Skip to Content

Franchise Agreement


Submit

A Franchise Agreement is a formal, legally binding contract established between two parties: the franchisor and the franchisee. The franchisor is the entity that owns and has developed a specific business brand, operational system, or product. On the other hand, the franchisee is the individual or company that receives permission to operate under the franchisor’s established brand. This agreement outlines the terms and conditions under which the franchisee can use the franchisor’s trademark, brand name, and proprietary business model. In return, the franchisee agrees to pay certain fees or royalties, which could be one-time payments, ongoing royalties, or a combination of both. The Franchise Agreement typically includes detailed provisions about the operational procedures, quality control standards, and marketing guidelines that the franchisee must adhere to. This structured relationship ensures consistency across all franchise locations and helps maintain the integrity of the brand while providing the franchisee with a proven business model and support from the franchisor.


·        Established Brand Recognition: Franchisees benefit from operating under a well-known brand.

·        Proven Business Model: The franchisor provides a tested system for operating the business, reducing the risks for the franchisee.

·        Training and Support: Franchisees receive comprehensive training and ongoing support.

·        Marketing and Advertising: Franchisees leverage the franchisor's larger marketing campaigns and brand presence.

The Finance Act, 1999, introduced a definition of a franchise agreement in India. This definition has been incorporated into the Income Tax Act, 1961, and other relevant laws. According to the Finance Act, 1999, a franchise agreement is an agreement by which the franchisee is granted the right to:

·        Sell or manufacture goods

·        Provide services

·        Undertake any process identified with the franchisor

Whether or not a trademark, service mark, trade name, logo, or any such symbol is involved.

The Finance Act, 1999, also provides that any payment made by a resident of India to a non-resident in connection with a franchise agreement shall be subject to the provisions of the Foreign Exchange Management Act, 1999 (FEMA).

Here are some of the key laws that govern franchise agreements in India:

·        The Indian Contract Act, 1872: It lays down the general principles of contract law in India..

·        The Competition Act, 2002: This Act prohibits anti-competitive practices in the franchising industry.

·        The Foreign Exchange Management Act, 1999: This Act governs the transfer of funds and other financial transactions related to international franchising.

·        The Indian Trademark Act, 1999: This Act provides legal protection for franchisors' trademarks. For example, it prevents franchisees from using the franchisor's trademarks without permission.

·        The Copyright Act, 1957: This Act provides legal protection for franchisors' copyright works.

·        The Income Tax Act, 1961: This Act governs the taxation of income from franchise agreements.

Explore Our Latest Blogs

Your Dynamic Snippet will be displayed here... This message is displayed because you did not provided both a filter and a template to use.

1000+ satisfied clients who trust us to enhance their financial wealth through expert tax planning and optimization.

 Join and elevate your tax strategy today.

Contact us