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What are the legal issues that arise in India in different kinds of franchise business

March 16, 2017

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In this article, Anubhav Pandey discusses the intricacies of franchise agreement in India.

Globalization has opened a new era of entrepreneurship, an era of franchise ownership. Indian market is loaded with foreign and Indian brands such as Mcdonalds, KFC, Nike, Reebok, Big Bazaar (Future group) and many such brands. In this article, we will take a look at the legal issues that arises in different kinds of franchise business in India.

What is a Franchise

A business where a parent company provides its business model and brand name to a third party is called as, franchisee. A franchise is owned and operated by individuals but branded and overseen by much larger multinational companies.

From a layman’s perspective, the following are the features of a franchise business.

A business that is seen in multiple cities and identifiable because of their brand sign and colors. (Unique yellow M of Macdonald)
The business is same all throughout the places where the franchise operates. For example, the quality of Reebok shoes is same no matter from where you purchase it.
Examples of a franchise are Hard Rock Café, Johnny Rockets, KFC, Krispy Kreme Donuts, McDonald’s, Pinkberry, Pollo Tropical, Pizza Hut, Quiznos, Subway and many such other brands which you see in malls and big shopping complexes.

Legal issues that arise in different kinds of franchise business in India

In the Indian market, franchise business model has already deepened its roots. Hence, it becomes necessary for us to understand the legal implications involving a franchise business.

To simplify things. The overall business model is called a franchise business model. The parent company is called the franchisor and the individual owning a particular outlet is called franchisee.

Does India has a specific law for franchise business

No, India does not have any separate enactment for franchise business model. There is no requirement to register franchise offerings or to provide franchise disclosure documents. There is no specific law dealing with franchise agreement and its aspects such as termination, non-disclosure, and other clauses.

This does not mean that franchising in India is uncontrolled and arbitrarily governed. By various enactments, the franchise business model has carved its exemplifying base in India.

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Different laws governing various aspects of franchising in India

The Indian Contract Act, 1872.

The Indian Contract Act is the mother law governing the fundamental aspect of contractual obligations between a franchisor and a franchisee in a franchise business. It decides fundamental principles, such as offer and acceptance, consideration, breach of contracts and other root level activities.

The Competition Act, 2002.

The competition act prohibits arrangements related to production, supply, distribution, storage, acquisition or control of goods or provision of services that cause or are likely to cause an appreciable adverse effect on competition within India. This law is made for the purpose of restricting big franchise from creating a monopoly in the market.

Income Tax Act, 1961

Tax aspect of a franchise business is governed by the Income Tax Act. The income tax law makes it a point that the company taking benefit from the Indian soil pays the requisite taxes. This statute regulates the mechanism of international franchising as well. All the royalties or the franchise fee are taxed at applicable rates in India.

Consumer Protection Act, 1986

Consumer Protection Act promotes the idea of consumer and consumer interest. The Indian consumer protection law is pro-consumer. The consumer is provided with multiple safeguards against unfair trade practice. If there is any defect in the product or deficiency in services, the consumer protection law comes into action. Under the consumer protection law, a consumer can file complaint against both the franchisee as well as the franchisor.

Arbitration and Conciliation Act, 1996

Alternate dispute resolution is promoted extensively in India. Indian courts are flooded with cases and arbitration is a solution to the problem. The Arbitration and Conciliation Act expands the concept of arbitration to resolve the issues wherever possible.

The Foreign Exchange Management Act, 1999

The FEMA rules pop in wherever there is involvement of foreign currency or assets. Big time international brands, having a franchise in India such as Reebok, KFC, Subway, all are controlled by this legislation. It governs the payment in foreign currency. The Indian government has lifted a number of the prior restrictions on foreign franchisors’ ability to charge certain fees without needing governmental approval.

The Trademarks Act, 1999, Patent Act, 1970, Design Act, 2000, Copyright Act 1957

These laws govern the trademark, patent, design, copyright aspects involved in a franchise agreement. The identification of any brand is its trademark, and the same is protected in India using proper registration as mentioned under the Trademark Act. Every product has its unique recipe! No one knows how to prepare the same taste as KFC chicken at home. This aspect of products is regulated by the patent law.

Common problems faced by franchisee owners in a franchise business

Hidden Fee

In a franchisee agreement, a fixed percentage of revenue is decided which is to be given to the franchisor. Most of the time, the franchisor tends to take extra money or hidden fee for training and marketing and other miscellaneous stuff. A franchisee owner should read the entire franchise agreement carefully and understand fee structure involving a franchise agreement

Finding a great team

Franchising is not a one man game. To survive in the franchising business, you need to have a great team to work along with. Take an example, you own a KFC franchise in your city, but you do not have people to run the business. No matter how hard you try, all your efforts will go in vain. The first step is to get to know individuals who can be used as an asset and can help to run your franchise. Having an efficient team makes it a possibility that your franchise might run well. But on the other hand, not having a good team diminishes all the existing possibility at once.

