Franchise Agreement (India)
FRANCHISE AGREEMENT
Indian Contract Act 1872 | Trade Marks Act 1999 | Competition Act 2002 | CGST Act 2017 | Copyright Act 1957
This Franchise Agreement ("Agreement") is entered into on [Agreement Date] between:
FRANCHISOR: [Franchisor Name] (PAN: [Franchisor PAN]), GSTIN: [Franchisor GSTIN], registered at [Franchisor Address] (the "Franchisor"); and
FRANCHISEE: [Franchisee Name] (PAN: [Franchisee PAN]), GSTIN: [Franchisee GSTIN], registered at [Franchisee Address] (the "Franchisee").
1. GRANT OF FRANCHISE
1.1 The Franchisor grants the Franchisee the right to operate a [Business Description] under the trade mark "[Brand Name]" and the Franchisor's business system (the "Franchise") in the following territory: [Franchise Territory] (the "Territory").
1.2 This Agreement shall commence on [Agreement Date] and continue for [Franchise Term], subject to renewal under Clause 9 and termination under Clause 10.
1.3 The Franchisee is an independent business owner and not an employee, partner, or agent of the Franchisor. The Franchisee shall conduct the franchise business in its own name and on its own account, and shall clearly indicate that the business is independently owned and operated.
2. IP LICENCE
2.1 The Franchisor grants the Franchisee a non-exclusive (or exclusive within the Territory, where so agreed), non-transferable licence during the term of this Agreement to: (a) use the trade mark "[Brand Name]" and associated marks registered under the Trade Marks Act 1999; (b) use the Franchisor's copyright materials including the Operations Manual, training materials, and marketing collateral under the Copyright Act 1957; and (c) use the Franchisor's proprietary know-how, recipes, processes, and trade secrets.
2.2 The Franchisee shall use the Franchisor's IP only in the manner specified in the Operations Manual and brand guidelines. The Franchisee shall not alter, adapt, sublicence, or register any IP of the Franchisor.
2.3 All goodwill arising from the Franchisee's use of the Franchisor's IP shall accrue exclusively to the Franchisor.
3. FEES AND ROYALTIES
3.1 Initial franchise fee: The Franchisee shall pay the Franchisor an initial franchise fee of ₹[Franchise Fee] (excluding GST) on execution of this Agreement. This fee is non-refundable.
3.2 Ongoing royalty: The Franchisee shall pay the Franchisor a monthly royalty of [Royalty Rate]% of the Franchisee's gross sales (excluding GST) for the preceding month. Payment is due [Royalty Payment Date].
3.3 Marketing fund: The Franchisee shall contribute [Marketing Fund Contribution]% of gross sales per month to the Franchisor's marketing fund.
3.4 GST: All fees and royalties are subject to GST at 18% under the CGST Act 2017 (SAC code 999711 — licensing of trademarks and IP). The Franchisor shall issue compliant tax invoices. The Franchisee may claim ITC on GST paid.
3.5 TDS: The Franchisee shall deduct TDS at 10% on royalty payments under Section 194J of the Income Tax Act 1961, deposit it with the Income Tax Department, and issue Form 16A to the Franchisor.
4. TRAINING AND SUPPORT
4.1 The Franchisor shall provide the Franchisee with: (a) initial training for the Franchisee and key staff before the franchise outlet opens; (b) the Operations Manual setting out all operating procedures, standards, and brand guidelines; (c) ongoing operational support, including periodic visits and advice; and (d) access to the Franchisor's supplier network and approved product list.
4.2 The Franchisee shall ensure that all staff complete the Franchisor's required training programmes before performing their designated roles.
5. OPERATING STANDARDS
5.1 The Franchisee shall: (a) operate the franchise in strict accordance with the Operations Manual and the Franchisor's standards; (b) use only approved suppliers, products, and equipment; (c) maintain the premises to the Franchisor's standards; (d) permit the Franchisor to conduct inspections and audits of the franchise at any reasonable time with 24 hours' notice; and (e) not make any changes to the menu, products, or services without the Franchisor's prior written approval.
