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.
Wanna know the basics of what is a franchise agreement?
You could easily download a franchise agreement sample or a 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?
The franchise agreement is ‘compulsorily’ required, to offer your franchise in India. Here is how you can go about creating your franchise agreement India draft from the experts at Sparkleminds, as we have done this for 500+ clients in the last 20+ years.
How To Prepare A Franchise Agreement And When?
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 a 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 franchisees. They feel that these franchise disclosure documents are sufficient to get started and a simple franchise terms and conditions agreement drafted by any lawyer is sufficient. They recruit a few franchises quickly as their business or brand is attractive. Hence, they have serious inquiries, 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 another support system at the initial stage, with the assistance from experts. Franchising is like that tip of the iceberg, 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.
Franchise Model Requirements
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. The creation of the right Franchise Agreement Format happens when you undergo this exercise properly, first.
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 specialized 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 a similar business. Your business is unique. Do not go fishing for a franchise contract sample or a franchise agreement sample in India while exploring the different types of the franchise agreement that could be suitable for your business or for that one franchising agreement sample that is closest to your industry or sector. 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.”
Prohibitive clauses generally form an integral part of franchising agreements. This may not constitute a 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 advise 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. All the rights are mentioned to justify the Franchisees’ interest along with the employee well-being and the franchisor’s business. Finally, it must aid the expansion they seek, without compromising on any legality.
Hence it is extremely critical to have a franchise agreement India that helps you achieve the growth that you are seeking across different regions. We have seen that this becomes a bottleneck for franchise marketing teams. In addition, when not done correctly, the franchises do not pay the desired royalties and fees.
How does a franchise steal or replicate a franchisor’s business so easily?
The franchise is not at fault. If you are the franchisor, then you are. You have not protected the business adequately, and have permitted the franchise to take advantage.
Call us now to protect your business and to help you create the right legal framework and documentation for your business.