Financing

The franchisee must have a minimum amount of capital to meet the requirement of the franchisor. Any franchisor before giving a franchisee looks into this aspect very seriously. You need money for every step in any business. For marketing and training, supplies, equipment, and other purposes a franchisee cannot always depend upon the franchisor. Therefore, a minimum amount of capital must always be available with the franchise at any given point of time. A franchise must have decent credit.

Risk involving the franchise

Franchising, most of the time is a profitable investment for a franchisor. The franchisor passes the risk to the franchisee, and it is the duty of the franchise to see to it that the franchise succeeds. There is no guarantee of success in a franchising business. Multiple factors such as market, competitors, governmental regulation play a pivotal role in deciding the success rate of any franchise business. Therefore, any franchisee before starting any franchise business should keep few basic factors in mind. The basic factors are discussed below.

Business plan

Preparing a business layout is paramount. What are the expectations of the franchise owner from the franchisor? Within how many months the franchise is expected to make a profit? What will be the marketing plan? It is the duty of the franchisor to share all the relevant data from their company-owned operations in a similar market. This helps in creating a good business layout.

Here is a list of few common checklist one can think off before investing in any franchise

#1 Choose the brand carefully

Talking from the perspective of any average middle class franchise store visitor, a majority of people buy the brand and not the product! Choosing which franchise to invest in is a major decision which one should take after doing all the research work one can do. Buying a big franchise might help you to reduce the marketing cost, but at the same time, the royalty to be paid is also high. Hence, choose the franchise carefully.

#2 Talk to previous franchise owner

This is a must do before investing in any franchise. The franchisees who have previously invested in the franchise can tell about the ground reality and the relationship between franchisor and franchisee in the franchise business. What was their marketing strategy? How did they employ people? The reason for their exit? (The reason they choose to leave the franchise). These queries should get redressed before buying any franchise.

#3 Get professional advice from lawyers

An expert in the field of law and maybe accountancy, with prior experience of franchisee clients, can educate you inside out about various aspects of the business in which you are about to invest. Getting things on paper is a must before entering into any franchise business. The Franchisee agreement needs to be drafted by good lawyers. If you are the one paying for the franchisee, it is of paramount importance that you get it reviewed and negotiated through a competent lawyer who have domain experience.On Cliklawyer, you can find lawyers with extensive experience in franchisee business in India. Cliklawyer.com is a portal that is standardising legal services and it ensures Rol driven quick legal actions through competent lawyers at a very competitive price point. Cliklawyer.

What are the pitfalls that franchisor should watch out for while giving the franchise

Franchisor put their name on stake

In a franchised business model, a franchisor gives its brand name which is most valuable to him. A franchisee might work well and further add to the value of the brand, or there are possibilities where the franchisee might even diminish the brand value by not performing well. Therefore, a franchisor should take utmost caution before giving its brand under a franchise business. Know your franchisee. Will he add value to the company? A franchisor must look into this aspect before signing the franchise agreement.

Get to know the business plan of the franchisee

A franchisor is not duty bound to prepare a layout a business plan for the franchisee. Ask your franchisee, whether they have developed any business model or not? How will they add value to the company? Are the goals of the franchisee and your expectations compatible? Doing an interview with the potential franchisees and getting them to submit their business plans is critical. At the same time, providing them the assurance that they have the backing of a big brand is also important, after all that is why they are coming and paying for the franchisee rights.

Financial status of the franchisee

In a franchise business, a franchisee cannot be dependent on franchisor for financial help. Therefore, make it sure that the franchisee to whom you are giving your franchise is financially sound to manage the affairs..[2]

What is a franchise agreement

A ‘franchise agreement’ is a legal binding contract between a franchisor and a franchisee. Let us look at the essential characteristics of a franchise agreement.

Franchise agreements are mostly non-negotiable in nature

The easiest way to administer the system and to take most out of a franchisee is to have each franchise on the same program. Therefore, franchisor makes a similar contract for every franchisee and mostly they are non-negotiable in nature.
In practice it is observed that, franchisee often heavily negotiate. It depends on the bargaining power. Of course franchisors don’t want to negotiate and they might not have to if there are large number of waiting takers. However, that is unusual.

Most of the time franchisee negotiates terms that work for them too.

