Inside Scoop: Gagan Anand of Scuzo Ice 'O' Magic Shares Insights on Franchise Business

📝Interviews

Muskaan Kapoor

Jan 11, 2024 — 8 min read

Gagan Anand, Founder and Director of Scuzo Ice 'O' Magic

In India, the franchise business is experiencing significant growth, with the Indian franchise industry currently valued at around INR 800 billion. The industry is expected to grow at a rate of 30–35% per annum in the coming years. This growth is driven by increased franchise opportunities and a boost in consumer spending.

To gain a deeper understanding of how a franchise business operates in India, we connected with Mr. Gagan Anand, Founder and Director of Scuzo Ice 'O' Magic. In this insightful conversation, Mr. Anand breaks down the dynamics of Scuzo's franchise business, offering insights into how Scuzo is making its mark and providing us with a closer look at their unique position and strategy in this evolving business scenario.

StartupTalky: Could you share a brief overview of Scuzo Ice 'O' Magic and its unique position in the dessert industry?

Mr. Anand: Combining expertise with a commitment to innovation, Scuzo introduces a diverse range of delectable treats, capturing the essence of every child's first love—ice candy. It is the first live popsicle brand in India that offers an innovative live popsicle concept where customers can select their favorite fruit from an extensive range and witness the craft as their popsicle is prepared within minutes.

Apart from popsicles, Scuzo offers premium products like gelatos, sorbets, milkshakes, sundaes, waffles, brownies, & many more. With a beautiful storefront for your Insta-worthy pictures, Scuzo specializes in providing healthy and natural desserts. It is an absolute one-stop dessert solution for the sweet tooth of all our customers, as it is also 100% vegetarian and guilt-free.

StartupTalky: What is the process for someone interested in buying a Scuzo Ice 'O' Magic franchise?

Mr. Anand: For individuals looking to invest in a Scuzo Ice 'O' Magic franchise, the initial point of contact is our Business Development team. The executive presents the business proposal to them and helps finalise a suitable model amongst the different business models we offer. Initial contact with the executive can be made by directly putting a franchise query on the official site of the brand.

StartupTalky: Are there specific criteria or qualifications that potential franchisees need to meet?

Mr. Anand: Criteria or qualifications that the potential franchisees need to meet include prior experience in the food and beverage industry. While not obligatory, Scuzo as a brand is enthusiastic about nurturing and collaborating with emerging entrepreneurs who share the same zeal and passion for the business.

StartupTalky: For new franchisees in India, what growth or sales expectations can they reasonably anticipate in the initial years of operating a Scuzo franchise?

Mr. Anand: For our new brand partners in India, reasonable growth and sales expectations that they may anticipate in the initial years of operating a Scuzo franchise amount to an average of INR 3 lakhs per month, or close to INR 40 lakhs annually.

StartupTalky: How do you assess the growth potential for Scuzo franchises in different markets, especially for those considering locations in smaller towns?

Mr. Anand: Assessing the growth potential for dessert cafe franchises in different markets, especially in smaller towns, involves a comprehensive analysis of various factors.

Market research is a primary aspect and includes demographics, competition, etc. It is imperative to gain an understanding of the local population, age groups, and preferences. Analyzing existing dessert options in the local area and identifying where we have our strengths and weaknesses compared to our local competitors. Consumer behaviour plays an equally significant role. Identifying current trends related to dessert spending patterns of local customers to align pricing strategy with local affordability. There are many such factors that need to be taken into consideration that provide valuable insights.

StartupTalky: What kind of support and training programs does Scuzo Ice 'O' Magic provide to its franchisees to ensure a successful start and ongoing operations?

Mr. Anand: We provide 360-degree support to our franchisees. The brand's pre-opening support commences with the identification of a suitable site that aligns with our criteria. The company aids franchisees in finding such locations and offers guidance for negotiating favorable leasing terms. Reviewing & monitoring the fabrication of the store, providing comprehensive training to all brand partners on store operations, accounting and inventory control, assistance in tie-up with local delivery partners, and assistance in getting all required licenses to operate the store in coordination with consultants, etc. come under the umbrella of support for the franchisees pre-opening.

Post-opening, we provide training on SOP’s and brand policies. New product launches and implementation, inaugural discounts, loyalty programs, assistance with local promotion programs and media launches, tie-ups with local influencers, guidance with inventory control and administrative hurdles, and more are activities that the brand undertakes for the franchisees.

