Legal agreement between franchisor and franchisee defining brand usage rights, fees, territory, and operational standards.
Civil court or Arbitral Tribunal where franchise territory is located. CCI for competition issues.
3 years from breach — Limitation Act 1963. Trademark infringement — 3 years from discovery.
This coverage is provided by a practicing advocate. Specific sections cited depend on the facts you provide during drafting.
A Franchise Agreement is a contract between a franchisor (brand owner) and a franchisee under which the franchisor grants the franchisee the right to operate a business using the franchisor's brand name, business model, systems, and support, in exchange for a franchise fee and ongoing royalties. The franchisee operates independently but must adhere to the franchisor's standards and operations manual.
Use a Franchise Agreement when: you are a brand owner wanting to expand through franchising, or you are investing in a franchise business. The agreement defines territory rights, franchise fees, royalties, training obligations, use of brand and IP, quality standards, renewal and termination rights, and the consequences of brand violations.
India does not have a dedicated Franchise Act. Franchise Agreements are governed by the Indian Contract Act, 1872 (general enforceability), the Trade Marks Act, 1999 (brand/trademark licence), the Copyright Act, 1957 (use of creative works), the Competition Act, 2002 (restrictions on franchisee's suppliers/prices — must not restrict competition), FEMA, 1999 (for international franchise fee remittances), and the Consumer Protection Act, 2019 (franchisee's obligations to end consumers).
Without a Franchise Agreement, the relationship is not protected — the franchisee can copy the brand model without paying royalties; the franchisor cannot control quality standards; territorial exclusivity is unenforceable. Both parties are exposed to significant commercial and legal risk.
A territory clause grants the franchisee an exclusive or non-exclusive right to operate the franchise within a defined geographic area. Exclusive territory means no other franchisee or the franchisor itself will operate the same concept in that area — highly valuable and typically more expensive.
Initial franchise fee (one-time payment for the right to use the brand), ongoing royalty (typically 3–10% of monthly/annual revenue), marketing fund contribution (1–3% for national marketing), and technology/software fees. The fee structure varies significantly by industry and brand.
Only if the Franchise Agreement allows it. Typically, the franchisee must obtain the franchisor's consent (not to be unreasonably withheld), the buyer must meet the franchisor's qualification criteria, and the franchisor may have a right of first refusal to buy the franchise back.
Franchisor obligations typically include: providing training (initial and ongoing), an operations manual, use of trademarks and IP, national marketing support, product/service supply chain, and ongoing technical assistance. These should be clearly defined and are often the basis for franchisee disputes.
Termination grounds typically include: non-payment of fees, failure to meet quality standards, unauthorised use of brand, breach of confidentiality, insolvency of franchisee, non-compliance with operations manual, or criminal conviction of the franchisee. The termination process (notice, cure period) should be clearly defined.
On termination, the franchisee typically must: stop using the brand and marks, return operations manual, return unsold inventory (at agreed price), and cease operating the franchise model. The franchisee loses the right to operate but is not typically entitled to compensation for their investment (unless wrongfully terminated).
The agreement should specify renewal terms — typically the franchisee has a right to renew for additional terms if performance criteria are met, there are no material breaches, and the franchisee signs the then-current form of the franchise agreement (which may have updated terms).
The trademark licence embedded in the franchise agreement should ideally be registered as a 'registered user' with the Trade Marks Registry — this protects the quality-control provisions and gives the trademark licence statutory recognition. The franchise agreement itself does not require registration.
Please confirm all of the following before proceeding with your Franchise Agreement document:
Please confirm all eligibility conditions above to proceed. If you are unsure about any point, you may not be eligible for this type of notice.