Why Foreign Brands Still Prefer the Franchise Route in India
Even though India opened its doors to 100% foreign direct investment (FDI) in single-brand retail back in 2012, most global fashion and lifestyle companies still aren’t setting up shop on their own. Instead, they’re choosing to partner with local players through franchise and distribution models — a safer, low-risk way to enter one of the world’s fastest-growing retail markets.
The Franchise Trend: 23 Out of 28
According to data from Third Eyesight, out of the 28 apparel and accessories brands that entered India after the FDI reform, 23 chose franchise or distribution partnerships over direct investment.
Brands like Gap Inc., Aeropostale, Desigual, Rider, and Ipanema all entered India through local franchise tie-ups rather than going solo.
“Most companies do not see India as a strategic market and tend to take a lower-risk, export-oriented approach through franchise or distribution relationships,” — Devangshu Dutta, CEO, Third Eyesight
Why Franchising Still Wins
Under a typical franchise setup, the local partner invests in marketing, store operations, and expansion — while the foreign brand provides the name, product range, and design direction. This means less financial exposure for the global company and faster market access.
Direct investment, on the other hand, signals a long-term commitment — not just money, but management focus and time. Only a few brands are ready for that level of engagement.
H&M: The Rare Exception
One of the few international retailers to go all-in is H&M. The Swedish fast-fashion giant entered India via the FDI route and is steadily expanding its footprint — aiming for 12 stores by the end of the year.
“The timing was right,” said Janne Einola, Country Manager, H&M India. “Our research showed India was emerging as a strong retail market.”
India’s Retail Market: Huge but Complex
India ranks #2 after China on the AT Kearney Global Retail Development Index (2016) — thanks to an improving business climate and clearer FDI regulations.
Still, challenges remain:
Complex local regulations (with 29 states having their own FDI rules)
High attrition rates and labour law hurdles
Limited high-quality retail space
Infrastructure bottlenecks
Yet, with a $1 trillion retail market potential, the opportunities are too big to ignore.
Adapting to the Indian Consumer
Even the brands that stick to the franchise route are getting smarter about local preferences. They’re collaborating closely with Indian partners to fine-tune:
Store design and fit-outs
Product assortment
Pricing strategies
“Our partners sell to us at manufacturing cost, which lets us price products competitively in India,” — J. Suresh, MD & CEO, Arvind Brands Ltd
Arvind Brands — which manages Gap and Aeropostale in India — exited its Debenhams franchise in 2024, citing high pricing and limited local relevance.
The Bottom Line
While India’s FDI policy gives foreign brands full ownership freedom, franchising remains the favorite route — balancing growth with caution.
It’s a model that works well in India’s diverse and unpredictable retail landscape, where local insight often matters just as much as global branding.
