Franchise Business in India

Franchise is a master plan used by many organisations for expanding their business worldwide. When an entity needs to expand and grow, things of the ways of expansion and franchise play a vital role.Franchising provides an attractive opportunity for aspiring businessmen who want benefits of a recognised brand and as his own operations. Franchise agreement consists of two party franchisor(the organisation which is willing to expand and provide its name) and franchisee ( the organisation or person wants to have benefits of the  already well established organisation). Under franchise agreement franchisor grants the franchisee the right to operate a business using the name of franchisor or system or support. 

Franchisors also provide adequate training to franchisees to have necessary skills and knowledge for running the business smoothly. Franchisees also get benefits from marketing of franchisors as well as support from the franchisor ensuring that it receives guidance as well as resources to help the business run smoothly and grow. The combination of a trusted brand training , marketing support, and ongoing assistance makes it one of the most promising business models with its high chances of success.

Franchisee history

Franchise agreements have existed for quite some time. In the late 1800s, they were popular in the United States. At the time, "franchise" meant granting people or businesses specific rights or authority, such as running utilities or transportation services.

However, franchise agreements as we know them today date back to the early 1900s. Businesses such as auto dealerships and soda bottlers began allowing others to utilise their brand names and methods of operation. This enabled people to launch their own enterprises with the assistance of larger corporations.

The formation of the International Franchise Association (IFA) in 1960 was a watershed point in franchise history. This organisation contributed to the development of franchise agreements' norms and standards.

Franchise agreements are now commonplace. They can be found at fast food restaurants, shops, and a variety of other establishments. These agreements specify what the corporation and the person in charge should accomplish. They cover fees, where you may operate, training, and corporate assistance. Franchises are a popular way for large corporations to expand and for individuals to create their own enterprises with the assistance of a well-known brand.

Franchise Agreement 

For entering into a franchise business model is not an easy task as it requires various terms and conditions on which parties need to agree in order to run business in its best form. So in order to understand the franchise agreements let us first first unfold the word agreement . Agreement is entered when an offer is made by one party and the same has been accepted by another party on the same terms and condition.

Franchisee agreement is an agreement where franchisor and franchisee agree and it is legally binding on both the parties  . Franchise Agreement contains rights, obligations and responsibility on which both the parties have to agree. It covers various essential terms, including compensation, timelines, conditions for brand usage, and more. Crafting an ideal franchise agreement is essential for ensuring a fair and sustainable business relationship between the franchisor and the franchisee. In case of dispute between the parties, agreement plays a vital role as its  legal document as used by authorities to resolve the dispute. 

PROs 

For franchisee’s  

1. For any new entity to earn brand name takes time where in case franchise it gets the benefits of already well established brand name shaving the resources of organisation which would have otherwise been used for establishing brand image. 
2. Interfering into new business is quite risky. It may be successful or may not result in loss, franchise tested  business model which is already established and successful.
3. Training and support of franchises to franchisee results in the success of even franchisee ventures without any prior experience.
4.  Franchisees get the benefits from the network of franchisors as they receive goods in bulk at huge discounts .
5. Continuous promotion of franchisors also increases visibility of franchise and helps in driving the customers to the nearest franchise store. 
6. Being a part of a large network also helps them to know best practices , exchange their experience helps in personal and professional growth. 

For franchisor

1. Franchisor gets faster expansion and less costly as individual franchisees bear setup cost and operation costs, resulting in less capital needed for expansion.
2. Franchisees' vested interest in the business's success drives their diligence, ensuring the business thrives under their ownership resulting in profit of franchisors. 
3. Franchisors generally receive royalties from franchisees as most of the work of running the business and cost bearing is also borne by the franchisors.

CONs

For franchisee

1. Franchisees have to share a portion of it with franchisors where most of the work is done by franchisee and all the expenses are borne by the franchisee itself for running the business. 
2. If any franchise does any act it also affect other franchisee as well 

For Franchisors

1. The franchisor does not possess any direct control over the sale of its products, due to which in this case any franchisee does not maintain the quality it harms the goodwill of franchisee.
2. Franchisees may provide any trade secret of the franchisor to its competitors.  

Franchise Laws 

In India there is not specific law running the  franchise agreement rather it is governed by various laws such as   

• Consumer protection Act, 2019 : - This act protects the consumer from both franchisee and franchisor when there is defect in product or services . Whenever a consumer is aggrieved may apply to consumer protection court.
• Foreign exchange management act, 1999 : - Foreign exchange management act comes into picture when there a foreign franchise involved. Payment is made to such party foreign currency 
• Special relief act : - When any person is aggrieved because of franchise agreement and there is a specific relief that the party wants can apply under this act.
• Transfer of property act, 1882 : - If there is any property in India that is involved under franchise agreement then we look into the act as it specifies the legal requirements for such transfer.
• Indian Stamp Act, 1899 : - Stamp duty for franchise agreement is calculated as this act considering the payment involved under this agreement.
• Patent Act 1970, Trademark Act 1999, Copyright Act 1957: - Under this agreement there are various patents, trademarks and copyright are involved in India. It is protected by the acts in India.
• Indian contract Act, 1872 : - It is one of the most important acts when it comes to any contract to be performed in India as it sets the guidelines for what is considered as a valid contract and how such contracts are made. It also provides information related to how to enter into contact and important points to be kept in mind while making a contract.
• Income Tax Act, 1961 : - Parties to the agreement which received benefits from India should pay the taxes to authorities in India. There are several international franchises that are also governed under this act.

