Transcript Franchising and Licensing in India

FRANCHISING & LICENSING
IN INDIA
LexCounsel, Law Offices
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Different Routes for entering the
Indian market:
 Wholly-owned subsidiary company; or
 Joint venture company; or
 Branch Office; or
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Franchise Business model.
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GENERAL OVERVIEW OF FRANCHISING
IN INDIA
Contributing Factors
Wave in India:
for
Franchising
- Huge consumer base of over a billion
people;
- Booming economy with flourishing urban &
middle class consumers;
- Brand
awareness
consciousness;
and
quality
- Abundance of human resources;
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- Entrepreneurial skills.
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Fact Assessment:
- Impressive growth of around 30-35% over the
last 4-5 years;
- An estimated annual turnover of US$ 4
billion;
- there are close to over 70,000 franchisee in
the Indian market;
- Contributes approximately 9% of the GDP of
the country;
- It is the second fastest growing industry in
India; and
- It has been successful in approximately 35
different sectors.
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What is Franchising:
FRANCHISE
Business Model
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Name, Get-up,
Image
&
Business Identity
Confidential
Know-How
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-
The Franchisor licenses the right to use
his business format for a limited period of
time.
-
Franchisee does not gain any interest in
the ownership of the format or the
associated marks.
Brand
Establishment
Quality Control
Franchise Business
Model
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Services
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- No difference between the outlets of the
Franchisor and the Franchisee, as regards:
 decor of the outlets;
 selection of goods or services; and
 staff uniforms.
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ADVANTAGES OF FRANCHISE TO
FRANCHISOR
 Gains Franchisee’s
territory;
knowledge
of
the
 Access to local sales channel and marketing
expertise;
 Reduces investment;

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Minimum government approvals;
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 Freedom from recruitment of local workforce; and
 Accelerated network growth and profitability.
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ADVANTAGES OF FRANCHISE TO
FRANCHISEE
 Opportunity for the young entrepreneurs to
associate with a known and credible brand;
 Opportunity to develop the business on
assured business model and become
successful; and
 Gains from the Franchisor the entire
business concept with network of technical,
managerial and training support.
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MODELS OF FRANCHISING
There are three distinct models of franchising:
1. Product Distribution Franchising involving
a co-operation for the distribution of
goods, mostly in retail business;
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2. Trade
Name
Franchising
where
the
Franchisee uses the trademark/business
name of the Franchisor in order to sell its own
product or services;
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3. Business
Format
Franchising
a
combination of the other two types of
franchising using the Franchisor’s
trademark/business name in order to
distribute the Franchisor’s goods or
services.
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LEGAL FRAMEWORK
No consolidated franchise specific legislation.
Important laws which affect the franchise
arrangement in India are:
 The Indian Contract Act, 1872;
 The Competition Act, 2002;
 The Trade Marks Act, 1999;
 The Copyright Act, 1957;
 The Consumer Protection Act, 1986;
 Labour and Taxation Laws; and
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 The Foreign Exchange Management Act,
1999.
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SIGNIFICANT CONTRACTUAL
AND LEGAL ISSUES
 Enforcement of obligations
compete covenant;
and
non-
 Payment Terms & Taxes;
 Duration, Renewal & Termination of the
Franchise Agreements;
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 Post Termination Issues;
 Governing Laws and Implementation of Laws;
 Agency Issues; and
 Consumer Protection & Anti-Competition.
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LICENSING & USE OF
INTELLECTUAL PROPERTY
RIGHTS
Important
aspects
Arrangement :
of
a
Licensing
 Registration;
 Use/license and Scope of the License;
 Misuse/unauthorized use of the Trade
Mark; and
 Protection.
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ENTRIES OF BRANDS
THROUGH FRANCHISE
BUSINESS MODELS ASSISTED
BY LEXCOUNSEL
Nike is one of the leading sportswear and
equipment supplier based in the United
States.
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Salvatore Ferragamo, is one of the world’s
leading fashion brands in luxury goods. The
group is active in the creation, production and
distribution of shoes, leather goods, apparels,
silk products, fashion accessories like eyewear
and watches and fragrances for men and
women.
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Fratelli Rossetti is one of the leading Italian
companies in luxury footwear field.
Levi’s, is a worldwide known brand of
apparels. Recently, it has also launched
its footwear range in India.
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Tommy Hilfiger, is one of the leading
multinational designer brand.
Lotto Sport Italia, is an Italian sports
apparel manufacturer.
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Dockers, is a leading brand of business
casual clothing for men and women.
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H2O+, is one of the leading brands of skin
care products.
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Paul Smith, is a clothing brand owned by
leading English designer Sir Paul Smith.
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Florsheim, is one of the world’s
leading shoe brand.
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SEEMA JHINGAN & DIMPY MOHANTY
PARTNERS
LEXCOUNSEL, LAW OFFICES
C-10, GULMOHAR PARK
NEW DELHI 110 049
INDIA
TEL: +91-11-41662861
FAX: +91-11-41662862
E-mail: [email protected]
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