TOP TEN (10) LEGAL TIPS FOR SETTING UP FRANCHISE BUSINESS IN INDIA.

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  • Finding the right Industry and right Franchisor- it is the first and the most major step for a Franchisor, in which industry can he invest in and open a franchise. It is advisable to have a thorough research of the desired industry.
  • Valid Agreement- Entering into a valid Franchise Agreement as per the Indian Contract Act, 1872 and Specific Relief Act, 1963.
  • Applying for business licenses- Business licenses are issued by a government authority that allows startups to operate a particular business within its jurisdiction
  • Proper management- Success of a franchise depends largely upon the way it is carried out, thus it is important to have proper management of the franchise
  • To have anti-competitive clause in the Franchise Agreement- This clause prohibits the franchisee from operating a business that competes with the franchised business. Significantly, it limits the franchisee’s ability to plan for the future, after the franchise’s term ends.
  • Dispute handling- The franchisor must ask the franchisee as to how it deals with the disputes and disagreements. Whether they have created an amicable approach towards it or not, it must be pre-determined before setting up the franchise business.
  • Safeguarding the franchise from bankruptcy- The contract between franchisor and franchisee must take Insolvency and Bankruptcy Code, 2016 into consideration; wherein the contract clearly stipulates that a franchisor can terminate an agreement with an individual outlet if they file or threaten to file for bankruptcy.
  • Legislation Compliance- Adherence to applicable laws such as the Foreign Exchange Management Act, 1999, Intellectual Property Laws, Competition Act, 2000, Consumer Protection Act, 1986, and Labour Laws.
  • Compliance management of accounts and taxes- It is extremely critical for sustainable growth of any business to have thorough legal, secretarial, accounting and taxation compliances.
  • Termination- Termination of the franchise agreement clause must also be inserted in the franchise agreement in order to avoid future ambiguity or disputes.

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