In this article of franchise analysis, we analyze a franchise business which is ideal for all women and homemakers. This toy franchise in India, named Khilonewala, is based out of Indore. We had the opportunity to speak with its co-founder, Mr Abhishek, regarding the business plan for this toy franchise in India. Read on for excerpts from the sit-down interview.
When did this toy franchise begin in India and what is its current reach?
Khilonewala began in 2011 from Indore. We opened a centre in Indore first and ran it for 3 years. After all the trials and tribulation we understood that this concept of toy franchise in India was the need of the hour. That is when we began to franchise this business. As of 2019, we have our franchises in 17 states, 45 cities and 70 centres. Furthermore, we plan to grow to 100 centres by the end of 2020.
What is the Khilonewala business model?
Khilonewala is India’s number one toy library. We provide toys, games and books on rent for kids between the ages of 1 to 12 years. The need for this toy franchise in India was due to two reasons. Firstly, branded toys have become increasingly expensive nowadays. It is difficult for parents to buy every new toy that comes in the market. Secondly, if a parent buys a new toy for his kid, then also the toy loses its utility after some time. This could be because the child grows up and gradually loses interest in the new toy. Hence, these toys accumulate and create clutter in every household. Additionally, our toys also provide a positive engagement source for kids. They learn to use their time productively which makes them creative and active and helps in their mental development.
What is the investment required for this toy franchise in India?
The basic investment package for Khilonewala begins at Rs 3.5 lakh. This includes the franchise fees of Rs 94,400 (i.e. Rs 80,000 + GST). The remaining amount is your investment towards the stock which comprises of all the toys, books, stationery, etc. Approximately, we give about 200-210 toys and 110-120 books. These are a combination of around 50-60 brands which are popular both nationally and internationally. Some of these brands are Fisher-Price, Funskool, Little Tikes, Leapfrog, Hape, Melissa and Doug, etc. We deal in 15 different categories of toys for children of ages 1-12 years.
Furthermore, franchise fees encompass the following amenities. Firstly, we provide you with live training. Our team member travels to the franchisee and gives a full day of training of 8-10 hours. this teaches the franchisee the full business know-how. When the franchise goes live the next day then we provide with on-spot support too. We show the franchisee how to deal with customers and give them a boost of confidence in running the franchise. Other than this, we also provide around 35+ branded business stationery to the franchisee. This includes things like accounting book, visiting card, membership plan, delivery bag, t-shirts, sanitization kit, to name a few. We provide all these things with our franchising.
We also provide an online catalogue on our website Khilonewala. Here, customer can find your specific centre location and view all the products you have in stock. Customer can even check out individual products specifications and images and add them to their wishlist. This wishlist is viewable to the centre which can then dispatch the products to the customer. Additionally, we also provide franchisees with centre location-specific marketing campaigns. These include both online and offline marketing plans, which the franchisee can print as per requirement. Franchisees can use these marketing tools for online purposes, WhatsApp sharing, flyers handing, etc.
The above was the investment plan for a tier 2 city. The investment scheme and price will differ accordingly for a tier 1 or a tier 3 city. Tier 1 city will be slightly more expensive while tier 3 city will be less expensive.
What are the requirements for opening this toy franchise in India?
The first requirement for opening this toy franchise in India is a space of about 100-150 sq ft. This can either be a room in your house or a pre-owned shop somewhere else. The exact location of this centre is not important since the customer can view and order the products on the website itself. The second requirement is a part-time delivery person. This can be a local person who is willing to work for 2-3 hours per day. He is only required to deliver the products to the customers.
What is the value for customers in this toy franchise?
The customers have to join the Khilonewala library at his location. This requires a one-time fee of Rs 500 for registration. One registration is complete, the customer can go on to select a plan for himself. Plans begin at Rs 400 per month. Theoretically speaking, if the customer chooses Rs 500 plan, then he gets toys worth Rs 5500 on rent per month. This product delivery is broken down into two combinations of approx Rs 2700-2800. The delivery person delivers the first set of products to the customer. After a fortnight, the delivery person delivers the second set of products and takes aways the first set send earlier. Hence, the customer receives almost 10x times worth of products with free delivery twice in a month. Furthermore, plans also vary in terms of monthly, quarterly and yearly basis. Plans are also available on the basis of different age groups for kids.
Moreover, we also have a section of products available for parties. This comprises of big and bulky toys such as trampolines, toy cars, etc. This works perfectly for big kids’ parties. The products are delivered under 3-4 hours and collected later as well. For adding this plan to your franchise, the franchisee needs to pay an extra Rs 1.2 lakh. This amount covers all the stock only and not any extra fees. Having this perk increases your revenue as a franchise and lowers your marketing fees conversely. On the other hand, the cost of these party products to the customers ranges from Rs 2,500-8,000. Since these party products require extra transportation for delivery, they also incur a small delivery fee for the customer.
What is the member count for a successful franchise?
On average, most franchises operate at 80-100 members. Some franchises even have over 200 members. Hence, it depends on individual franchise effort and marketing.
What is the break-even point for this toy franchise in India?
Thus overall after approx 7 months, if a franchise had 80 members then they would earn Rs 40,000 (=80×500) per month. Every new registration will earn another Rs 5,000 per head. In terms of expenses, there is no rental fee for the franchise. The cost of hiring a delivery person would be Rs 3000-5000. Additional expenses for amenities like electricity, fuel, maintenance and marketing would come to Rs 7000-10,000. Hence total expenditure for a franchise after 7 months of operation should come to about Rs 10,000-12,000. Therefore, your profit for a month would amount to Rs 30,000-32,000 after 7 months.
Thus, within 12-18 months is it possible to break-even and get your investment return for a franchise. Post this, the franchisee can keep growing his business organically.
What is the sanitization procedure for the inventory of toys?
To ensure that the toys and other products which parents receive are clean and germ-free, we maintain a complete sanitization protocol. We begin with an inspection for hygiene and maintenance. Once we receive a product from a customer, we inspect how dirty it is. Then we sanitize it with natural products so that the chemical products do not harm the children. We move on to disinfect the product and package it to maintain its clean state. Hygiene is our primary concern and only after all these steps do we deliver the product to a customer.
Who pays for any product damage?
Whenever we add new products to our inventory, we check whether it is durable and popular. Only when products satisfy these two conditions do we add it to our stock. If a toy is not sturdy enough then we do not add it to our stock. We also purchase very high-quality products which are are not going to break easily. These are not your average Chinese market toys. Usually, kids between 1-4 years cause the most damage to toys as they are not careful. Hence, toys for these age groups are mostly made of wood or hard plastic which are very strong and not easily broken. In the case of books, we import hardcover books which are also sturdy and tamperproof. We also train our franchisees to laminate the inventory and prolong the durability of products. Therefore, all these steps ensure that there is no damage to inventory at all.
On the rare occasion that there is significant damage to a product, then the customer has to purchase it at a 20-30% discounted rate. On average, around 12-15 toys and 5-6 books are damaged for any given franchise. Which is also not a loss for the franchise, since the customer pays for it.
Contact details for Khilonawale
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Watch our interview with Mr Abhishek below.
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