Master

Franchisee
Proposal -
Dec - 2023
The proposed Business Plan is a Master Franchisee - FOFO (Franchisee Owned Franchisee Operated)
model in which the responsibilities have been split as per the below structure.

WHO is a Master Franchisee?

A Master Franchisee (MFR) is the single point of business contact or business representative for RRL
for a state or a defined territory to operate RRL’s wholesale apparel franchisee business by opening
a certain agreed numbers of stores in that state or defined territory. The MFR will be responsible for
achieving state level/territory level sales targets, increase brand reach/penetration of RRFB branded
products, retailer/buyer growth by appointing sub-franchisees to open stores in that state/territory
within a given period of time.

In this model, the master franchisee will be liable to arrange for the property and the capex for store
fit out as per RRL guidelines. RRL will support the MFR with brand compliant toolkits for store VM,
color pallet guidelines, façade, dealer-board and other branding aspects of the products and store.
Proposed Master Franchisee Structure for DELHI (Illustrated Model) -

Responsibilities of Reliance Retail Limited (RRL) -

 Stocks provided to Franchisee partner on SOR model
 Primary Logistics Cost for delivery of stocks from RRL DC to Wholesale Store to be borne by
RRL
 Marketing and Promotional Support for RRL Brands and Wholesale Store
 POS and Inventory Management Technology
 Store Manager on RRL’s payroll
 Retailer Rewards Schemes to help drive store sales
Responsibilities of Franchisee Partner -
 Appointment of Sub-franchisees in alignment and discussions with RRL
 New Store Openings with sub-franchisees in alignment and agreement with RRL
 Property will be leased by Partner with Rent and Security Deposit paid by Partner
 Partner will manage the store operations, bear the store opex and drive sales
 Appointment of store staff and pay their salaries with other incentives
 Leverage existing customer base and sub-franchisee’s customer base heavily along with AJIO
Business’s customers to drive sales target
 Provide credit facility to the customers or retailers
 Provide Bank Guarantee against the stocks transferred on SOR basis to the store
 Stock insurance
 Logistics of the orders from the store
 Collection of all receivables for the sales done
 Manage all Customer Returns from the store sales
 Security of the stock and the store
 Store Fit-out Capex for avg. 2000 sqft – 3000 sqft store at approx. 700 per sqft., total of 15L
– 20L INR approx. to be borne by the Partner

Ways of Working -
 RRL will invoice the stocks to Franchisee at:
Invoice Price = (MRP – 50%) + GST%
 RRL will also provide the stocks on SOR basis securitized through a Bank Guarantee provided
by the Partner. The Bank Guarantee will be sought in 1:1.5 ratio w.r.t the stock value
 RRL will install its proprietary POS system in the store and the billing to the customers need
to be mandatorily done through this POS system
 The selling price range of the products will be decided by RRL with real time price synced
with Storefront (App) on POS.
 The Partner will pay the amount generated from the Store Sales to RRL in every 30
days (stock level reconciliation to be done weekly/bi-weekly/monthly)

Master Franchisee Partner Margin Structure -

 The Partner will earn a Total Margin on the Final Sale Value for the month (based on the POS
billing). The Total Margin will be a combination –
o Base Margin of 9%
o Turnover Margin of upto 4%
o Expansion Margin of upto 2% (avg. 0.5% per new store opening)
 Proposed Slabs (INR Lacs) Master Franchisee MODEL
Metro
Large Town Small Town Base Additional Total
City
<35 <30 <20 9% 0% 9%
35-75 30-50 20-40 9% 2% 11%
75-150 50-100 40-60 9% 3% 12%
150+ 100+ 60+ 9% 4% 13%
*Additional 2% for New Store Opening (0.5%-0.75% per store for first 2 stores, and 0.5% avg. per store thereafter
upto a max 2% total)
*For the initial 3 months of operations post store going live, the partner will be eligible for the highest slab of
margin as given in the above table irrespective of realized sales value for that month. This is a one-time benefit
offered to the partner and cannot be claimed later on or extended
*The detailed Margin structure working to be strictly discussed only in one on one commercial discussions, and
followed by a Non-Disclosure and Confidentiality Agreement signing between RRL and Partner

 Payment Process - Currently we are offering upto 30 payment days to the Partner from the
date of Store sale on POS.
Payment Cycle Store Sale Period Payment to RRL
Cycle 1 1st - 15th 30th of same month
Cycle 2 16th - 30th/31st Next Month 15th

 The Margins will be paid on a monthly basis within a mutually agreed time frame and post all
necessary validations & reconciliation
 The product returns from customers (post sales) need to be managed by the Partner. Only in
case of damaged products, the stock can be returned to RRL post validation
 Periodic Stock Audits will be done (daily/weekly / monthly / quarterly) in the store premises
and signed off by the Franchisee Partner