Some of the points that must be kept in mind while making a Franchise Agreement

Drafting a franchise agreement stands as a decisive step towards a prosperous franchise system. The subsequent essential components beckon consideration while fashioning such an agreement:

1. Precision and Clarity: The agreement must be made in such a manner that it is  indisputable. Terms in agreement should contain the obligations, anticipations, and roles of both the franchisor and franchisee. 
2. Intellectual Property: The agreement must contain the utilisation of trademarks, logos, and additional intellectual property owned by the franchisor. Plunge into the ways the franchisee to safeguard these assets.
3. Geographic Scope: Firmly define the geographic territory in which the franchisee may operate. Address the entitlements of exclusivity and territorial protection.
4. Initial and Ongoing Financial Commitments: Define the initial franchise fee, continuous royalties, advertising contributions, and other financial obligations. Present payment schedules candidly and delineate the implications of non-payment.
5. Term and Renewal Provisions: Specify the time period for which the franchise agreement should be valid and conditions governing renewal. 
6. Training and Support: Detail the training routines and continuous support that the franchisor will extend to the franchisee. This encompasses preliminary training, refresher courses, and access to operational resources to help the franchisee to set up business.
7. Standards and Quality Control: Institute operational benchmarks, prerequisites for product or service quality, and the anticipations for delivering an elevated customer experience. The franchisee must adhere to these standards set by the franchisor.
8. Directives for Advertising and Marketing: Elaborate on the mandates concerning advertising and marketing, encompassing local and national campaigns. Clarify the collection and utilisation of advertising funds.
9. Supplier Relationships and Products: Prescribe the sanctioned suppliers and sources for products, equipment, and supplies. Address any restrictions on procurement from unsanctioned suppliers.
10. Legal and Regulatory Adherence: Affirm adherence to pertinent laws, regulations, and industry standards within the precincts of the franchise agreement.

Key points before committing to the franchise agreement

1. Financial dedication: - It contains overall investment made, fees and the time period for which royalty must be paid.
2. Franchisor duties: - It is the duty of franchisors to provide training, specific ingredients used by assistance required for running the business.
3. Term renewal :  - The agreement must contain the time period with which the contract will be renewed along with the process of renewal.
4. Joint operations : - There are specific area where both the parties can collaboratively conduct the business
5. Advertisement and promotion : -  Franchisors should give guidelines for any promotion made by franchise including frequency of the advertisement. Advertisement  done by franchisors benefits franchisees as it helps in free promotion for their business.

Parties to Franchise Agreements

Franchisor : -

The party that owns the right of intellectual properties like trademark and grants such rights to the parties who fulfil the criteria given by the franchisor

Franchisee : -

The party that on payment of fees specified in the franchise agreement can use the intellectual property and use the guidance of franchisor to run the business and get benefitted from pre-existing popularity.

Guarantor : -

The party which is responsible for franchisee running the business as per the guidance given by franchisor. If also ensures timely payment is made to the franchisor and franchisee does any act which will hamper the image of franchise.

Lender : -

Lender comes into picture only when the franchisee borrows money for his franchise and to establish the business or run the business perfectly.

Subfranchisor : -

Franchisor for running the business outside their country may appoint a subfranchisor who will provide a licence for the franchisee in that country which has got the permit.

Initiate your Franchise  application with SeedUp.

1. Free Consultation: Our experts will provide you a 15 mins free consultation on the regulatory aspects and case to case basis consultation depending upon the business conditions of the enterprise.
2. Price: We provide the best price in this perfect competitive market across India along with enriching client experience.
3. Documents Collection: A complete list of documents required to complete the task shall be provided by us at once to eliminate the hassle for documents.
4. Documents Preparation: The drafting and reply to be made to opposite party shall be made by us which is best among the industry
5. End to End Support: We provide end to end support to our client’s right form start of the project till the completion of the task.
6. To know more please click here to consult our experts 

Some Well Known Franchise Opportunity in India 

1. Amul ice cream :- Amul is a well renowned dairy brand in India. Amul has extended franchise opportunities across India, encompassing various dairy products and retail outlets.

2. KIDZEE :- One of the most famous school franchises in India is kidzee. Kidzee is spread all over India having spread over 700 cities in India, making it a popular school franchise.

3. Paragon :- Paragon is well known for its footwear industry for casual as well as party wear. Getting into the footwear business Paragon is one of the best choices. It provides reputation, profitability, stability and growth.

4. Patanjali:- Baba Ramdev and Acharya Balkrishna founded this company. It has established itself as a trusted and popular Indian Brand among our older generation.

5. Momomia :- Monomia is one of the low cost franchise in India, it offers delicious steamed momos .    

6. Cafe Coffee Day :- Cafe coffee day is a popular coffee brand in India, it is famous for its high quality coffee in India along with food and beverages.

7. Big Bazar :- One of the well known franchises in the retail area is big bazar it provides having items under one roof so it attract many customers.