StartupGrants India

Franchise Agreement

License your brand and business system to franchisees with a clear, enforceable agreement

What is Franchise Agreement?

A Franchise Agreement governs the right of a franchisee to operate under the franchisor's brand, using the franchisor's systems and support. We draft agreements that protect your brand, define territory and fees, and include clear standards and termination rights.

India does not have a standalone franchise law — franchise relationships are governed by the Indian Contract Act, 1872, Competition Act, 2002, Consumer Protection Act, 2019, and IP law. The absence of a specific statute makes a well-drafted Franchise Agreement even more important: it is the primary legal document defining the relationship. Key provisions include the territory granted, franchise fees and royalties, training and support obligations, quality standards and audit rights, sub-franchising rights, IP licensing (with strict brand-usage guidelines), termination and renewal conditions, and post-term non-compete restrictions. The franchisee receives the right to operate under the franchisor's brand, system, and support in exchange for payment of fees and adherence to standards. The franchisor retains ownership of the brand and system and can terminate for breach of standards. The agreement must be precise on both sides — a poorly drafted franchise agreement is the most common cause of franchise disputes in India.

Who Needs Franchise Agreement?

Any business expanding through franchising — food and beverage, education, retail, healthcare, fitness, professional services — whether you are a franchisor drafting your first agreement or a prospective franchisee reviewing one before signing.

What's Included

  • Exclusive or non-exclusive territory defined precisely to prevent encroachment
  • Franchise fee and ongoing royalty structure clearly set out
  • Brand usage guidelines and quality audit rights protecting the franchisor's IP
  • Training and ongoing support obligations enforceable by both parties
  • Termination and renewal rights balanced for both parties

⚠️ Penalty for Non-Compliance

A franchisor operating without a properly drafted agreement risks brand dilution, unauthorised use of trademarks, and difficulty terminating a poor-performing franchisee.

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How It Works

  1. 1

    Understand the model

    We discuss the franchise structure — territory, fees, support obligations, brand standards — and your existing IP position.

  2. 2

    Draft agreement

    A comprehensive Franchise Agreement is drafted covering all commercial and legal terms, including IP licensing, quality standards, audit rights, and termination.

  3. 3

    Review

    Both franchisor and franchisee review the draft. We advise each party on terms that are unusual or unfavourable.

  4. 4

    Execution

    The agreement is executed by both parties on stamp paper. Trademark licence-related provisions should be aligned with the trademark registration records.

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Documents Required

Items marked Required are mandatory; others are situational.

Business details

  • Business description and franchise modelRequired
  • Territory to be grantedRequired
  • Fee and royalty structureRequired

IP

  • Trademark registration numbers
  • Existing brand usage guidelines
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Fees & Pricing

Fees

Government fee

No government registration required for the agreement itself

Free

Stamp paper

Amount varies by state based on the term and fee value

Varies

Professional fee

Quoted after reviewing the franchise model and territory structure

Varies

* Government fees may vary. GST applicable on professional fees. Final pricing confirmed after review.

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Frequently Asked Questions

Is a Franchise Disclosure Document (FDD) required in India?

India does not currently require a mandatory FDD by statute. However, providing a disclosure document is considered best practice and reduces the risk of a franchisee claiming misrepresentation.

Can a franchise agreement restrict a franchisee from competing after the term ends?

A post-term non-compete is a restraint of trade and may be unenforceable under Section 27 of the Indian Contract Act if it is unreasonably wide. Restrictions during the term are generally enforceable.

Who owns the IP developed by the franchisee using the system?

Improvements or derivative works created by a franchisee using the franchisor's system typically remain or revert to the franchisor under a well-drafted agreement. This must be explicitly stated.

What happens if the franchisee fails to meet quality standards?

The agreement should include a process: written notice of default, a cure period, and termination if the breach is not remedied. An audit-right clause allows the franchisor to inspect and enforce standards proactively.

Can the franchisee sub-franchise to others?

Only if the agreement explicitly permits it. Most first-level franchise agreements prohibit sub-franchising without prior written consent.

What taxes apply to franchise fees?

Franchise fees and royalties are subject to GST (under the supply of services) and, where paid to a foreign franchisor, withholding tax under the Income Tax Act.

Detailed guides for Franchise Agreement

Go deeper on any part of the process.

Process

Step-by-step timeline and what happens at each stage.

Checklist

Every document to keep ready, and what's mandatory vs. optional.

Fees

Transparent breakdown of government and professional fees.

FAQs

Answers to the questions founders ask most often.

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Franchise Agreement

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