What is a Franchise Business? And Franchise Business Registration in India

Introduction

India is the world’s third-largest consumer of goods and services. In India, launching a franchise is a tried-and-true method of launching a business. Some of the most popular industries for franchise startups are transportation, beauty, fast food, education, wellness, mail delivery, clothing, and health care. One of the options that brands have embraced for expansion in India is the franchise business. One can choose from a variety of inexpensive franchise options in India. This article focuses on Franchise Business Registration in India, “What is a Franchise Business?”, and Documents required for Franchise Business registration are mentioned.

What is a Franchise Business?

It is one of the main ways that foreign companies and brands have grown stronger in the Indian market. A franchisor (franchise brand) is involved in the process and offers the franchisee (owner of the franchise outlet) conceptual, structural, legal, and training support in exchange for an upfront start-up fee and royalty payments.

Both the franchisor and the franchisee earn from owning and operating a franchise. The franchisor can further extend the business in untapped markets, thereby boosting the market share and revenues, after the franchisee has access to the brand’s devoted customer base, legal counsel, creative support, and training support. The most valuable and practical type of business opportunity is franchising.

Legal framework of Franchise Business registration in India

• Franchise Registration

Before entering into an agreement for this purpose, the franchisor is not required by Indian law to be registered with any professional or regulatory authority. On the other hand, the Indian Trademark Act makes it easier to record a Trademark’s registered user.

• Agreement for Franchise Business in India

A franchise is founded on a franchise agreement, with the exception of the obviously necessary elements of financing, infrastructure, and other necessities. The sort of agreement used for this purpose varies depending on a number of variables, including the format, control, type of franchisor, and others.

Franchise agreements must adhere to the Indian Contract Act of 1872’s provisions. Franchisees may impose disclosure requirements in the contract, subject to this provision. In this situation, the franchisor’s misrepresentation makes it easier for the franchisee to file a civil lawsuit for damages as well as a criminal complaint for false statements of fact and criminal breach of trust.

• Discloser Standards

According to disclosure regulations, which certain nations follow, franchisors must give franchisees the necessary information before they sign any contracts. By specifically encapsulating precise disclosure requirements in the aforementioned franchise agreement, the application of pre-disclosure responsibilities in India is determined based on said franchise agreement. The Contract Act, 1857’s “consensus ad idem” clauses, which apply in this case, maybe noted by the readers.

The franchise agreement is also used to establish if this requirement applies to sub-franchisees. It is important to emphasize that the proposed contractual connections are subject to common law norms in this case.

No particular formats or obligations exist in connection with continued disclosures in the absence of any disclosure requirements.

Setting up a Franchise Business in India

• Niche Recognition for the Business

One of the key requirements for any budding entrepreneur aiming to enter the business world is niche identification. When you finally decide to launch your franchise, be sure to pick a market that will be beneficial to you in terms of sustainability and revenue production.

To make an informed choice, it is advised that you do a thorough analysis of the market and city-specific information. Remember that the popular niches are more susceptible to ferocious competition.

• Taking Care of the Legalities

Once you have chosen your specialization, be sure to obtain legal authorization from the Ministry of Corporate Affairs as soon as you sign the franchise agreement with the relevant business. If the franchise is outside of Indian Territory, be careful to choose a reputable company that can help you deal with any problems early on.

Once you have fulfilled the aforementioned conditions, officially assume possession. It is advised to secure a reliable witness while legal proceedings are ongoing to prevent future legal disputes with the franchisor.

• Essential Licensing for Business

The most important factor for starting a franchise in India is now presented. To work in harmony with the law, you would require a separate license and registration. For instance, if your company has a chain of restaurants, you must obtain an FSSAI License without exception.

• Tax Liabilities for a Business

Every business owner has to understand the tax repercussions. We therefore ask that you emphasize the same and comprehend the various tax regimes that are applicable to your company.

India has a wide variety of taxes, from customs duties to the GST, therefore it is crucial to understand the layers and be prepared appropriately. You can determine the best approach to avoid paying a lot in taxes at this time.

• Human Resource

Additionally, essential to the franchise’s business operation in India are its human resources. Therefore, you must be aware of how many employees will be required to support the operation. In order for the hiring process to go smoothly, you, the owner, must also become familiar with the responsibilities of the staff.

Conclusion

Briefly stated, a franchise is a solid business plan that lessens the franchisee’s responsibility to deal with all losses that are more common in other business models. Franchise is becoming a popular growth-oriented business model in India for startups and entrepreneurs that do not want to take significant risks up front.

The franchise business model is profitable in India because to the little investment and few compliances. A franchise consultant should always be present when drafting a franchise agreement because it is a professional task.