StartupTalky: Can you outline the initial franchise fee and any ongoing royalties or fees that franchisees are required to pay?

Mr. Anand: The initial franchise fee is INR 6 lakhs and a monthly royalty is 8% (6% is pure royalty and 2% is marketing levy) on net sales is what the franchisees are required to pay.

StartupTalky: What are the typical operational costs associated with running a Scuzo franchise in India, including staffing, inventory, and other overhead expenses?

Mr. Anand: Typical operational costs pertaining to running a Scuzo franchise in India, including the rental charge of the location, lie between the range of INR 30 thousand to INR 1 lakh, subject to the city, specific area, size of the shop, etc. Staff costs can range from INR 30 thousand to INR 50 thousand, depending on the franchise model and size of the shop. The cost of electricity and water might range between INR 12 and 15 thousand. Other additional expense charges related to operations might be estimated at around INR 10 thousand. Royalty charges of 6% on net sales. The cost of goods, including packaging, is approximately 32%.

Apart from the above-mentioned expenses, 30% (25% commission + 18% GST on commission) will be the cost of all sales generated through online aggregators such as Swiggy, Zomato, etc.

StartupTalky: How does Scuzo support franchisees in marketing and branding efforts? Are there centralized marketing initiatives or guidelines for local promotions?

Mr. Anand: Yes, there are centralized marketing initiatives.The brand is directly responsible for social media and countrywide marketing for both the brand and the franchise store. Our strategies are designed to bring our brand partners the proper exposure across all online platforms. Marketing for local stores is carried out in collaboration with brand partners. The brand partners get guidelines based on their specific domains.

The marketing initiatives are divided into three major subheadings: pre-opening, soft-launch, and post-opening, respectively. Pre-opening marketing is generally accomplished through social media platforms, using methods such as targeted postings and teaser videos. Soft and grand launch events are prepared and carried out via newspaper inserts, pamphlets, local food blogger visits, celebrity guest visits, radio station tie-ups, and so on. Post-launch strategies include newspaper inserts, samples, blogger activity, and inauguration incentives, among many more.

StartupTalky: How is the supply chain managed for franchisees? Are there designated suppliers, and how does Scuzo ensure quality and consistency in product offerings?

Mr. Anand: Scuzo has a well-established supply chain that is entirely handled by the company. The brand meets all inventory requirements through a single point of contact, the Scuzo supply chain manager. This manager serves as a liaison between the brand and the brand partner. This is done to guarantee smooth operation throughout the order placement, payment, and shipment processes.

We have year-round warehouses that keep our stock in order to assure quality and consistency in our product offerings. The brand is in charge of supplying raw materials and packaging. Local purchases are kept to a minimal minimum and include things like the store's milk requirements, among other things.

StartupTalky: The company's revenue for FY23 was INR 5.3 crore. Can you highlight key drivers and any unexpected challenges during this period?

Mr. Anand: There were a myriad of challenges and key drivers during the period of FY23. Among these, prominent and recurring aspects included acceptance and awareness of a newer brand. There have been instances where the concept that we offer has been welcomed by the respective franchisees, but there remained an underlying sense of hesitation. Availability and feasibility of locations (considering increased rentals) were major concerns for certain locals, particularly in smaller cities.

Adding to the above, there was the fact that many customers were unaware of the distinction between gelato and ice cream. One recurring element was potential franchisees' misperceptions about our competition in the area. There are limits that come with being a self-funded, bootstrapped business. We were unable to prioritise certain areas for the same reason.

But by approaching all of these obstacles with a deliberate, methodical, and focused approach, we were able to overcome them at their very core.

StartupTalky: What measures are in place to achieve the targeted revenue for the upcoming year?

Mr. Anand: We are expanding our market presence across various regions in India and internationally. We want to promote the Make in India concept by highlighting Indian flavors and expertise abroad. Our goal is to tap into the global market and offer a unique culinary experience that reflects the rich cultural heritage of India.

We are developing our own delivery platform, including an app, to facilitate direct ordering and delivery. While we may collaborate with platforms like Zomato and Swiggy, we want to have our own reliable delivery system to ensure efficient and cost-effective operations.

Also, we will be opening around 10 cloud kitchen locations in Delhi/NCR simultaneously to cater to these areas. With such wide coverage, we can also consider delivering to places slightly outside our designated delivery areas, as long as it is feasible. Our goal is to ensure that customers receive their orders promptly, and we aim to deliver within 24 hours from the time the order is placed.

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