Why Franchises Fail in Nagpur

There’s something about walking through a city that quietly rewrites expectations. One road reveals a vacant donut shop with faded branding while another leads to a buzzing corner store where credit slips are scribbled in ledgers and names are remembered without fuss.

Vidarbha's Nagpur, often overshadowed in national conversations, presents this duality daily. The Orange City’s appetite for enterprise isn’t in question, but its preferences seem stubbornly specific.

When Scale Doesn’t Translate

The struggles of franchises in Nagpur aren’t simply isolated business setbacks. They represent a pattern that’s repeated itself over time, from electricity distribution to education and food retail.

Back in the early 2010s, power distribution franchises like Spanco and Crompton Greaves floundered under mounting debt, with losses crossing ₹200 crore. Though those failures belonged to a different sector, the template has stayed intact across categories that large-scale operations with structured pricing and fixed processes find it difficult to sustain momentum in the city.

Post-2020, the effects have been even more visible in food and retail. National chains such as More Retail exited key locations, while fast-food names were forced into reactive pricing.

A Vidarbha Industries Association report in 2023 highlighted a key problem of operational costs for franchises were 30 to 40 percent higher than those of local businesses.

It wasn’t just rent or salaries but also compliance. Standardised packaging, GST filings, and wage rules added an average 15–20 percent premium to the final price. In a city where nearly 70 percent of buyers weigh cost more than brand, this margin is often decisive.

Brands with national presence have had to change their approach drastically just to remain afloat. Domino’s began offering ₹49 pizzas in the city, but this led to falling profitability.

By 2024, monthly sales per outlet had dipped by 22 percent. Dunkin’ Donuts, with its premium pricing model, shut shop in 2021.

It simply couldn’t compete with snacks that cost a third of the price and carried generational loyalty.

The Kirana Equation

While franchises wrestle with fixed models, local retailers thrive by staying flexible. Kirana stores still form the backbone of Nagpur’s daily retail ecosystem, occupying around 85 percent of the grocery market.

They operate on terms that corporate systems can’t mirror. Most offer informal credit to regulars, sometimes running into months of unpaid tabs without involving interest or paperwork. It’s a system built on trust and community proximity.

Then there’s the question of what’s stocked. Chain stores follow centralised procurement lists, but kirana owners handpick inventory based on local needs. Items like mahua oil, seasonal pulses, or Nagpur oranges are kept in stock because people ask for them. These are rarely found in chain supermarkets, not because they’re obscure, but because they don’t align with mass-level supply chains.

Infrastructure also plays its part. Nagpur’s cold storage gaps result in around 28 percent wastage for perishables, according to a 2023 report by the National Cold Chain Development Centre.

Chains like Mother Dairy spend upwards of ₹1.2 crore annually on cold logistics in Nagpur. Local dairies, by contrast, use short-loop delivery systems and community-run collection hubs that reduce both waste and cost. What franchises call supply chain inefficiencies, locals have addressed with organic, decentralised adjustments.

A Tough Classroom and a Slower Internet

The education sector hasn’t been immune. Digital learning franchises like Byju’s rapidly expanded across Indian cities, banking on hybrid models and online-offline synergy. But in Nagpur, they hit a wall.

By 2023, 12 of the 15 centres had shut down. The reasons weren’t simply commercial, they were infrastructural and behavioural.

Just 34 percent of households had internet speeds suitable for interactive e-learning tools. Moreover, the fee structure of such franchises clashed with community norms. Local institutes slashed prices to half, banking on low overheads and word-of-mouth marketing.

Parents preferred them not just because they were affordable, but because their teaching style aligned better with the city's academic rhythm, less about test prep apps, more about evening classes in quiet neighbourhood rooms.

Even planned infrastructural enablers haven’t delivered. The MIHAN project, once hailed as a logistics revolution, remains partly dormant.

The opportunity exists, but uptake is slow.

Franchises, which often depend on fully functional logistics hubs, find themselves constrained by this half-built promise.

The Paper Trail That Keeps Tripping Up

Bureaucracy Hurdles for Businesses in Nagpur

If there’s one element that comes up in every conversation with business owners, it’s bureaucracy.

The licensing process for retail outlets, for instance, took 45 days in 2019. By 2023, the wait time had jumped to 78 days.

For large brands, this means costly delays. For small franchises, it’s a dead weight. It disrupts timelines, adds legal consultancy costs, and erodes the early momentum that’s often crucial for new outlets.

GST compliance is another sore point. Small franchisees often spend ₹3 to ₹5 lakh a month on consultants who help them stay within the rules. Compare this with kirana stores that still run primarily on cash. While technically outside full compliance, they benefit from operational simplicity and financial agility. Franchises argue that they’re penalised for following the law, while competitors circumvent it with no consequences.

The fallout is circular. Every franchise that shuts down creates a deeper fear in prospective investors.

It also makes policymakers reluctant to pursue reform, they worry that streamlined policies may benefit only a small sliver of players without widespread public approval.

There’s a missed opportunity here. If regulatory processes could recognise hybrid models or offer staggered compliance structures for emerging franchisees, the playing field would widen without compromising tax oversight.

Yet, Nagpur is far from hostile to growth. The city does embrace new ideas, it simply chooses which ones align with its pace and preferences.

Haldiram’s is often cited as an example of how to blend corporate structure with local understanding.

Their outlets carry a mix of standardised products and regionally tailored offerings. Pricing is moderate, and the cultural connection is reinforced through food choices that reflect local habits.

The real path forward may lie in approaches that are neither fully top-down nor completely organic. A food franchise sourcing directly from nearby farms can lower its input costs while also positioning itself as ethically grounded.

An educational venture that blends live sessions with printed notes, delivered weekly by tutors on scooters, might appeal more than cloud-based apps.

The city doesn’t necessarily reject progress, it rejects models that expect it to change first.

At its heart, Nagpur seems to respond best to what feels familiar, flexible, and respectful of its economic tempo. Franchises that land in the city expecting a ready-made customer base often miscalculate. Those who arrive curious and eager to observe before acting stand a better chance.

In Nagpur, there's a logic shaping how business works. It doesn’t announce itself with marketing campaigns or boardroom strategies, it plays out in handwritten ledgers, WhatsApp orders, and the unspoken rapport between sellers and buyers.

For franchises seeking long-term roots in the city, the advice is simple: stop trying to replicate models that work elsewhere. Start by asking what already works here.

References

Vidarbha Industries Association. (2023). Operational Cost Analysis of Retail Franchises in Nagpur.
National Cold Chain Development Centre. (2023). Perishable Storage Report.
The Times of India. (2012). Franchisees have failed to increase revenue: Vidarbha Industries Association.
IJARSCT. (2022). Opportunities and Challenges for Franchise Business in Nagpur City.