Franchise questions and answers

A franchise is an agreement in which a company lets you run a business under its brand and system. You pay fees and follow its rules. You own the outlet and carry its risk.

India has no separate franchise law. Your agreement is a contract under general law such as the Indian Contract Act, 1872. That is why the written terms matter so much.Source: Indian Contract Act, 1872 (India Code)

In a franchise you use the brand's name and full way of working. In a dealership you mainly buy goods from a company and sell them in your area. The terms differ by company, so read the agreement.

FOFO means the franchisee owns and operates the outlet. FOCO means the franchisee owns it and the company operates it. COCO means the company owns and operates it, so there is nothing for you to buy.

Royalty is a regular payment to the brand for using its name and system. It may be a share of your sales or a fixed amount. Ask on what amount it is charged and whether it can change.

It depends on the brand, the shop size and the city. Ask for a written list of every cost, including fit-out, stock and working capital. Keep money for the first months, when sales may be low.

No honest brand can guarantee profit, because sales depend on your town, shop and effort. Treat a promise of assured monthly income as a warning sign.

Be very careful. Indian Oil, Amul and PIB Fact Check have warned about fake offers that ask for registration or processing fees. Check on the official website first and never pay into a personal account.Source: Amul press note on curbing fake websites

Type the company's website address yourself and find its dealership page. Call the head office number from that site. Ask if the person who contacted you works there.

No. The Department of Telecommunications says it does not collect any fee for leasing premises for mobile towers and does not issue a No Objection Certificate for them. Do not pay anyone who promises a tower.Source: PIB Fact Check Unit warns against mobile tower installation fraud (AIR)

Call your bank at once. Report on the National Cyber Crime Reporting Portal and on helpline 1930. Keep all screenshots and receipts, and do not pay more to get the money back.Source: National Cyber Crime Reporting Portal

Yes. Do it before you sign or pay any large amount. A lawyer can explain the clauses on term, exit, fees and disputes. The fee is small compared with your investment.

Many agreements try to. Section 27 of the Indian Contract Act makes agreements in restraint of trade void, with limited exceptions. How it applies to you is a legal question, so ask a lawyer.Source: Indian Contract Act, 1872 (India Code)

These are payments for a service, so GST can apply. The rate can change, so ask your chartered accountant and insist on a proper tax invoice.

The bands are Shishu up to Rs 50,000, Kishore up to Rs 5 lakh, Tarun up to Rs 10 lakh and Tarun Plus up to Rs 20 lakh. Tarun Plus is for people who repaid an earlier Tarun loan. Confirm current limits with your bank.Source: PIB: MUDRA Tarun Plus (October 2024)

MUDRA loans are for small non-farm businesses and are given by banks and other lenders, not by MUDRA itself. Whether a bank accepts your franchise project is the bank's decision, so ask your branch.Source: Pradhan Mantri MUDRA Yojana

PMEGP mostly does not allow trading, with limited exceptions. A shop that only resells goods may not qualify. Check with your district KVIC, KVIB or DIC office.Source: PMEGP guidelines (Government of Odisha PDF)

It helps bank loans between Rs 10 lakh and Rs 1 crore for Scheduled Caste, Scheduled Tribe and women entrepreneurs. The business can be in manufacturing, services, agri-allied work or trading.Source: Stand-Up India

CGTMSE is a trust set up by the Ministry of MSME and SIDBI. It guarantees collateral-free loans given by member lenders. It does not give money itself.Source: CGTMSE

A franchise gives a known name and a method, but you pay fees and follow rules. Your own business is freer but slower to build. Do the sums on paper for both before you decide.