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Why franchising in India is not like in developed countries?

by selenaparker

India is the second-largest populated country globally and the world’s knowledge capital. There is huge potential for big brands to open shops in India to give the best products to meet the huge purchasing power of the people. But, franchising in India has yet to spread its wings to many parts. A few franchises like KFC, McDonald’s, Subway, and others are available in metro cities and other high-growth cities across India. However, franchising foreign brands into joint ventures with Indian companies is part of the FDI or foreign direct investment policy. But still not having enough franchising rules and regulations in India, it is yet to grow like in developed countries to use its full potential of 138 billion people’s buying power. But it is contrary to the easy filing of a trademark internationally.

So, let us check the existing franchising in India framework and the new changes for it to increase, like in developed countries, along with the benefits of filing trademarks under the Madrid protocol.

What is Madrid’s protocol for filing a trademark internationally?

Trademarks are vital in this globalized and digitalized world to identify products from recognizable designs, signs, and expressions. They are part of the intellectual property for an individual or a business organization to own to differentiate products from specific sources. It is vital for filing a trademark internationally to have the right over such important trademarks or service marls. Madrid Protocol system is the most cost-effective and convenient solution to register trademarks worldwide. It reduces the costs, efforts, and time for filing trading registrations in 128 countries as a single application in the Madrid system. It is enough to have the protection of the governments for the 128 countries to the trademarks registered in any of the countries, including India, which is part of the Madrid system.

Evolution of franchising in India

Franchising in India got metamorphosed after the opening up of the economy during the early 1990s. In the last three decades, many franchisee businesses opened shops across India with domestic and foreign signages, trademarks, merchandising, and slogans to become common in the Indian landscape. But with the increased growth of franchising in India, there are no legal framework improvements for it to rise more like in the developed countries. There are over 34 jurisdictions as of February 2020 with some form of franchise-specific rule or regulation in India. It requires delivering of disclosure document to the prospective franchisee before buying the franchise. The franchisor should sign a joint venture as per the Companies Act 2013 and comply with the FDI policy. All of it makes franchising in India grow as in developed countries, even after rapid globalization and digitalization in the past three decades.

Steps to take for increasing franchising in India

Franchising in India could increase FDI or foreign direct investment, and hence there should be many steps like

  • The franchise agreements should incorporate new conditions favoring the franchisor and franchisee.
  • The upfront fees payable to the franchisor by the franchisee should get regularized.
  • The term for the franchisee should have a specific period and not without minimum or maximum terms.
  • The termination rights should include many clauses as per the rights and ownership of the franchisee’s business.
  • Provide proper dispute resolution for the foreign franchisor and the Indian franchisee to resolve amicable issues.

The above facts and steps will surely help franchising in India increase like in developed countries, using its vast potential and buying power for increasing foreign direct investments.

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