Franchise regulations needed in India

Indian franchise industry which is estimated to be Rs 5,000 crore is witnessing restricted growth as a result of absence of franchise regulations.

Franchise India, one of the pioneers of franchising in the country, is of the opinion that a set of franchise laws will make the sector more transparent and will help the business to grow by 50 per cent annually from the current 30 per cent.

Franchise India President Gaurav Marya said, "Presently, franchising has no regulator in India and is not governed by any legislation, unlike other developed countries which not only have legislation but also a code. India is losing huge amount of FDI in absence of legislation for the franchising industry.”

The Indian franchising sector is the second largest in the world and retail and education are its main components. There are over 1.5 lakh registered franchisees in the country.

The government allows only up to 51 per cent FDI in single-brand retail, while foreign investment is prohibited in multi-brand retail segment.

India, among some other countries, has certain rules which make entry of foreign players difficult in the retail and education markets. Many global players, therefore, opt for the franchise route under which the franchisee owns the business whilst the franchisor takes a share of the profits.

Franchise India has asked the government to make special provisions for franchise financing as a separate category, on lines with regulations for financing of SMEs by banks.

"In the absence of regulation, the confidence of franchising investors is low. Legislation will make franchising transparent," Marya said, adding that in the absence of proper legislation the sector faces lack of standardisation in its operations.