Pricing and Discounts on POS –

 The Retailer Selling Price of the products in store will be determined by RRL with real time
price synced with Storefront (App) on POS
 Partner will be provided with a further upto 6% additional discount support on the POS and
2%-2.5% Cash discount on the POS by RRL
 RRL will work with Partner and provide support for festive season, events specific and trade
promotions related schemes and discounts at the store
AJIO BUSINESS DELHI 5-Year Growth Plan for Franchisee Wholesale Business
– (Estimated Growth Figures)
DELHI: 5-Year Plan FY2025 FY2026 FY2027 FY2028 FY2029
Mar-25 Mar-26 Mar-27 Mar-28 Mar-29
Flagship Stores 1 1 1 1 1
Store Type
Franchisee Stores 0 2 3 3 3
Average Footfall 570 1425 3325 3657.5 3990
Average Bills 342 855 1995 2194.5 2394
Average Buyer Value ₹ 35,000 ₹ 35,000 ₹ 35,000 ₹ 35,000 ₹ 35,000
Revenue per month (Cr) 1.2 3.0 7.0 7.7 8.4
Revenue per annum (Cr) 14.4 35.9 83.8 92.2 100.5
Revenue per store per annum (Cr) 14.4 12.0 20.9 23.0 25.1

MFR Model Franchisee Earning Potential (Cr) 1.9 5.2 12.6 13.8 15.1

Master Franchisee Proposed P&L Model – (Estimated Monthly Figures)

Particulars At Store Sales: 50L At Store Sales: 75L At Store Sales: 1Cr
INR per month INR per month INR per month
Partner Total Margin 13% 14% 15%
Partner Revenue (INR) 6,50,000 10,50,000 15,00,000
Manpower (INR)* 1,00,000 (15%) 1,50,000 (14%) 2,00,000 (13%)
Electricity (INR) 15,000 (2%) 15,000 (1%) 15,000 (1%)
Stock Insurance (INR) 5,500 (1%) 8,000 (1%) 11,000 (1%)
Logistics Cost (INR) To Pay To Pay To Pay
Consumables (Packaging & 11,500 (2%) 17,000 (2%) 23,000 (2%)
Supplies) (INR)
Visitor F&B (Chai, water, 10,000 (2%) 15,000 (1%) 20,000 (1%)
etc.) (INR)
BG Interest (INR)* 10,500 (2%) 15,600 (1%) 21,000 (1%)
Overheads (INR) 50,000 (8%) 75,000 (7%) 1,00,000 (7%)
Rent (INR)* 1,50,000 (23%) 1,50,000 (14%) 1,50,000 (10%)
Pilferage (INR) 25,000 (4%) 37,500 (4%) 50,000 (3%)
Partner Net Take (monthly, 2,72,500 (42%) 5,50,000 (52%) 9,00,000 (60%)
INR)
Partner Net Take (annual, 32,70,000 66,00,000 1,08,00,000
INR)
Partner EBITDA % 42% 52% 60%
Capex/Capital Expense 15,00,000 15,00,000 15,00,000
Capex Recovery Period 5.5 months 2.6 months 1.6 months
Partner Credit Investment* 44,00,000 66,50,000 88,75,500
ROI on credit annual % 60% 94% 117%
*Manpower Calculation: For a 3000 sqft avg. store, with 1 Manpower per 500-600 sqft, 5-6 Junior Store
Agents at 15,000 INR Salary per month per agent and 1-2 Senior Store Agents at 25,000 INR per month per
agent. This is estimated to grow from ~6 total manpower at 50L store sale, to ~8 total manpower at 75L store
sale and ~10 total manpower at 1Cr store sale. At a Store Sales level, avg. cost of manpower estimated to stay
in 2-3% range

*Cost Items: All expense items in the particulars are expressed as a % of the Partner Revenue, based on the
monthly store sales assumed above

*Partner Credit Investment: Credit towards retailers estimated at 70% of monthly sales at steady state avg. of
store operations. An avg. 25 credit days provided by RRL, remaining partner exposure w.r.t cost of credit for 40-
45 days on a rolling basis

*ROI on Credit investment annually: ROI estimated annually based on a year of store operations from the
rolling credit offered by partner and franchisee margin earned vis-a-vis cost of credit exposure. On an avg. after
5-6 months partner will be able to recover entire capex investment and thereafter earn purely net margin/take
home from the store sales and credit investment towards sales.

*BG Interest: Estimated at 2%-2.5% annual bank charges on BG

*Rent Estimates: At a Store Sales level, avg. rent estimated at 3%-4% of store sales