Comprehensive Guide For Franchise Business Registration

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Comprehensive Guide For Franchise Business Registration

Franchise businesses are often a preferred choice among entrepreneurs who want to benefit from the established brand reputation and credibility of an existing company. By investing in a franchise, they can minimize many of the risks generally associated with starting a business from the very scratch. 

If you are interested in franchise business registration in India, then check out this blog post where we will discuss all the essential details about it!

What is Franchise Business?

A franchise business is a collaborative business model in which an established company’s owner (i.e., the franchisor) grants a license to an independent operator (i.e., the franchisee), under a franchise agreement that allows the franchisee to run a business using the franchisor's name, brand and business model. 

Franchise businesses are quite popular across the world. Many entities like Burger King, Jumboking, Wow Momo, Mother Dairy and Amul offer franchise opportunities to entrepreneurs.

Main Components of Franchise Business

The main components of a franchise business are as follows:-

• Franchisor:- The franchisor means the original business owner who developed and owns the brand and business model. They have the authority to grant the right to franchisee for operating a business under their company’s brand (subject to certain terms and conditions as outlined under the franchise agreement). 

• Franchisee:- The franchisee means the individual who, under the franchise agreement, purchases a license from franchisor to operate a business under their brand.

• Franchise Agreement:- The franchise agreement meaning can be explained as a document that clearly specifies all the terms and conditions regarding franchisee's operation of business under the franchisor's brand. In the agreement, all the necessary provisions like intellectual property rights, indemnification clauses, franchise disclosure documents and non-compete agreements must be included. This agreement is legally binding in nature and both the parties (franchisor and franchisee) must adhere to it. 

Major Types of Franchise Models

The major types of franchise models based on business structure are described below:-

• Business Format Franchise:- This franchise model is perhaps the most common one. In this model, the franchisee receives an entire business system from the franchisor, including the brand, operating procedures and marketing support.

• Conversion Franchise:- In this, an existing independent business converts into a franchise to reap the benefits of franchisor’s brand recognition, proven operational strategies and support system.

• Product Distribution Franchise:- In this model of franchising, the franchisee sells products from the franchisor. For instance, in the beverage industry, franchisees sell soft beverages manufactured by franchisors. However, in this model, the franchisor provides brand name and usually limited support for the business system itself.

• Investment Franchise:- In this type of franchise model, investors provide the capital and manage the business through a hired team.

• Manufacturing Franchise:- In this, the franchisor licenses franchisee to manufacture as well as market the franchisor’s products under the franchisor’s brand name.

Documents Required for Franchise Registration

Below, we have provided you with a list of some essential documents required for franchise registration in India:-

• Business registration documents, such as certificate of incorporation, partnership deed or sole proprietorship proof (like PAN card and Aadhaar card).

• Intellectual property documents like trademark registration certificate or trademark application’s proof.

• Well-drafted Franchise agreement (signed and notarized copy).

• Franchise disclosure agreement.

• Financial documents like audit reports and annual business turnover details.

• Government-issued IDs like PAN and Aadhaar.

• Passport-sized photographs of the franchisee as well as the franchisor.

Franchise Business Registration Process

To register a franchise business in India, you need to follow the steps stated below:

Step 1: First and foremost, you need to create a franchise business plan. To do this, you must define your business model and highlight all the operational protocols. Additionally, you need to outline revenue sharing model and royalty structure and also specify terms and conditions related to franchise expansion.

Step 2: Once you have a business plan in place, you must consider securing your brand name, logo, symbol and other intellectual property. For this, you must obtain trademark registration by filing an application with Trademark Registry. Upon receiving approval from the Registry, you will be able to protect your brand from infringement.

Step 3: You must draft a franchise agreement as per all the legal requirements. In the agreement, you must include key details like territorial rights, fees and royalties, training and support and agreement termination clause. It is advised to hire a legal consultant for drafting the agreement. 

Step 4: A franchise disclosure document must also be created. This document must mention disclosures regarding the franchisor’s business, obligations and finances. 

Step 5: The franchisee business must be registered as a business entity like a limited liability partnership, private limited company or sole proprietorship. Additionally, other key licenses as well as registrations like FSSAI license (required for food franchises) and GST registration must also be obtained.

Step 6: All the state-specific registration requirements must be fulfilled within the prescribed timelines. Also, the applicable stamp duty must be paid and the agreements must be notarized in a timely manner.

Completing all the above-mentioned essential steps will help you set up a successful franchise business!

Conclusion

A franchise business is one of the most effective ways to start a business. Entrepreneurs often prefer this type of business due to lower risks and immediate brand recognition. Need assistance in franchise business registration? Connect with our consultants at Registrationwala as soon as possible!

Frequently Asked Questions (FAQs)

Q1. What is the cost of franchise business registration in India?

A. The exact cost depends on various factors like the brand's reputation, industry, location, business model, franchise fees, etc.

Q2. What is a franchise agreement?

A. Franchise agreement is an agreement between the franchisor and the franchisee. It is a legally binding agreement that outlines all the terms and conditions for operating the franchise business. 

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