Franchise Agreement

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.

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.

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.

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.

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

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.