Preparing your India Franchise Agreement, Perfectly
It is extremely important that you understand the nuances of Indian franchising deeply. There is no specific franchising legislation or franchise law in India. Indian Contract Act 1982, The Trade Mark Act 1999, The Arbitration and Conciliation Act 1996, The Competition Act 2002, Income Tax Act 1961, The Consumer Protection Act 1986, Intellectual Property Laws, Taxation Laws, Indian Labour Laws, Transfer Of Property Act 1882, Foreign Exchange Management Act 1999, The Designs Act 2000, The Patents Act 1970, The Copy Right Act 2013 are considered while creating an effective franchise agreement india.
The implementation of GST in July 2017 has eased some portion of the franchise rules and regulations in India. The ongoing taxation reforms have resulted in a more uniform tax structure. There is greater clarity on payments of royalty, franchise fees and other charges and removal of incidences of duplication of taxation. This was affecting the franchise systems on various counts. All tax payments and statutory filings have become online with strict timelines. These are just a few things that you will have to structure and integrate correctly whilst you are planning to set the franchise terms and conditions agreement. International companies looking to adapt their Master Franchise Agreements in India could look at the above developments positively.
Let us not go into the basics of what is a franchise agreement ?
You could easily download a sample franchise agreement pdf or know about its content at our blog.
Have you begun the preparations to franchise your business ?
Do you have the list of documents required for franchise in India ?
Franchise agreement is ‘compulsorily’ required, to be able to offer your franchise in India. Here is how you can go about this:
How To Prepare A Franchise Agreement?
Over the last two decades, we have built competitive intelligence and ground level understanding. There is a high level of leakage, across layers. We help the franchisor to plug these leakages, at the earliest. With this knowledge and understanding, we protect our clients and make franchising work for them. We have helped our clients with wide range of services that cover the entire gamut of franchising. Most importantly, we know what you must not do and hence ensure that we safeguard you from costly mistakes.
Several Business owners in a bid to start franchising quickly, provide P&L sheets, ROI Plans and a basic agreement (done by any lawyer) to prospective franchises. They recruit a few franchises quickly as their business or brand is attractive. They have serious enquiries, who feel that they could replicate this success, in their locations. This is where things begin to fail. It is important to create the right franchise strategy, documentation, training programs and other support system at the initial stage, with the assistance from experts. Franchising is like that tip of the ice-berg, which to most people externally seems beautiful. Internally, you need to have a very strong base, to be able to support the majestic tip on the top.
At Sparkleminds, we believe strongly in creating your franchise model first. Once your franchise program is structured correctly, you go about creating a strong legal document. It is then integrated with important terms and conditions, rights and obligations, customer service standards, provisions, terminations, etc. We discuss the roles and responsibilities on both sides and help the franchisor understand the limitations and advantages of working with franchises.
Registration of Franchise Agreement India
Most businesses cannot be franchised in their original forms and have to be reconfigured at an early stage. They must blend into franchising and must have the potential to scale up quickly. Doing the entire business model with an experienced franchise consultant at this stage is an absolute compulsion to help you navigate the pitfalls of franchising, early. Once you have done this, you go about hiring specialised franchise lawyers in India, not before that. Franchise agreement in India is printed on legal stamp papers. They are bought from the respective state registrar office. Both parties sign the agreement in the presence of a witness.
It is advisable not to replicate your competitor or follow similar business. Your business is unique. The draft agreement template should factor your strengths, weakness, goals and franchise strategy. Do not, ever copy, any franchise agreement format, as that is the surest way to commit 100’s of mistakes at your end. You are unique and hence must not clone anybody’s model. We have seen blunders happening through this cloning and usually term these as “franchise genetic failures.”
Franchise Agreement does not protect alone, it could also be a good marketing tool.
Prohibitive clauses generally form an integral part of franchising agreements . This may not constitute fair business practice. Franchisors at times go overboard to safeguard their business against perceived malpractices. Franchisees find their investments or efforts at high risk . Having interacted with both sides, we always advice the franchisors to ensure that they have an agreement which compliments their business growth. It also must be fair to both sides, to whatever degree it is possible. Exclusive and Non-exclusive rights are inserted to justify the franchisees interest, the employee well-being and the franchisors business. Finally, it must aid the expansion they seek, without compromising on any legality.
Hence it is extremely critical to have a franchise agreement that helps you achieve the growth that you are seeking. We have seen that this becomes a bottle neck for franchise marketing teams. In addition, when not done correctly, the franchises do not pay the desired royalties and fees.
How does a franchisee steal or replicate a franchisors business so easily?
The franchisee is not at fault. If you are the franchisor, then you are. You have not protected the business adequately, and have permitted the franchisee to take advantage.
Call us now to protect your business and to help you create the right legal framework and documentation for your business.