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August 16, 2021

How to use Multiple Deal Structures to Make Partnerships Successful in India

Reliance retail is one of the fastest-growing retailers in the world. It is the largest, most profitable retailer in India with more than 16 brands in their portfolio partnership spanning from Japanese brands all the way to American brands. Learn directly from their president and CEO, Darshan Mehta, as he talks about how they use multiple deal structures and make all their partnerships successful. 

"Often, grief happens when business is good, not when business is bad. When business is good, and there's a lot of food on the table. That's when these issues come up" - Darshan Mehta

Different Deal Structures

Darshan is very flexible and uses a wide variety of deal structures. He aims for the big brands in India to cater to different types of players in the market and the different appetites for risks. Here is an overview of the deal structure types that they have:

  • Joint Venture 

Companies who choose this structure are the people who recognize India as a significant market, but they feel like they need assistance from a known brand like Reliance. Most importantly, they want to keep control of the business in India. 

Darshan doesn't like to put time limits in their JVs. According to him, if the brand owner wants a time-bound JV, they'd rather execute a master franchise model. They take JVs very seriously, and it would take a breach of contract before you can end a JV. 

  • Master Franchise Model

This is the model for companies who believe that India is not a very significant market and is a simpler and easier model compared to the joint venture model. The brand owner doesn't like to invest in this situation but is willing to sell you the products and help you establish the business. They have a high-level control over the brand itself, but Reliance ultimately runs the business and gets all the risks and rewards.  

  • Licensing

A very loose governance model where you pay the royalty fees for trademark usage, and you are pretty much on your own. You can run the brand any way you want. 

  • Direct to Retail

Direct to Retail is pretty much the same as licensing with a few tweaks. One significant difference is that the DTR model is a more holistic partnership. Unlike the licensing model, where you can get a license on a specific product, DTR is all about taking the entire business. Also, DTR is a long-term partnership ranging from 10 to 15 years, unlike licensing deals which can be as short as two years. 

  • Mixed Model

Depending on the negotiations, Reliance is also very open to mixed models. Sometimes, they do a master franchise with a potential joint venture down the line, written in a very detailed master franchise agreement. 

Choosing Models

When deciding what deal structure to use, it is crucial to understand what the brand owner wants. It starts with how long they want to be operational in the country and identifying the parts of the business they don't want to be involved. Finding a good meeting ground is crucial to success so that both parties are happy with the partnership. 

For someone as big as Reliance, Darshan makes sure that new partnerships will have no conflict of interest with their existing partnership agreements. They have a robust governance structure to avoid any problems with all their partners. 

Deal Sourcing

Sourcing deals is not a challenge for Reliance. People eventually find out that Reliance is the one to talk to when you want to partner in India, so they receive many inbound calls. However, when it comes to hunting deals, they do a plethora of research and data tracking. They are constantly tracking the fashion and lifestyle industry, as well as their customers' wallets to find upcoming brands that you have never heard of before. 

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