According to a recent study produced by global management
consulting company, A.T. Kearney, India is the world's most
attractive retail destination after Russia, even ahead of China.
The retail sector is currently valued at between US$350 billion, of
which only 5% is classified as "organised retail".
Further, there are a large number of shopping malls that have been,
or are in the process of, being developed in and around major
cities. These "pull factors", combined with the fact that
foreign direct investment in certain sectors, such as retail, is
restricted, means that franchising is increasingly being used as a
market entry strategy for international franchisors and
There are now over 800 franchise systems in India including
several Australian franchise systems. These include Gloria
Jean's, Cookie Man, LJ Hooker, Just Cuts and Cartridge World.
Some of the key industry sectors that have embraced the franchising
concept include healthcare, food and beverages, education,
entertainment, fitness clinics and courier services.
The concept of franchising is still evolving in India and there
is no specific franchise law. Although there are no franchise
disclosure or registration requirements, there are a number of laws
that affect the franchisor-franchisee relationship. These include
general contract, intellectual property, taxation, labour,
competition and property laws, and rules regarding payment of
franchise fees. There are also a few traps. For example agreements
need to be carefully drafted to avoid ceilings on the royalty
percentage, and the consent of the Reserve Bank needs to consent to
the giving of any guarantees or financial security by an Indian
company or individual.
If you are considering expanding your network into India or
would like some further information on the legal requirements and
practicalities of franchising in India, please contact us to
request a copy of our "Franchising in India"
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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