Franchising | Licensing | Agency

Franchise legal advice | Legal issues in franchising in India | Lawyers for franchise in India

Franchising refers to the business model whereby one entity (the franchisor) grants an independent operator(s) the right to use the franchisors business methods and practices and can include the right to distribute products manufactured by the franchisor, use the franchisors trade marks and obtain training and other support such as international and national advertising. Such agreements are often for a long period with early termination by either party usually incurring serious penalties. The franchise model has become a popular method for overseas companies seeking to enter the Indian market whilst retaining control over their brand. It is also popular with Indian businesses seeking to expand domestically and regionally.

Domestic, international businesses and brands looking to enter and expand into the Indian retail market, and potential franchisees looking to acquire a franchise interest seek franchise legal advice on legal issues concerning franchising in India. Agency and franchising lawyers at Legaleye Associates have vast experience acting as franchise counsel, franchise lawyers, advising on franchise law and providing regular franchise related legal advice and assistance throughout India. Our agency and franchising lawyers provide franchise advice, opportunity reviews, due diligence and exhaustive franchise dispute assistance.

We also help companies expand their businesses through franchising. We also draft franchise agreements and non-disclosure documents. Our franchising lawyers in Mumbai provide ongoing franchise compliance counselling. Legal advice should be taken on the specific terms and conditions to ensure the franchisor and/ or franchisee are aware of their rights and potential risks and liabilities under a franchise contract.

DOES INDIA HAVE ANY SPECIFIC LAW FOR FRANCHISE BUSINESS AND WHAT ARE THE RULES OF FRANCHISE IN INDIA?

No, although there is no one specific franchising law in the India, (unlike in other jurisdictions), a range of civil and commercial laws apply depending on the terms of the contract. There are multiple laws which can apply to franchising relationships and these include law relating to contracts, agency, distribution, leasing, assignment, securities, financial investments, intellectual and industrial property, competition, companies, immovable and movable properties, labour, foreign investment, insurance, income tax, banking, import-export, technology transfer, and other legislations as may be applicable to different franchising arrangements.

WHAT ARE THE LEGAL ASPECTS OF FRANCHISING?

There is no one specific franchise law in the India. The concept of franchising falls within the ambit of commercial and agency laws which do not specifically differentiate between franchise, agency or distribution agreements.

The Agency Law tends to favour agents/franchisees rather than franchisors, and does it is important to structure your agreement well.

In cases of international franchise arrangements, the FEMA and RBI regulate the terms of payment under Franchise Agreements (such as royalty fees, franchise fees, management fees, development fees, administrative fees, and technical fees) where one party is a non-Indian entity including the amount to be paid and procedure for remittance of these payments outside India.

In cases of international franchise arrangements also if the franchise agreement stipulates payment of royalties or lump sum fees beyond the specified limits, the approval of the Foreign Investment Promotion Board (FIPB) may be required.

There is a prescribed formula for calculation of royalties for repatriation of funds by a foreign company outside India.

There are a number of methods that can be used in order to attempt to mitigate the effects of the Indian agency laws from applying to a franchise relationship depending on the specific terms and conditions of the franchise agreement being negotiated. Our franchise lawyers in India provide complete legal services and solutions for franchisors and franchisees. We assist domestic and international clients in choosing the right franchise model, advise on identifying the right teams and tie-ups. Our lawyers conduct due diligence, draft franchise manuals and also make necessary representations to the Ministry of Commerce if required. Our franchise lawyers endeavour to render practical and business friendly solutions to clients.