For some old franchisee business like Subway, contract are very well defined over the years and many points in the contract may be untouchable. It is important to hire a lawyer who will understand which terms are negotiable and which are not and proceed accordingly.

A franchise agreement is usually one sided contract in the first draft favouring the franchisor. It is up to the franchisee to negotiate and manage to out in other clauses that protect the franchisee.

Franchise agreement is full of must dos and don’ts

In a simple reading of any franchise agreement, one can clearly get the list of things to do and things to strictly avoid in a franchise business. These rules can help in formulating a business strategy. The franchise agreement outlines some issues which you are strictly forbidden from doing. The non-competing clause, which says a franchisee cannot operate a similar business and other such similar clauses are discussed below.

Relevant clauses in a franchise agreement

Franchise agreement clauses differ from business to business. There are few common areas which these agreement addresses. These are,

Term and renewal
Fees and royalty clause
Proprietary marks
Confidentiality clauses
Training
Duty of Franchisor
Duty of Franchisee
Default and Termination
Products and operations standard and requirements
Advertising
Dispute resolution
Post-term obligations

Term and renewal

Term and renewal clause contain the time duration for the initial term of a franchise agreement. Under this section, a franchisee is obliged to operate the franchised unit for the specified period in the agreement. The renewal clause provides the opportunity for the franchisee to continue with the franchise and notify within stipulated time.

Fees and royalty clause

This clause mentions the non-refundable franchise fees which the franchisee has to make to the franchisor and also the one-time fees if any. Royalty clause is the non-refundable portion of the payment (usually in percentage) which the franchisee are obliged to make to the franchisor. An example of this is, royalty can be 8% of the gross sale to be paid weekly. The period of royalty can be weekly or monthly depending on the nature of the contract.

Proprietary marks

The franchisee is granted to use Franchisor’s Proprietary Marks only in connection with the operation of the franchised unit in the Franchise Agreement at the location where such franchise is settled. An owner of a Nike showroom cannot use Nike’s Proprietary mark at any other place except the store.[3]

Confidentiality clause

All franchise have manuals which contain specific confidentiality clause to which the franchisee are to abide. To protect the reputation and goodwill of Franchisor and to maintain uniform standards of operation, a franchisee is to abide to the norms of the franchised business by accepting the Franchisor’s Confidential Operating Standards Manual.
The information provided in the manual is to be kept a secret.
Manual contain information relating to patent and product design, service information, statistics of the franchisor and other useful information relating to the business.

Training

Before you open your franchisee, specified number of key holders of your franchise are required to attend and complete the franchise training program. Key holders of the franchise might include the franchisee, an Above Store Leader, General Manager or Assistant Manager. The time duration of the training along with the place where training will be conducted is specified in this clause. There might be a stipulated fee for the training and the franchisee is responsible for all costs incurred including travel and lodging of the management team.[4]

Duty of Franchisee

Duties of the franchisee are specified, and they are expected to maintain high and uniform operating standards. Clause contains duty such as,

To maintain the premises of franchised unit in conformity with the standards. These includes equipment, signs, fixtures, furnitures and other infrastructures.
Duty to maintain the reputation and the goodwill of the brand.
It is the responsibility of the franchise to meet and maintain the highest standards and an obligation to maintain the standards and ratings applicable to the operation of the Franchised Business.
A duty to maintain the supply of goods at all the times.
To use the premises of the Franchised Unit solely for the purpose of conducting the business franchised.
Duty to advertise the brand.

Duty of Franchisor

Among various duties, few duties which the franchisor owe towards a franchisee are,

The franchisor will make available to franchisee continuing advisory assistance in the operation of the Franchised Business.
It is the duty of the franchisor to make available to Franchisee standard plans and specifications to be utilized only in the construction of the franchised unit.
Franchisor will continue its efforts to maintain high and uniform standards of quality, cleanliness, appearance and service at all franchised unit.

Default and Termination

The clause contains conditions which will automatically terminate the franchise agreement. Few examples of such conditions are,

If a petition for bankruptcy is filed by franchisee or such a petition is filed against Franchisee and not opposed by Franchisee,
Franchisee is adjudicated bankrupt or insolvent,
If proceedings for a composition with creditors under the applicable law of any jurisdiction should be instituted by Franchisee or against Franchisee and not opposed by Franchisee.
The Franchise Agreement might get terminated when the Franchise does not abide by the rules such as maintaining of standards and other infrastructural maintenance clause.

