Sagar Ruparelia

Sagar RupareliaThe concept of a franchise Business in India has now caught on in full swing with most large brands being represented by franchisees across the country. With the big daddy’s of the business like McDonalds, Pizza Hut and KFC proving the scope and potential of the franchise phenomenon, desi brands are now following suit and growing from strength to strength in both quality and brand image.

A franchise business is a commercial venture operating under the strength of a highly established brand or product or company. In earlier days, conventional franchising was the permission granted by a large corporation to sell its products in the market and to undertake all dealings in relation to the product. However this did not include operating under the company banner.

Today Franchising is seen from broader perspective and has expanded to the point of a licensee operating totally as a representation of its parent, in this case the franchisor company. The present day franchisee license enables a start up or a businessman to establish a company under the same name with total rights to brand logo, brand entity and trademark. Thus a franchisee carries the weight of an established heavyweight brand.

The Model of a Franchise Business

Franchising is a license agreement to operate under a brand name. The brand owner is the franchisor who grants the license to the user of the brand, termed as the franchisee. The agreement between both parties binds each other to various commitments and rules as termed in the agreement. In a typical franchise agreement the benefits and commitment are as follows: The franchisee will obtain the permission to operate under the trademark of the franchisor. He will be allowed full use of the logo and brand name of the franchise business or product. Thus a franchisee acquires all of the characteristics of a franchisor brand with a well established modus operandi in place. A franchisee gets ample support to work towards early success.


Franchise Business Benefits

  • Leverage existing promotional, marketing and advertising activities; no need to separate investment
  • Total Brand support
  • Training on sales, marketing and operation
  • Design and supply of products and materials
  • Established infrastructure
  • Trademark and logo of a reputed brand
  • All privileges related to the brand

In return for the complete support and use of a brand, the franchisor will retain a license fee as determined by the nature of the business. A franchisor fee can be a onetime flat payment or it can amount to a start up fee with additional fees calculated annually or bi monthly. In certain cases a franchisee may also have to share a percentage of the profits with the franchisor. Franchisee fee vary from brand to brand. The bigger the brand the more the demand for continued brand support.

A Franchisee Is an Individual Entity In Terms Of Business

A franchisee may be bound to a franchisor agreement that is effected by a license, but as a business, a franchisee is regarded as a separate legal entity. It requires registration and license from a government authority to operate a business. Thus the physical nature of your business does not belong to the franchisor and you are the sole owner of your business.

How to Register and Start a Franchisee Business in India

Till now India does not have an effective framework of laws governing franchising in India. Thus franchisees can be governed under any of the various laws pertaining to business in India such as FEMA and the Companies Act. In terms of business, however a franchisee will have to abide by business laws in India and requires following licenses:

  • Trade license as granted by the municipal corporation
  • Registration of trademark under the Trademark Act
  • Business license
  • Police and fire license depending upon the nature and dimensions of the property
  • Entertainment, liquor and food license in case of an eatery or chain restaurant
  • Tax registration for Sales Tax, Vat etc
  • Registration under Ministry of Corporate Affairs (MCA) for international franchising

How to Obtain Franchising Opportunities

Franchising opportunities are abundant in India. Besides larger multinational brands, one has a choice of Indian brands in all sectors of industry. Some well known players are trending in food and entertainment, services, education, manufacture & production and retailing. Ample opportunities can be sourced from online directories that feature international and national franchise opportunities in India. Today there is a scope in the food and hospitality industry as well as courier services. The retail food sector provides huge potential for small scale businessmen to deal in packaged products like Venkys chicken. For large volumes of business one can also explore opportunities in big names such as Café Coffee day and Barista.

(Author runs runs MyEfilings, which provides online professional services like Company Registration, Tax Registrations, and other Secretarial, Legal and Accounting services and can be reached at 

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0 responses to “How a Franchise Business Works”

  1. Sunitha says:

    Good Info 🙂

  2. N.UDAYASIMHA says:

    You have not touched upon accounting aspects.
    Franchiser collects deposits from Franchisee and use the same funds for
    furnishing the show room.He shows such expenditure as his assets.It being
    a.Should he take permission for collecting deposits(NBFC rules??)
    b.Franchiser’s Balance Sheet will show outside liabilities, which may
    affect his borrowing powers.
    c.There are no accounting standards prescribed.
    d.Should Franchiser net the assets with deposits?
    Reply solicited.

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