5.2 The Franchisor may issue notices of non-compliance and require the Franchisee to remedy deficiencies within 14 days. Repeated failure to maintain standards shall be grounds for termination under Clause 10.
6. COMPETITION LAW
6.1 Both parties shall comply with the Competition Act 2002. The Franchisor shall not impose minimum resale prices on the Franchisee. The Franchisor may provide recommended retail prices.
6.2 The Franchisee shall not engage in any conduct that could give rise to liability under the Competition Act 2002, including price fixing, market sharing, or bid rigging.
7. CONFIDENTIALITY
7.1 The Franchisee shall keep confidential all of the Franchisor's proprietary information including recipes, processes, know-how, financial information, and trade secrets, during and after the term of this Agreement.
7.2 The Franchisee shall ensure that all staff sign confidentiality undertakings before accessing the Franchisor's confidential information.
8. NON-COMPETE
8.1 During the term of this Agreement, the Franchisee shall not, without the Franchisor's prior written consent, directly or indirectly own, operate, or be financially interested in any business that competes with the Franchisor's business within the Territory or within a 5 km radius of any other franchise outlet.
8.2 For 1 year after termination, the Franchisee shall not use the Franchisor's confidential information or trade secrets to operate a competing business.
9. RENEWAL
9.1 Renewal right: [Renewal Term]. The Franchisee must give written notice of intention to renew at least 6 months before expiry and must not be in material breach of this Agreement at the time of renewal.
10. TERMINATION
10.1 Either party may terminate without cause by giving [Notice Period] written notice.
10.2 The Franchisor may terminate immediately upon written notice if the Franchisee: (a) commits a material breach and fails to remedy it within 15 days; (b) is convicted of a criminal offence; (c) becomes insolvent; (d) repeatedly fails to meet operating standards; or (e) abandons the franchise.
10.3 Upon termination: (a) all licences granted under this Agreement immediately terminate; (b) the Franchisee shall cease using all of the Franchisor's IP including trade marks, trade names, and uniforms; (c) the Franchisee shall return all Operations Manuals and confidential materials; and (d) the Franchisee shall deidentify the premises.
11. GOVERNING LAW AND DISPUTE RESOLUTION
11.1 This Agreement is governed by the laws of India and the laws of the State of [Governing State].
11.2 Any dispute shall be referred to and finally resolved by arbitration under the Arbitration and Conciliation Act 1996, seated at [Arbitration City]. A sole arbitrator shall be appointed by mutual agreement. The language of arbitration shall be English.
11.3 This Agreement shall be executed on non-judicial stamp paper as required under the Indian Stamp Act 1899 and the applicable state stamp act of [Governing State].
Franchisor
________________
Signature
Franchisee
________________
Signature
What Is a Franchise Agreement (India)?
A Franchise Agreement in India records the bargain between the parties, fixing their respective rights, duties and remedies.
India does not have a dedicated franchise statute or mandatory pre-sale disclosure requirements. This means franchise relationships are primarily regulated by the agreement itself, supplemented by general contract law and the statutory IP protections that the franchisor has registered.
The Indian franchising industry is one of the fastest growing in the world, encompassing food service, retail, education, healthcare, beauty, automotive, and professional services sectors. The Indian Franchise Association estimates that the Indian franchise industry comprises over 4,600 franchisors and 200,000+ franchisees, making India one of the largest franchise markets globally.
For international franchisors, franchise arrangements in India also involve FEMA 1999 and RBI regulations governing the remittance of franchise fees and royalties, and withholding tax obligations under the applicable DTAA. Indian franchisors expanding domestically must address GST on royalties, TDS under Section 194J, and IP registration under the Trade Marks Act 1999.
