FRANCHISING LAW IN INDIA
Franchising is a process by which an entity expands its business by allowing other existing entities or would be entrepreneurs (franchisees) the right to use the franchisor’s proven business model in another location for a definite period of time in exchange of initial and ongoing fees.
Is there a Law for Franchising in India?
Currently there is no particularly dedicated legislature to regulate Franchising in India.
Benefits of Franchising in India
There are many benefits of Franchising in India. Some of the benefits are:
- The financial investment requirement for Franchising in India is low, as there are many businesses in the Indian market who would invest money in potential Franchise.
- The geographical size and abundantly diverse business minds in India is ideal for a Franchise model.
- The strong, powerful and Franchise friendly business environment are some other positives.
Who can Franchise in India?
Any business entity or an individual can Franchise in India. Franchising is a strategy for business expansion. Even a foreign company can Franchise in India. Franchising is one of the most preferred routes that a foreign entity chooses to expand or establish itself in India.
How can a Foreign Company Franchise in India?
Following are essentially some of the ways in which a franchise system may be expanded overseas:
The franchisor, either from its headquarters or from foreign branch operation, grants individual franchises to franchisees in the target country
The franchisor enters into a master franchise agreement.
The franchisor establishes a subsidiary in the target country, and that subsidiary acts as the franchisor.
A joint venture is established between the franchisor and a third party who is knowledgeable about the target country. The joint venture will acts as the franchisor in the target country.
Precautions that are needed to be taken before Franchising in India
Before Franchising in India, it is advisable for the businesses to do some preparation. Some of the precautions are:
A thorough market research on the goods and service that are to be franchised is necessary.
There are several Franchising models that Franchises can adopt, therefore choosing the right and most suitable entry strategy is important.
A detailed study should be done on the Franchise/License fees that has to be paid. Sometime the Reserve Bank of India can regulate the fees on a case to case basis.
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