Dunkin Donuts to India India’s economy is growing rapidly and with the country’s interests coming together with U. S. interests the opportunity for companies to enter into this market is also growing. While many fast food businesses have recently opened in India, there may be no uniform way to enter into the country. For Dunkin Donuts to become a powerful food chain in India we must look at different entry strategies such as exporting, importing, joint venture, and foreign direct investment. Our company is a franchise that has seen growth all over the world.
While exporting a franchise to India is a billion dollar industry in the country, it only accounts for 3% of India’s market. Although franchises are a small part of the market the risk of opening a one is relatively low and is an ideal investment for entrepreneurs in the country. Even with our strong brand recognition, there also needs to be an understanding of the diverse cultures and tastes that exist in India. In metro cities retail space can be expensive and the quality of the space is somewhat poor.
There is also lack of legal structure with no specific laws on franchising. Even with these cons, exporting franchises is becoming the popular entry to reach the Indian consumer (“India Country Commercial Guide”). Although there are no specified laws when it comes to exporting a franchise to India, licensing has many key laws that affect doing business in India including the Competition Act of 2002, the Trademarks Act of 1999, the Consumer Protection Act of 1986, and other labor and tax laws.
Before an agreement is made an Indian court must decide if the contract is reasonable and if it is in the public’s best interest. The licensee must also not release confidential information about the licensor. There are also laws that promote healthy competition and protect the licensor’s trademark. With such strong restrictions put into place, doing a license with a local business may be a safer way for our company to penetrate India’s market. However, we would be limiting ourselves on market control and putting it in the hands of the licensee (Anand).
Joint ventures are also popular in India, but all ventures must have government approval which can be obtained through the Reserve Bank of India (RBI). This can take a long time to process because a mistake in a joint venture can be costly. The partner’s long term expectations and roles must be clearly defined and examined (“India Country Commercial Guide”). Although this entry strategy will lower the financial risk our company will be taking, it is not necessarily the type of strategy that we have previously used when entering other countries.
For years, India has not allowed foreign direct investment in the retail market. There are over 12 million mom-and-pop stores dominating this industry. In 2006, the Indian government implemented new rules which allow single brand retail chains to own 51%. Since then several international companies have entered the market including housewares, apparel, and cosmetics. Even with these new rules, foreign fast food chains that have entered India found it hard to compete with current Indian fast food chains (Rao)