Chai Sutta Bar®

The Future of Franchise Market in Tier 2 & Tier 3 Cities

India is becoming a well-known centre for its development in metropolitan cities. Tier 2 and 3 cities are becoming vibrant places for the franchise market to grow. These cities offer attractive business opportunities due to their expanding economy and growing consumer base. 

The franchise market is currently witnessing a shift toward Tier 2 and 3 cities, even though earlier they used to prefer to be based around metropolitan cities. The franchise industry boosts local economic growth along with assisting businesses to expand.

In this blog, we’ll examine how franchising is significantly changing the local economy in these smaller Indian cities. 

Let’s first understand what Tier 2 and 3 cities are in India.

Tier 2 & Tier 3 Cities In India

Tier 2 and Tier 3 Cities are less developed or developing cities in India. Jaipur, Chandigarh, Ahmedabad, and Vadodara are some of the top Tier 2 cities of India. On the other hand, Agra, Chandigarh, Bhopal, and Amritsar are some of the top Tier 3 cities of India. 

Tier 2 cities are home to a growing middle class who want to have the same goods and services found in metropolitan cities.

Food and beverage

Rise of Entrepreneurship in Non-Metro Cities

Traditionally, the franchise market thrived in major urban centres due to a higher concentration of resources and consumer demand. However, the entrepreneurial spirit is now ablaze in Tier 2 and Tier 3 cities. As aspirations rise and local talent seeks opportunities closer to home, the franchise market is giving them opportunities for success beyond the metros.

Changing Consumer Behavior

The evolving consumer landscape plays a vital role in the franchise market’s shift towards these cities. By 2025, Tier 2 and Tier 3 cities in India are expected to account for over 45% of the GDP growth of the nation, as per a report by the Boston Consulting Group.

Tier 2 cities are home to a growing middle class who want to have the same goods and services found in metropolitan cities. 

These cities are having rapid population growth with a rate of 2.5% increase. This led to demand for housing, infrastructure, and consumer goods which as a result opened up opportunities for investors and enterprises.

Infrastructure Development

With ongoing infrastructural development initiatives, Tier 2 and Tier 3 cities are becoming more conducive to business growth. The government’s emphasis on infrastructure development, especially the Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation, would increase these cities’ capacity for growth. 

All these will result in an environment that is beneficial for franchises to build a strong presence in these cities.

Great Ambience

Government Initiatives and Policies

Governments at various levels are recognizing the economic potential of non-metro cities and are introducing policies to encourage business development. These cities are becoming more franchise-friendly places to operate thanks to tax breaks, subsidies, and simpler regulations.

How Does Franchise Model Help Tier 2 And Tier 3 Cities?

Franchise models benefit Tier 2 and Tier 3 cities in several ways. 

a. Brand Recognition:

Local entrepreneurs can join hands with established brands, bringing recognized products and services to smaller communities. 

b. Minimal Risk

The collaboration between local entrepreneurs and franchise businesses reduces the risk associated with starting a new business. 

c. Support & Training

Franchise business provides a foundation of support through training and guidance from the franchisor. 

d. Local Economic Growth

The franchise model increases economic growth by creating job opportunities within the local community.

e. Job Creation

Franchise businesses create jobs in the community. This can be especially important in these cities when job opportunities are few. 

Diversification Opportunities

The franchise market in Tier 2 and Tier 3 cities covers many sectors. In these cities, there are promising business opportunities in various sectors.

  1. Food and Beverage franchise: Investing in small cafes or restaurant franchises can be successful. Nowadays, the local population in these cities want to eat good food from outside in a vibrant place. 
  1. Education franchise: Education franchises are another popular option in smaller cities. The need for high-quality education and growing competitiveness have led to a rapid expansion of franchises in this sector. 
  1. Retail Franchise: Retail franchises are growing in popularity. Since branded goods are becoming more and more popular, franchises such as Reliance Retail, Bata, and Nike have established strong footholds in smaller cities.
  1. Hospitality Franchises: Chains such as OYO Rooms, Treebo, and Lemon Tree have gained a lot of popularity as more tourists visit these cities. Visitors can stay at the lovely and affordable lodgings offered by these companies.
  1. Health and Wellness Franchise:  The health and wellness sector in India is growing swiftly, and franchising is a popular approach to business there.

Lessons for the aspiring franchise business owners in these cities

  • Research and choose the right franchise
  • Get adequate funding
  • Focus on customer service
  • Build a strong team
  • Follow the brand’s guidelines
  • Be prepared to work hard

The Road Ahead

In conclusion, there is an excellent chance for entrepreneurs in the Tier 2 and Tier 3 franchise sectors. Most importantly, this simple business strategy fosters a mutually beneficial partnership between regional players and popular brands. India’s franchise sector is booming, and there are plenty of opportunities for new business owners to establish themselves.

The entrepreneurial spirit in these cities is high and ready to be used by big brands. The future of the franchise market in Tier 2 and Tier 3 cities is not just a shift but a revolution. For aspiring entrepreneurs from these cities, one very good opportunity lies in the franchise model of Chai Sutta Bar. Our brand not only promotes local but is very vocal about it. Join the revolution of the franchise market in tier 2 and tier 3 cities.