The legal framework governing the Franchise Agreement (India) in India draws on several key statutes and regulatory bodies. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Parties executing a Franchise Agreement (India) in India should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Indian Contract Act, 1872 sets the foundational requirements.
When Do You Need a Franchise Agreement (India)?
You need a Franchise Agreement when you are granting another party the right to operate a business under your brand and business system. This is the foundational document for any franchise arrangement.
You need this agreement when an established business wishes to expand by franchising — granting franchisees the right to replicate the business model in new cities or regions under the franchisor's brand, using the franchisor's systems, training, and support.
You need this agreement when a foreign franchisor appoints an Indian master franchisee or area developer to manage franchise development across India. The agreement must address FEMA compliance, royalty withholding tax, GST on imported services, and trade mark registration requirements.
You need this agreement when an individual entrepreneur wishes to invest in a franchise opportunity and requires a formal agreement that clearly defines the franchise fee, royalties, territory, support obligations, renewal rights, and exit conditions.
You also need this agreement to protect the franchisor's intellectual property — particularly trademarks and know-how — by clearly defining the scope of the IP licence, the standards the franchisee must maintain, the consequences of brand damage by the franchisee, and the obligations upon termination to cease using the franchisor's IP.
Parties in India should prepare a Franchise Agreement (India) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Franchise Agreement (India)
A thorough India Franchise Agreement should contain the following key elements.
Parties: Full legal names, addresses, PAN, GSTIN, and CIN of the franchisor and franchisee.
Grant of franchise: The specific rights granted to the franchisee — to operate under the brand, use the systems and know-how, and sell the approved products or services.
Territory: The geographic area within which the franchisee may operate, and whether the territory is exclusive, protected, or non-exclusive.
Franchise fee and royalties: The initial franchise fee, ongoing royalty (typically as a percentage of gross sales), marketing fund contributions, and any other fees. GST applicability (18% on franchise services) and TDS obligations (Section 194J at 10%) should be specified.
IP licence: Grant of a non-exclusive, non-transferable licence to use the franchisor's trade marks, copyright materials, trade secrets, and know-how, subject to the franchisor's brand guidelines and quality standards.
Training and support: Initial and ongoing training obligations of the franchisor, and the franchisee's obligation to complete training before opening.
Operating standards: Quality, service, and operational standards the franchisee must meet, the franchisor's right to inspect and audit, and consequences of non-compliance.
Marketing: Obligations to contribute to and comply with the franchisor's marketing programs.
Term and renewal: The initial term, renewal rights, conditions for renewal, and fees payable on renewal.
Termination: Grounds for termination (for cause and without cause), notice periods, and post-termination obligations including cessation of IP use and return of materials.
Dispute resolution: Arbitration under the Arbitration and Conciliation Act 1996.
Additional compliance elements for a Franchise Agreement (India) used in India include: Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Forms-legal.com provides this template as a starting point for India-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Franchise Agreement (India) (India) [Legal document template]. Forms Legal. https://forms-legal.com/india/business/contracts/franchise-agreement-india
"Franchise Agreement (India) (India)." Forms Legal, 2026, https://forms-legal.com/india/business/contracts/franchise-agreement-india.
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title = {Franchise Agreement (India) (India)},
year = {2026},
howpublished = {\url{https://forms-legal.com/india/business/contracts/franchise-agreement-india}},
note = {Free legal document template. Based on Indian Contract Act, 1872}
}Also available for these jurisdictions:
Frequently Asked Questions
India does not have a dedicated franchise statute comparable to the franchise disclosure laws in the United States, Canada, or Australia. Franchise arrangements in India are primarily governed by general contract law under the Indian Contract Act 1872, intellectual property law under the Trade Marks Act 1999 and Copyright Act 1957, competition law under the Competition Act 2002, and tax law under the Income Tax Act 1961 and CGST Act 2017. The absence of dedicated franchise legislation means there are no mandatory pre-sale disclosure requirements in India — unlike jurisdictions where franchisors must provide a Franchise Disclosure Document (FDD) before accepting fees or executing agreements. However, franchisors operating in India should be aware that: (a) misrepresentation in pre-sale materials may give rise to rescission rights under Sections 17–19 of the Indian Contract Act 1872; (b) the Competition Act 2002 applies to franchise arrangements that have market exclusivity, price control, or territory restrictions; and (c) the Trade Marks Act 1999 and Copyright Act 1957 govern the use and protection of the franchisor's brand and materials. The Indian Franchise Association (IFA) and the Franchising Association of India (FAI) have published voluntary codes of conduct and ethical guidelines for franchise arrangements in India, but these are non-binding.
