Master Franchisees In India

There are multiple factors that promote and encourage the global brands to penetrate into Indian master franchisees arrangements. The reason is simple as this gives franchisors a benefit of acquaintance of the master franchisee with the local surroundings, market familiarity, expertise, marketing channels, less investment, less expenses, easy government approvals, cheap workforce and last but not the least lower financial risk.

Master Franchising Agreements:Master franchise arrangement lets the master franchisee to build up the business in the territory under the franchisor’s brand name and trademark with or without the legal consent to manufacture the products locally, offers guiding principles for the proper functioning of the business and states the returns for the franchisor. As per the agreement, Master franchise contract governs:

  • Transfer of technical expertise in manufacturing, promotions and selling.
  • Restrictions and authorization to use company’s insignia, trademark within the respective territory
  • Royalty to the franchisor
  • Control over the sub-franchisees via master franchisee;
  • Availability of enthusiastic staff by the franchisee;
  • Yearly market penetration objectives
  • Joint marketing, proper sharing of advertising cost and support by the franchisor;
  • Regular reporting by the franchisee
  • Exit options for the both the parties if any one of them wish to discontinue
  • Certain obligations after the discontinuation of the agreement such as trade contacts; return/destruction of advertising materials, liquidation of raw material, unsold inventory.

From an agreement point of view, while formalizing the agreements, a franchisee should try to bridge all possible gaps by identifying and evaluating maximum questions or doubts. Try to consider the plan of arrangement detailed in the agreement in relation to the financial, technical, marketing, human resource and business planning abilities. The sensibleness of targets and schedules is necessary to avoid a default situation later on.

While evaluating initial and running costs, the franchisee should take in the costs of obtaining the necessary technical knowledge and skills to run the business; trading in of preliminary inventory; shipping of material; lease rentals and franchise stores; local market research; professional fees and workforce wages.

As per the foreign exchange regulations, an Indian franchisee can pass on the royalty towards license of trademark up to the sum of 1% of domestic sales and 2% of exports without any previous government sanction. In case the licensor also gives technical expertise to the Indian licensee, then the Indian firm can pay royalty of up to 5% of the domestic sales and 8% of the exports without the government consent. There are various firms that are specialized in the master franchisee. The professionals guide and direct the budding entrepreneurs with the best options available. They could ease out everything from franchise selection to the franchise agreement.

International Franchise

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