Products and operations standard and requirements

The following clause makes it mandatory for the franchisee to abide by the products and service standard and requirements as directed by the Franchisor.
A restaurant franchise includes the following clause relating to Products and operations standard and requirements.”Authorized Menu. Your business must be confined to the preparation and sale of only such Menu Items and other food and beverage products as we designate and approve in writing from time to time for sale by your Restaurant.”

Advertising clause

“You agree to actively promote your Franchise, to abide by all of our advertising requirements and to comply with the norms set for advertising.” An advertising clause begins this way.

An advertising fee is set which the franchisee is bound to pay to the franchisors.
The Franchisor saves the right to determine the expenditures of the amounts collected and the methods of marketing, advertising, and media employed and contents, terms. The franchisor and conditions of marketing campaigns and promotional programs.

Dispute resolution

Dispute resolution clause mentions which court to appear in a case of conflict between the Franchisor and the Franchisee. Nowadays, a Franchise Agreement contains an arbitration clause specifying the seat of arbitration and the institution to appear in case of disputes.

Post-term obligation

Upon the expiration or termination of the Franchise Agreement, the Franchisee still owes obligations toward the Franchise. Examples of such obligations are,

Discontinuation of Trademark use. Upon the expiration of the agreement, a franchisee is debarred from using the trademark of the Franchise.
Purchase Option. The Franchisor reserves the right to purchase or designate a third party that will purchase all or any portion of the assets of the franchised unit including, without limitation, the land, building, equipment, fixtures, signage, furnishings, supplies, leasehold improvement.

Exclusivity clause (Restricting franchisor from setting up of same franchise nearby the already existing franchise)

A point to note before proceeding, there are many franchisor which do not include the exclusivity clause in their contract.
A majority (but by no means all) of franchise agreements contain some sort of exclusivity for franchisees – clauses which prevent the franchisor from appointing another franchisee in the franchisee’s territory.
A reason why franchisors are reluctant to grant exclusive territories is that it is often difficult to terminate an underperforming franchisee but it may be easier to place another franchisee near to the under performing franchisee with a view to encouraging the underperforming franchisee to perform or simply to service the territory properly.

Risk involved in Franchise business

Underreporting of franchise business revenue

Simply put, underreporting is when franchisee report less income or sales to the franchisor. Few contracts underlines that there might be surprise audit of the franchisee directly from the franchisors. Others do not welcome the clause on surprise visit.
Some agreements permit the examination of only a very few specifically identified documents; others allow the franchisor’s representatives to peruse the franchisee’s personal tax returns and home mortgages.
It is mostly observed in franchisee agreement, underreporting of sales might lead to revocation of franchise license. To protect the interest of the franchisor, the termination clause of most franchise agreement mentions underreporting of sales and revenue as a mode of termination.
Also, few franchise agreement makes it a point that, franchisee will bear the cost of the audit if there exists underreporting within specified percentage.

Over-demanding franchisor

A franchisor might create problems for the franchisee by demanding unnecessary payments at times. It is a major risk in franchise business as the franchisee are obliged to pay the royalties and other such payment when required by the franchisor. At this, point a Franchise Agreement comes to rescue you.
Only those payments need to be made to the franchisor which are duly mentioned in the Franchise Agreement. This is explained in the above section of “Fees” clause.

When franchisor do not facilitate the required supervision

The success of any franchise depends on two factors.

First, it depends upon the efforts made by the franchisee.
Second, it also depends upon the supervision and guidance of the franchisor.

If any franchised unit is not getting the required supervision from the franchise, the Franchise Agreement through its non-performance clause might protect the rights of the franchisee.

Poorly documented Franchisee Agreement

It is a nothing but a nightmare for a franchisor as well as a franchisee. Few franchisors are uninterested in paying focus to their manuals, agreement and guidelines for their training curriculum. Franchisee buying such franchise can use the terms of poorly drafted Franchise Agreement as an escape tool and might exploit the franchisor.

There are legal service providers which provide excellent services when it comes to the drafting of any agreement. One can go to the following link for the drafting of a Franchise Agreement. Cliklawyer

Few common Franchise businesses in India

There are various types of franchise such as single retail franchise (Nike, Puma, Bata) and multi retail franchise (Big Bazaar, Pantaloons.)

Restaurant franchise in India

Barbeque Nation, Moti Mehal, Haldiram, are few of the most common franchise in India. They have occupied a unique place in the food industry.
Macdonald even changed their menu and removed beef from it just for India.
KFC, Burger King, Subway are again big players in the field.
The industry’s supply chain is fragmented in nature and marked by the presence of multiple intermediaries. The lack of appropriate infrastructure, inadequate technologies, and non-integration of the food value chain are the key factors leading to the nearly 30-40% food wastage across to supply chain [5].

