents for the need
of Pre-School education especially in tier III towns and lack of good quality teachers due
to the unavailability of good quality training institutions.

The good news is that the scenario is changing rapidly for better. It is quite visible today
that the parents prefer organized Pre-Schools rather than the unorganized ones. This
would increase the organized Pre-School share from a current 8% to 25 % in the next 3
years time. This segment is also undergoing the phenomenon of price discovery and an
underpenetrated market will lead the way to the emergence of a high growth market.
With gradual passage of time there would be a consolidation of the industry as large
corporates would aim to acquire a share in the pie. This would also mean that more and
more mergers and acquisitions would be the order of the day. The government has of
late have shown interest in the education space. It would also be likely that this sector
would be open for the foreign education behemoths for exploration. That would also
mean that more and more competition and consolidation would continue to happen.
Perhaps, it would also be pertinent to state that the Government initiatives in the
Education sector as a whole would certainly help a smooth flow of education, across
various levels.

Franchising, against this backdrop, would continue to remain both challenging and
exciting. The future of franchising in Education sector in India is clearly very promising.
This is because of a number of factors: it would be difficult for an education service
provider to achieve a reach throughout the lengths and breadths of India on its own with
the desired speed; There is a ‘location factor’ that in reality is of utmost importance for
the success of an enterprise. If observed carefully many education services survive on
the demand that is generated in the location where the unit exists; It would be of utmost
importance that the entrepreneurial spirit of a franchisee is tapped so that a superior
performance within the domain is possible. Franchising certainly helps in solving these
problems. It would continue to do so in future. And so franchising in India would continue
to grow at a brisk rate.

From the view point of a prospective franchisee, a reasonable assessment needs to be

done before investing money into any franchise business to determine what challenges
she/he would be facing. The above stated statistic confirms prosperity in tation sector
now and in the future. But one has to be aware the issues that would confront oneself
before a decision is taken. The challenges that a franchisee could face while taking up of
the business, and wherein the importance of working with the right Brand is so
overpowering, would be to have the right manpower in place to begin with; build the
right infrastructure; choosing the right time to launch the project; the right
communication that he should send to the audience of his locality and finally, critical to a
development of the school is the relationship that she/he builds with the parents. Unless
that happens ‘Reference’ would not be sufficiently built and if reference is not sufficiently
built the flow of students would always require the investment of marketing. Herein lies
the importance of a prospective franchisee to have a right brand to bank his business
upon. The brand must have adequate pull factors working for it.

The prospective franchisor must achieve an economy of scale. It would only be possible if
the franchisor is financially strong. It is certain that Pre school industry would make great
progress in future. But, it would be the one who has the right differentiator in place who
would survive in the long run. The franchisor is faced with the competition scenario
where replication is immediate. The content and delivery that he would claim to be his
unique possession would get replicated very fast by the competitors. The concept of
‘core competence’ is fast becoming redundant. Faced with this threat of
‘commoditisation’ the challenge of a prospective franchisor would be to maintain the
differentiation.

Preschool industry has overcome all the challenges that it had faced during its formative
years. If the indications are of any material value, it would continue to do so going
forward.

(984 words)
PRE-SCHOOL FRANCHISING IN INDIA – THE ROAD AHEAD
Pre-School industry has made giant strides since over a decade now. It caters to the need
of providing education, care and welfare to children in the age group of 1.5 to 5 years.
Pre-Schools are also popularly referred to as Playschools, kindergartens and preparatory
schools. The Pre-School landscape in India is presently very fragmented and unorganized
with numerous ‘aunty-next door’ Pre-Schools spread across the geographic span of India.
Lack of government regulations in this segment has augmented the growth of the
unorganized sector which presently accounts for more than 92% of the total market
share. The organized sector, comprising of chain level Pre-Schools which have
national/regional footprints, is just about a decade old but increased affluence among the
Indian population is driving a shift to the organized sector. Pre-Schools till recently were
largely a metro/Tier I phenomenon, but of late there has been an increased penetration
of this concept in Tier II & III towns. Few key factors can be attributed to the growth of
this industry such as: increased awareness among parents about the benefit of quality
education, peer pressure, free pricing and low penetration.

