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| Franchising |
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Franchising is a form of business arrangement in which one party (called the “Franchisor”) usually licenses his business system, including his trade name, trade mark, copyright, technical know-how, operating manuals, procedures, etc. to another party (called the “Franchisee”), who contributes his skill, capital and/or labour to conduct sale of goods/services, under the Franchisor’s trade name, in a given geographical area. |
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| Under a Franchise arrangement, both the Franchisor and the Franchisee have several advantages to gain. |
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| Advantages for the Franchisor are: |
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Better, wider geographical coverage |
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Limited financial investment and commitment |
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Reduced staff requirement |
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Reduced employee liability |
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No involvement in day-to-day operations of individual units |
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Faster growth by leveraging the skill, capital and labour of the Franchisee |
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Financial and manpower resources provided by Franchisee |
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High level of commitment due to personal involvement of Franchisee |
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Valuable market feedback from different Franchisees |
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Easier and faster international expansion |
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| Advantages for the Franchisee are: |
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Benefit of Franchisor’s knowledge, experience and expertise |
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More sales due to established brand name |
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Reduced risk due to ready market acceptability and customer loyalty |
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Benefit of wide-spread advertising and promotional activities undertaken by the Franchisor |
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Financial and manpower resources provided by Franchisee |
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Support from the Franchisor to choose the product-mix, thereby improving stock turnover and reducing risk of |
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obsolescence |
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Benefit of regular market research conducted by the Franchisor |
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Goodwill and reputation earned by being associated with a well-known brand |
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In India, there is no legislation which specifically deals with or regulates Franchising arrangements. However, the relationship between the Franchisor and the Franchisee is contractual in nature and is, therefore, governed by various laws that affect such contractual relationship. |
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| Some of the laws that usually govern a Franchise arrangement in India are: |
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The Indian Contract Act, 1872 |
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The Trade Marks Act, 1999 |
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Copyright Act, 1957 |
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Consumer Protection Act, 1986 |
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Monopolies & Restrictive Trade Practices Act, 1969 |
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Foreign Exchange Management Act, 1999 |
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Standards of Weights & Measures Act, 1976 |
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Transfer of Property Act, 1882 |
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Information Technology Act, 2000 |
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Insurance Laws |
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Labour Laws |
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Taxation Laws |
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The various provisions contained in the above-mentioned laws have to be kept in mind while drafting an appropriate Franchise Agreement. Besides specifying the monetary consideration to be paid by the Franchisee to the Franchisor, the rights, duties and obligations of each party should also be clearly listed out in the Franchise Agreement. Strict consequences for breach of any of the terms and conditions of the use of the business system of the Franchisor should be provided to deter any malicious profiteering by the Franchisee. |
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We regularly assist and guide our clients through the entire process of establishing, operating and managing a Franchise business by: |
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Devising appropriate Franchising strategy, models, practices and procedures for clients wishing to set up a |
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Franchise network |
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Negotiating, drafting, reviewing and finalizing Master Franchise Agreements |
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Negotiating, drafting, reviewing and finalizing individual Franchise Agreements |
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Handling Franchise-related disputes, which are mainly contractual in nature |
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Advising on all Franchise-related aspects |
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| " Daksh - A Sanskrit word that means competent, proficient, adroit " |
| Developers : OSIRIS |
© 2006 Daksh Associates. All rights reserved. |
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