The franchise system is a way of doing business in which the owner gives a license to its operations, products, branding, and knowledge in exchange for a fee, which represents the owner’s investment. As a low-cost method of expanding a company’s market share or geographical reach, it may franchise its brand and product.
Business Franchises, on the other hand, are a joint venture between a franchisor and a franchisee. Franchisors are the original businesses and they are often referred to as franchisors. The company sells the right to use the name and idea of the company. It is the franchisee’s responsibility to purchase the right from the franchisor to sell their goods and services under the franchisor’s already existing business model and trademark.
An overview of the key requirements for starting a franchise business:
- Niche Identification:
Identifying a niche is one of the most important tasks for any aspiring entrepreneur. Once you’ve decided to start a franchise business, make sure to choose a business domain that you can rely on both in terms of sustainability and revenue generation, once you’ve decided to get started.
The best way to make an informed decision will be to conduct an in-depth analysis of the market and the city-specific factors in order to make an informed choice. There is no doubt that trending niches can be subject to fierce competition due to their high level of popularity.
- Addressing the Formalities:
As soon as you have chosen a niche, make sure you secure legal permission from the Ministry of Corporate Affairs(1) (aka MCA) as soon as you have entered into a franchise contract with the concerned company that suits your needs. Ensure that you hire a professional firm that can assist you overcome the challenges you may encounter if the franchise is located outside Indian Territory.
Once you have met the requirements above, you can legally take over ownership of the property. To avoid any legal contradictions in the future, it is advisable to arrange a legit witness at the beginning of the legal process. This will avoid any conflict in the future between the franchisee and the franchisor.
Here is the most important aspect of establishing a franchise business in India. In order to be able to operate seamlessly within the legal framework of the country, you will need to acquire different types of licenses and registrations. As an example, if you are operating a food chain business, then you must obtain an FSSAI license without exception.
- Human Resource Requirements:
The human resources department is also a pivotal component of the franchise business operation in India. The number of workers needed to support the operation must be understood. It is also necessary for you, as an owner, to become familiar with the employees’ roles and duties in order for the hiring process to run smoothly.
- Addressing Tax liabilities:
An understanding of tax implications is crucial for any business owner. Therefore, we want you to be aware of the different types of taxes that apply to your company.It is imperative to comprehend the layers of taxation in India, from customs duty to GST. You can also figure out how to avoid heavy taxation during this stage.
- Overseeing Currency Risks:
Entrepreneurs who deal with the global marketplace need to be aware of this. Usually, the first investment is made in foreign currency, followed by the receipt of the first earnings in the domestic currency. Therefore, it is important to have a better understanding of the difference in currency value before beginning a business operation in a foreign country. This will provide an accurate understanding of profit and loss for your business.