International single-brand retail companies are likely to shift to a new fee-based local partnership format in India from the present equity-sharing model, once the revised policy on foreign direct investment in this segment takes effect.
The franchisee model will continue in single-brand retail as local partnership is crucial, but in a different way, said experts.
Tony Fitzpatrick, managing partner, Franchise Your Business, an international consultancy, said a foreign company needed a lot of research to enter a new country. "In that sense, you need local partnership," he said.
But, instead of giving the Indian company any equity, foreign retailers are looking at an advisory fee-based model. That is, foreign retailers will pay their Indian franchisee partners a pre-determined fee for the advisory role they play in setting up the business and carrying it forward, according to Fitzpatrick.
He said the 51 per cent FDI cap in single-brand retail was a deterrent for foreign brands, as international chains want full control over their business.
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