Made your first million? Get an Apple franchise and make many more

Photo: Reuters
High networth individuals are well-versed with fund managers who tirelessly sweet-sell them creative ways to manage, preserve and multiply their hard-earned millions. The gamut of choices ranges from sophisticated financial instruments and investments to cold hard real estate in emerging boom towns. So, what does one have to say about a premium electronics venture franchise that requires around a million dollars in upfront investments, takes a couple of years to establish and then generates consistent returns year after year? It's called an Apple Premium Reseller and getting into business involves selling the world's most coveted phones and computers. 

Apple isn't the first to have been adopted by businesses as a non-core diversification move. Franchises that have proven to be cash machines in the past include fast food brands, movie rental businesses, Swiss watch and auto dealerships. But, as with all businesses that have been disrupted by e-commerce, those too have seen their models shift and upend over recent years. What really sets Apple apart from other franchise businesses are two overarching determinants - the price of rent or ease per square feet is justified by the company's product prices, which run into hundreds of thousands of rupees yet don't occupy as much shelf display space as, say, a designer denim store. Then it helps that Apple only has a couple of dozen SKUS or different kinds of products that it displays with the rest of its space dedicated to customers walking around. A fashion store or jewellery shop grapples with the problem of plenty and how to display what may be hundreds of saleable items to shoppers.  The other is that Apple has a stranglehold on the manufacturing of its products, and watches quality like a hawk, with the result that mark-downs, blowout sales and cut-rate prices are unknown to it. This is what ring-fences its premium positioning.

Given India's high growth of internet penetration, smartphone sales and computer access in the years to come, does it make as much economic sense for a business punter to invest in the premium versus, say, the mass or, say, a Dell or an HP store in this case? One individual who has worked with electronics manufacturers and distributors says that in the world of consumer electronics, Apple straddles the same spot that BMW does for luxury cars or Rolex does in Swiss watches. That means there's always going to be an aspirational target group that sees these products as a passport to success and will be striving to buy them despite the multitude of alternatives in the market. The trick, of course, is to get the right piece of real estate to connect with consumers close to their stomping grounds. 

So how does one sign up? Getting Apple to accept your applications means you run through a standard set of applications that include forms, a background check, basic financial solvency, an aptitude and preferably a displayed passion for electronics. One Apple official who understands how the process works, but declined to be named, said that in the last fifteen years the American tech giant has only signed on 160 franchisees as Apple Premium Resellers or sales partners who hawk their famous iPhones.

Says one watch dealer who declined to be named, "Landing an Apple dealership is pretty much like getting the authorisation for a Rolex dealership." The business guarantees the best products in its space, and comes with customer base that is hooked to new releases year after year and a headquarters that is proactively in touch with its entire distribution piece and methodically supports its sales outlets and partners with products, technology and the rest of it. 

Is there a checklist that aspirants will need to sign off against before they get enrolled by Apple? There indeed is one and Apple India doesn't share those details publicly. But the key stipulation predictably does include having financial access and the means to afford the right real estate, followed by a deep understanding of Apple stands for. 

That laundry list gets down to the details of how many strobe lights are to be positioned in a shop, to how many computers and products are to be displayed and exactly where. "Everything for the business is defined," says one retailer in the trade. That means that right from the three-inch-by-two=inch acrylic cardholders that tell you what products are on display to the furniture fixtures which come from Shenzhen and the planograms (visual representations of a store's products and services) that determine how and where products will be showcased, the lighting plans, and in what sequence -– there's a playbook somewhere that describes how it will be done  down to the shade of paint used on the walls feels and looks and will be the same across the stores in the world. 

So why does Apple just have a handful of dealerships after close to two decades in the country? For one, the tech giant sees its investments and the use of its name as a long-term investment, and any digression from what it sees as core values are abandoned without hesitation. In the past, Apple India has pulled the plug on franchises in Kolkata, and a couple of other cities where the collaboration wasn't panning out as planned. 

The other is it would take a fairly serious entrepreneur to put his or her money where their mouth is. Fancy phones and slick, trendy laptops aside, starting an Apple franchise isn't for the faint-hearted. The financials are front-loaded: the fixtures themselves can run anywhere between Rs 10 million and Rs 20 million, and ancillary costs like staff salaries, inventory, permissions and licenses anywhere from Rs 20 million to Rs 30 million. 

The rental costs or real estate charges are additional and can easily set a store operator back by Rs one million to Rs 15 million a month on average. Expect to break even within two years or sooner, however, and while predetermined margins on equipment are slim, which means it's a volume game despite being premium, the revenue from service plans, warranties, repairs and other accessories are where the real money is made. Typically, an investor can make profit of 3-10 per cent on devices with volumes driving the business. In phones, the margins are higher. 

Ample Technologies, a firm that has been running one of the earliest Apple stores called Imagine at the Forum mall in Benhaluru since 2004, now runs 13 stores across Bengaluru, Chennai, Cochin and Hyderabad, and sees itself not just as a seller of Apple products but as "Apple experts." Rajesh Narang, director at Ample Technologies, didn't respond as of press time. There are others such as iPlanet, Nyasa and Maple, which also signed up early and run multiple stores across the country. So do those like Narang think about what some might see as Apple's austere commandments? No discounting, no blow out sales to clear stock, wafer-thin margins, and constant direction on product sales cycles regardless of how local markets may behave differently? 

Devangshu Dutta, chief executive of consumer research firm Third Eyesight, says that India, of course, hasn't been the most important market for Apple, which is why the franchise model makes absolute sense.  Even so, what really makes a franchise successful is the creation of value. "For anyone creating a viable Apple franchise, they have to be clear that you're not just selling boxes being shipped to you - a lot has to go into the service piece and the experience zone which frankly most Indian franchisees aren't oriented towards," he adds. "Therein lies the opportunity and the potential rewards of being different."

Must-haves for Apple Premium Reseller
  • Spotless track record
  • Affinity for technology 
  • Own or access to great retail space
  • Be a successful business operator