Franchise Terms and Conditions
Before the franchisor and the franchisee decide to agree and bind into a contract known as the franchise agreement, it is necessary that both of them cautiously go through the terms and conditions of the agreement to ensure avoiding any kind of havoc.
The terms and conditions mentioned in the franchise agreement document must take into account the welfare of both the franchisor and the franchisee. The terms and conditions should enable the business to become a high profit-generating business that provides benefits to the franchisee and the franchisor.
A franchise agreement is a license from the franchisor to the franchisee to use the franchisor's intellectual property, systems, and brand name. It also enables the franchise to acquire the rights to open a business using these INTELLECTUAL PROPERTIES, provided it meets certain conditions.
Franchise Detailed Terms and Condition In India:
Key Franchise Laws, Rules, and Regulations in India:
In India, there are no specific franchise laws that govern a franchise business. There is a range of rules and regulations that can be made applicable to franchising. These laws include those addressing competition, consumer protection, intellectual property, labor, property, and the set course of taxation.
The following is a list of the common laws relating to franchising in India:
THE INDIAN CONTRACT ACT
The Indian Contract Act of 1872 governs all aspects of franchise contracts including the franchise offer, acceptance of the operation, validity of the franchise agreement, breach of contract, and its termination by any of the two parties. The act also seeks to ensure that the parties consent freely and value the contract.
COMPETITION LAWS
The Competition Act was enacted by the Competition Commission of India in 2002 but it came into effect full-fledged in the year 2009. The act aims to promote competition and freedom of trade, protect the rights of the consumers
and prevent anti-competitive agreements and activities that can harm the competition in India. In franchising, the Completion Act aims to ensure that the tie-in arrangements, exclusive supply, and distribution agreements, and resale price maintenance do not inhibit healthy competition in the marketplace.
INTELLECTUAL PROPERTY LAWS
Four acts are attributed to the task of covering intellectual property rights in India. The Copyright Act (1957), The Patents Act (1970), The Trademarks Act (1999), and the Designs Act (2000) are the acts that control the terms and conditions of the agreement of the franchise agreement. These rights are essential for the survival of the franchise industry and they provide protection for trademarks, patents, and registered designs and allow legal actions to be brought against third parties for infringement of any of these rights.
CONSUMER PROTECTION LAWS
The Consumer Protection Act was initiated in 1986 to provide recourse for consumers who received any defective goods or experienced unsatisfactory services. Under these laws, the government aims to encourage the
THE FOREIGN EXCHANGE MANAGEMENT ACT
This act was established in 1999 and aims to govern payments in foreign currency and is generally applicable to a cross-border or international franchise arrangement.
LABOUR LAWS
There are plenty of labor laws in India that may as well apply to the franchise business. Therefore it is important that the franchisee and franchisor are aware of these and the responsibilities concerning management and welfare of the workforce are delineated in the franchise agreement.
INCOME TAX ACT
The Income Tax Act of 1961 governs and looks into all the tax aspects of any franchise in India and also ascertains that a cross-border franchisor complies with local tax regulations concerning any applicable tax treaties to be signed and also ensures the fulfillment of any franchises that have been signed prior.
THE ARBITRATION AND CONCILIATION ACT
Enacted in the year 1996, The Arbitration and Conciliation Act governs the Indian law of domestic and international arbitration. This law only comes into effect if there is any case of franchisee-franchisor disputes due to non-compliance with any of the points in the franchise agreement.
PROVINCIAL INSOLVENCY ACT
The Provincial Insolvency Act of 1920 comes into effect in the case of insolvency of the franchisee or an individual franchise unit.
It is always advisable to consult experts while preparing a franchise agreement document because they can help let you ensure the formulation of correct rules, regulations, policies, terms, and conditions to be mentioned in the document.
It is a set of rules governing the franchisee-franchisor relationship and also ensures the day-to-day working and also ensures the state of work of your franchise in the long run. Thus, it is necessary that a franchise agreement document is cautiously drafted under expert assistance to avoid any havoc and omit any possible mistakes that could prove to be an expense for the business entity.
Apart from the above-mentioned provisions and clauses, several other pointers should as well be mentioned. There are some other brands and sector-specific rules and regulations that need to be taken into account while preparing a franchise agreement document.
RESERVE BANK OF INDIA RULES
The franchising agreement is also subject to all rules issued by the Reserve Bank of India (RBI) and they should necessarily be followed.
All these above-stated acts explain the basic rule of a franchise and enable you to set up a franchise that is based on ethical grounds. Every franchisor would want to set up a business unit that could expand his business, not only in terms of financial profit but also expand his market goodwill by assuring that the working of every single unit is based on ethical ground and is legally fair.
It is necessary that while preparing a franchise agreement, both the franchisee and the franchisor must know what are the three conditions of a franchise agreement, all of which are listed underneath.
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