Reviewed by Aug 27, 2020| Updated on
A franchisee is a person who buys a franchise. The franchisee then operates the company venue and becomes responsible for making decisions regarding the business. However, the franchisor would have already decided on several things, such as the look, name, and products to be sold, and the franchisee will have to follow them.
Each franchising group has a range of interests to protect. The franchisor is interested in securing trademark rights, managing the company model and maintaining know-how. The franchisee is obligated to provide the services for which the brand has become popular or influential. A lot of standardisation is needed here.
The location of operation will bear the signs, logos, and brand of the franchisor. The uniforms worn by the franchisee's employees must reflect brand style and colour. In an effective franchise operation, the service must be in keeping with the pattern adopted by the franchisor. Franchisors may not have full control of the business as they would have lent the control in the hands of the retailer/franchisee.
Franchise deals have no assurances or commitments, and the franchisor has little or no recourse to judicial action in the case of a dispute. The contracts are indefinite and at the franchisor's sole discretion. Some franchisors allow franchisees to sign agreements that specify where and under what law any conflict would be prosecuted.
Regulations in India
India's franchising of overseas products and services is at its infancy. The first International Exhibition only took place in 2009. India, however, is one of the largest franchising markets because of its large middle-class of 300 million who are not reserved about spending and because of the entrepreneurial attitude of the population.
In a highly diversified community, McDonald's is a success story given its menu that varies from that of the rest of the world.
Until now, franchise agreements are protected by two common contractual laws: the Contract Act 1872 and the Special Relief Act 1963, which provide for strict enforcement of covenants in a contract and remedies in the form of damages for breach of contract.