Taxation of franchise royalties in India involves both income tax and GST, and the applicable rates and compliance obligations depend on whether the franchisor is an Indian entity or a foreign entity. For domestic (Indian) franchise arrangements: Franchise royalties paid to an Indian franchisor are income in the franchisor's hands and are included in their taxable income. TDS is deductible by the franchisee under Section 194J of the Income Tax Act 1961 at 10% on royalty payments, being fees for technical services or royalty as defined under Section 9(1)(vi). GST at 18% is applicable on franchise services under the CGST Act 2017 (SAC code 999711 — Licensing of trademarks and intellectual property other than brand names). The franchisee can claim ITC on the GST paid on royalties. For cross-border (international) franchise arrangements: Royalties paid by an Indian franchisee to a foreign franchisor are subject to withholding tax under Section 115A of the Income Tax Act at 10% (plus surcharge and cess) on royalties defined under Section 9(1)(vi), or at the rate specified in the applicable Double Taxation Avoidance Agreement (DTAA) between India and the franchisor's country of residence, whichever is lower. The franchisee must obtain a Tax Residency Certificate (TRC) from the foreign franchisor to claim the DTAA rate. GST on reverse charge basis at 18% is applicable under Section 5(3) of the IGST Act on import of services (franchise royalties paid to foreign franchisors).
Protecting intellectual property before launching a franchise in India is essential, as the franchise system's value lies primarily in the brand, know-how, and proprietary systems that the franchisee will be using and to which it will have access. The key IP protections a franchisor should establish in India are as follows. Trade mark registration: Register all brand names, logos, trade marks, and service marks used in the franchise under the Trade Marks Act 1999. Registration in India is done through the Trade Marks Registry (CGPDTM) and can cover goods and/or services across the 45 Nice Classification classes. Use the correct classes for your business: Class 43 for restaurant and food services, Class 35 for retail, Class 41 for education/training, etc. A registered trade mark gives exclusive rights nationwide and is essential for enforcing the IP licence in the franchise agreement. Without registration, the franchisor can only rely on passing off action, which is more difficult to establish. Copyright: Works such as training manuals, operations manuals, marketing materials, website content, and software systems are protected under the Copyright Act 1957 from the moment of creation without registration, but registration with the Copyright Office provides a public record and evidentiary advantage. The franchise agreement should include a clear IP licence for these copyrighted works.
A Franchise Agreement (India) does not legally require a lawyer in India, and individuals and businesses may draft and execute the document independently. The Indian Contract Act, 1872 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified India lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of India has jurisdiction over disputes arising from this type of document, and Registrar of Companies (ROC) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
A Franchise Agreement (India) does not legally require a lawyer in India, though legal advice is recommended. Under Indian law, the Indian Contract Act 1872 governs agreements. The Companies Act 2013 and Registrar of Companies (ROC) regulate corporate documents. The Information Technology Act 2000 governs electronic contracts and data protection. The Consumer Protection Act 2019 provides consumer rights. The Income Tax Act 1961 requires tax compliance. Forms-legal.com provides this template as a starting point — always review with a qualified Indian advocate for significant transactions. Under India law, Indian Contract Act, 1872, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). Forms-legal.com provides this template as a starting point for India-compliant documentation.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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