# Franchise Agreement

> India has no franchise-specific law, so franchising runs on contract, trademark and tax law. A franchise agreement covers the franchise fee and royalty, territory, brand and operating standards, training, supply obligations, audit rights and exit. Franchise fees and royalties attract 18% GST, the franchisee deducts TDS on royalty, and payments to a foreign franchisor are permitted under FEMA, with withholding tax at the Act or treaty rate.

Practice: Legal Documents & Agreements — https://www.industax.com/services/legal-documents/

Because there is no disclosure law, franchisees rely on the agreement for protection, and franchisors rely on it for brand control. We balance both depending on which side you're on.

The trademark should be registered in India before franchising, and the licence terms aligned with the trademark registration's classes.

## Key facts

| Item | Detail |
| --- | --- |
| Law | Contract Act, Trade Marks Act, Competition Act |
| GST | 18% on franchise fees and royalty |
| TDS on royalty (resident) | 10% (2% for certain cases) |
| Foreign franchisor | Royalty remittance permitted; withholding at Act or treaty rate |

## Who needs this

- Brands expanding through franchisees
- Investors buying a franchise
- Foreign brands entering India

## What's included

- Franchise agreement
- Trademark licence
- Tax and FEMA review
- Negotiation support

## Documents

- Brand and trademark details
- Commercial model
- Operations manual (outline)

## Process

1. **Model** — Fees, territory and standards defined.
2. **Draft** — Agreement and licence prepared.
3. **Launch** — Executed and stamped.

## FAQs

### Is GST charged on franchise fees?

Yes, at 18%. A franchisee registered under GST can usually claim it as input tax credit.

### Can a foreign brand collect royalty from India?

Yes. Royalty for use of a trademark or franchise is a permitted current-account remittance, subject to withholding tax and documentation (Forms 145/146, formerly 15CA/15CB).

### Should the franchisor register the trademark first?

Yes. Licensing an unregistered mark is possible but weakens enforcement against copycats and franchisees who leave.

## Official sources

- India Code — central Acts: https://www.indiacode.nic.in/

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Canonical page: https://www.industax.com/services/legal-documents/franchise-agreement
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.