Despite a vast potential this segment remains untapped because of low penetration. The
population in the age group of 2-6 years is 10-11 crores i.e. about 9 to 10 % of the
population in India. But a low enrolment ratio limits the current size of the segment. In-
spite of this, the size of the Pre-School industry would be around 6000-7000 crores
presently. The industry faces the following challenges: a lack of regulatory mechanism
for this segment augments the mushrooming of a lot of unorganized players; the
vastness of the country limits reach; spreading awareness amongst parents for the need
of Pre-School education especially in tier III towns and lack of good quality teachers due
to the unavailability of good quality training institutions.

The good news is that the scenario is changing rapidly for better. It is quite visible today
that the parents prefer organized Pre-Schools rather than the unorganized ones. This
would increase the organized Pre-School share from a current 8% to 25 % in the next 3
years time. This segment is also undergoing the phenomenon of price discovery and an
underpenetrated market will lead the way to the emergence of a high growth market.
With gradual passage of time there would be a consolidation of the industry as large
corporates would aim to acquire a share in the pie. This would also mean that more and
more mergers and acquisitions would be the order of the day. The government has of
late have shown interest in the education space. It would also be likely that this sector
would be open for the foreign education behemoths for exploration. That would also
mean that more and more competition and consolidation would continue to happen.
Perhaps, it would also be pertinent to state that the Government initiatives in the
Education sector as a whole would certainly help a smooth flow of education, across
various levels.

Franchising, against this backdrop, would continue to remain both challenging and
exciting. The future of franchising in Education sector in India is clearly very promising.
This is because of a number of factors: it would be difficult for an education service
provider to achieve a reach throughout the lengths and breadths of India on its own with
the desired speed; There is a ‘location factor’ that in reality is of utmost importance for
the success of an enterprise. If observed carefully many education services survive on
the demand that is generated in the location where the unit exists; It would be of utmost
importance that the entrepreneurial spirit of a franchisee is tapped so that a superior
performance within the domain is possible. The Pre-School segment presents women
with an opportunity to excel in the field of education. A good work-life balance, an
excellent environment, social standing and financial returns remains attractive
propositions for women in India which encourages them to take up Pre-School franchise.
It would continue to do so in future. And so franchising in India would continue to grow at
a brisk rate.

Research shows that 90% of start-ups fail in the first year itself. Of those that survive
another 90% fail in the next two years. In a franchised business, over 90% succeed. From
the view point of a prospective franchisee, a reasonable assessment needs to be done
before investing money into any franchise business to determine what challenges she/he
would be facing. The above stated statistic confirms prosperity in education sector now
and in the future. But one has to be aware the issues that would confront oneself before
a decision is taken. The challenges that a franchisee could face while taking up of the
business, and wherein the importance of working with the right Brand is so
overpowering, would be to have the right manpower in place to begin with; build the
right infrastructure; choosing the right time to launch the project; the right
communication that he should send to the audience of his locality and finally, critical to a
development of the school is the relationship that she/he builds with the parents. Unless
that happens ‘Reference’ would not be sufficiently built and if reference is not sufficiently
built the flow of students would always require the investment of marketing. Herein lies
the importance of a prospective franchisee to have a right brand to bank his business
upon. The brand must have adequate pull factors working for it.

The prospective franchisor must achieve an economy of scale. It would only be possible if
the franchisor is financially strong. It is certain that Pre school industry would make great
progress in future. But, it would be the one who has the right differentiator in place who
would survive in the long run. The franchisor is faced with the competition scenario
where replication is immediate. The content and delivery that he would claim to be his
unique possession would get replicated very fast by the competitors. The concept of
‘core competence’ is fast becoming redundant. Faced with this threat of
‘commoditisation’ the challenge of a prospective franchisor would be to maintain the
differentiation.

Preschool industry has overcome all the challenges that it had faced during its formative
years. If the indications are of any material value, it would continue to do so going
forward.