How to Venture into the Franchise Business in India

Rishabh Sharma
Rishabh Sharma May 27 2021 - 5 min read
How to Venture into the Franchise Business in India
Franchising is One of The Safest Ways of Becoming a Business Owner. Read on to know more...

Planning to get a franchise? Well, before you move ahead with the thought, let us tell you that it is important to decide a number of things before planning to take up a franchise. While it is a tricky game altogether, but at the same time, the prospects and challenges nurture you as a strategic businessman, who knows his game right. Buying a franchise will help to achieve your dream of business ownership success. However, purchasing a franchise is not a cakewalk. So, are you ready to be the player? 

Follow the below-mentioned points, before planning to open a franchise:

1. Research:

The first step before buying a franchise is conducting initial research, making sure that you pick the industry that has a potential market. For example, opening a luxury brand franchise in a tier-1 town will never make any profit. Get information about various franchise opportunities available in your location. It is necessary to find the right franchise which suits your budget, qualifications, and personal interest. Then, research the franchise requirements to ensure that you qualify and have the proper information. It is suggested to study the market and city-specific and then move further. Any hospitality franchise is always workable in any city grade.

2. Identify Individual Franchise Companies:

Once you are done with your research, evaluate individual franchise companies and select one which you think is the most suitable for you. Try to choose the companies that will have territories available in your desired location.

3. Franchise Qualification Requirements:

Once the niche is decided, make sure that you get yourself registered with the Ministry of Corporate Affairs after the initial agreement with the franchise provider. If the franchisee is from outside India, make sure to get in touch with international brokers such as Franchise International Inc. Also, ensure that all the franchisees are eligible in terms of financing and professional experience, franchisors set minimum qualification requirements. This is because the success/failure of a franchisee will directly impact their business, brand image, goodwill, etc. Thus, there are few requirements that few requirements are often taken into consideration, such as Credit score, Net Worth, Cash in Hand, Management Experience, Industry Experience, outside income, etc.  

4. Submit Request for Consideration/Application:

Once you are done with all the research and analysis, select two or three industry categories. Within each category, pick one to three companies from which to request information. The companies will match you with a representative, and you should receive information back from them in a week by e-mail and/or telephone. It is suggested that while the legal procedure is on with anyone, it is important to have witnesses, in order to avoid any chaos in the future.

5. Required Documentations:

After submission of a qualification questionnaire, the franchisor will provide you with the franchise disclosure document (FDD), which contains important information regarding the franchise. Review this information carefully and get any questions you have answered before you proceed to the next step. In addition to the disclosure document, you will also be provided a 14 day disclosure period. A franchise agreement cannot be signed within this time span. These mandatory periods are provided to give franchisees the opportunity to research, the review disclosed materials, and make a well-informed decision about whether they should or not be part of that franchise.

5.1 Licensing:

Next and one of the most important steps in the process is completing the licensing formalities. From the concerned industry to the business licensing, you need all sorts of licensing done before you open the franchise in the public domain.

5.2 Registration:

International businessmen looking to start a franchise in India will be better off without starting operations if they are unwilling to stay here or visit it regularly. 

5.3 Human Resource Requirements:

Any franchise runs only through human resources, so it is important for you to understand the number of employees that will be required at various stages of operation. As an owner, you also need to know the exact roles of the employees, so that you can conduct hiring accordingly.

5.4 Paying Taxes:

While this comes at a later stage of the operation, but it is advisable to understand the different types of taxes that have to be paid in near future. From GST to custom tax, the range of taxation is wider, so it is important to understand the layers and prepare accordingly. During this stage, you can also explore the opportunities to save your taxes.

5.5 Managing Currency Risks:

This is important for those dealing internationally. Their first investment is normally done in international currency while the initial earnings are in INR. So, it is important to understand the currency value difference before initiating the business. It helps in defining profit and loss.

6. Visit Existing Franchisees and Franchisor:

If you’re about to enter a business, the best way to get information about it is to visit the existing franchise stores. Contact them and clear all the queries you have about the business. This is the best source to get to know about their lives as franchisees and evaluating how well a franchisor supports them. It is necessary to meet the people who will be supporting you to run your business successfully. You can get any of your final questions answered, but will also be evaluating yourself as a potential franchisee.

7. Finalize:

Once you have gone through all the above steps, it’s time to make your final decision. The final step in the mutual evaluation process is to sign the franchise agreement and meet the heads and key executives who will work with you as a franchisee. If you’ve carefully followed this process, then congratulations! You’re now into a franchise business.

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