The struggle of not having to buy a happy meal or post our Starbucks drinks on our social media is all too common among the youth in Nepal. Posting a simple McDonald’s burger on Ig’s story is such a big fuss when we go abroad. So why haven’t these famous international companies opened in Nepal yet?
WHY THESE COMPANIES ARE NOT IN NEPAL?
There are many possibilities about why there aren’t any of these famous franchise companies here in Nepal. From the perspective of bringing the franchise to Nepal, there are many hiccups in the way.
The cost of the franchise license is around 80 lakhs to 1 crore Nepali Rupees. Then comes the location, initial installment as per franchise standard. For the food chain, recipe according to standard and maintaining its signature taste or status for companies other than food. For these franchises to get a license, one who applies should have some years of experience in the related industries. Also should take the training in their school and pass the license test. An example of poor management can be, Pizza hut which temporarily shut down due to a regular employee strike.
Though it has many stories from the employee side too, this is what the employer gave to the media. And they shut the franchise after the earthquake. But KFC is still in operation. Both were initiated by NRI Indians in Nepal.
The other reason why franchise companies are not in Nepal is that the Nepali businessmen are not taking risks for all this. As they can get the Himalayan Java franchise with 8 lakhs to 12 lakhs Nepali rupees. Also, they can install a new coffee restaurant that looks alike Himalayan Java or Starbucks and still have the same profit.
Similarly, there are a lot of burger houses and other aesthetic cafes which earn well without extra risk, cost & hard work. So these businessmen are smart in not being involved.
There is also a second way where business owners earn enough out of big classic franchises without actually having to pay all the cost. This is done by changing their name. For example, KK Mart whose logo looks like the Seven-Eleven. Well, we can see that KK Mart is doing quite well with many branches throughout the country. And we happily shop in them.
Ethical factors also weigh down on the reason why some companies have not come to Nepal. Especially fast food joints like McDonald’s are known for their beef burger, which is illegal in Nepal. However, like in India, there can be made tweaks like in India serving chicken burgers.
Another factor that might answer the question is because people do not believe that the Nepalese people are willing to spend their money.
If companies like Sephora or even Vodafone were to come. It requires a hefty change in people’s habits. With the telecom market already saturated people might not leave their current comfortable options for a new one.
THE LAWS OF FRANCHISE
Factors like consumer taxation and political instability also affect the franchises in Nepal. The taxation system in Nepal changes from time to time which affects the businesses.
The changes in import rules also have a major effect. If the key ingredients or products having to be imported is canceled or made illegal then the business will see its downfall.
Some more non-constant laws affecting are labor laws, import laws, tax laws, and environmental laws.
The political instability in Nepal also affects business. The immediate strikes in the streets of Nepal affect the sustainability of the business. This affects sales and the overall performance of the business.
However, anyone can open a franchise in Nepal. The FIITA and PTDA are the legal organizations handling such affairs.
The procedures of franchising International brands here in Nepal are:
- Registration of Trademarks before the Department of Industry. This takes up to 12-13 months.
- Execution of Franchise Agreement with Foreign Company And local company. Without a Registration trademark, this agreement is not allowed. The foreign trademark registration should be identical to the foreign registrations.
- Approval of Franchise Agreement and Relate Agreement if any from the Department of Industry.
In India, for comparison, there is no specific legislation regulating franchising businesses. Franchising in India is built on the principles of contract law. As there are no specific laws for franchising businesses in India, there are no particular requirements or regulations that a franchisor must meet before it may offer a franchise. Hence the process is easier.
In conclusion, multiple factors are affecting the franchise in Nepal. The key obstacles faced by International Franchises in Nepal are cultural differences, political instability, fluctuating policies, lack of proper infrastructure development, and consumer mindset.
Opening an international franchise in Nepal is a long journey filled with obstacles. But if one does have the dedication and patience then there are some successful franchises in Nepal. For example KFC, Keventiers, and Miniso to name a few.