Hotel franchise in India

It is a dream of every middle class employee to have a vacation stay in any of the Radisson or Hyat franchise in India. These are to name just few big players in the industry. The hotel industry is too flourishing in India.
In today’s competitive and global hotel market, being part of a group of hotels that share a recognized brand and provide services such as a central reservation system, marketing, and defined operational procedures might mean the difference between financial success and failure.

Playschool franchise in India

Playschools such as Bachpan, Euro Kids, Junior, are few of the big players to name.
Educational services can be a rewarding career field for entrepreneurs who want to make a difference and make money. It is a major part of the franchise industry with plenty of business opportunities for prospective investors.

Clinics and Nursing Home franchise in India

Hospitals such as Fortis, Skinlab, Dr Batra are the big players in the field.
When the whole world is undergoing an economic crisis, the health industry was amongst the least hit sectors. Here, the business opportunities are more & the risk is less.

Gym Franchise in India

Gold Gym, Fitness Mantra, Chisel are the big players in the field of fitness.
In the USA, the membership in fitness clubs is 16%, while in India it’s just 0.4% in top 7 cities. This predicts huge business potential in this sector. A recent study by the FICCI and Ernst & Young predicts that the fitness industry is growing @30-35 % annually and is worth 110 billion (approx).

Sample Franchise Agreement

FRANCHISE AGREEMENT

This agreement is signed on this 16th day of January, the year 2017.

Between

………………………………………………………., a private limited company incorporated under the company’s act 1956, and having its corporate office at …………………………….., India, herein after referred to as the “Franchiser” which expression shall unless repugnant to the contest or meaning thereof include its successors and assigns of ONE PART.

And

………………………………………, a proprietary firm having its ……………………………, and represented by ……………………………, S/o ……………………………, aged about ….. years, hereinafter referred to as the “Franchise” which expression unless repugnant to the context or meaning thereof be deemed to include, legal representative, executors, administrators, successors and permitted assigns of the other PART, each a party and collectively referred to as parties.

Both parties as above have expressed a desire of entering in to a franchise agreement to meet their respective objectives, which are set out here in below,

a) ………………………. on its part has entered into the business of Online Ads, Offline Ads, Value Added Services and Premium Services and is interested in furthering this business through “Franchise” (Conductor) operated Signature:

…………………. outlets on national basis maintaining a uniform standard facilities and services including uniformity in the charges levied from the customers for rendering the specified services.

b)“Franchise” on his part is interested in entering into the business of operating as a service provider through their cyber cafe outlet and thus carrying out the business of providing services to the customers.

c)…………………………… is desirous of appointing “Franchise” to conduct, manage and operate the services through the …………… as per the uniform norms set up by ………………… in respect of nature of services and cost of services to the customer.

d)“Franchise” is desirous of taking over the services offered by ……………………., for the purpose of its operations and management to carry out business on the terms and conductions contained herein.

e)The purpose of this Agreement is to set forth the terms and conditions under which the parties to the Agreement shall conduct themselves during the substances of Agreement.

NOW, THEREFORE, the parties, in considerations of the convents, undertakings, and commitments set forth therein here by mutually agree as follows,

Section 1: Definitions and Interpretations

For the purpose of this agreement, the following expressions shall bear the respective meaning set forth below,

Details of terminology for the services to be provided

Section 2: Grant of the Franchise

The “Franchise” warrants and represents to …………………… that it is a company / firm, validly existing and a good standing under the laws of republic of India and has all requisite power and authority to enter into this agreement with …………………. All the obligations of the “Franchise” under this agreement are legal, valid and binding obligations enforceable in accordance with its terms. There are no proceedings pending against the franchise, which may have an advice effect on the ability of the franchise to perform and meet its obligations under this agreement.
On consideration of the “Franchise’s” applications and relying on such assurances and representations that “Franchise” has made to ……………………………., ………………… appoints the franchise as a franchise on the terms and conditions set forth in this agreement and in the website.
There is no product and/or service and/or territorial exclusivity granted to the “Franchise” as part of this Agreement by …………………… may give such right or a similar right to persons other than “Franchise” to sell …………………. products and services anywhere including geographic, area surrounding the premises.

Section 3: Services, Terms & conditions

……………………………… would provide their entire range of services by own or through the service providers which includes online ads, offline ads, value added services and premium services to the “Franchise”.
“Franchise” will act as a single point e-hub for all the services provided by ……………………………… falling within the purview of this agreement.
The entire business being on pre-payment basis, ……………………………… will supply all the services based upon requests from “Franchise” up to limits available for “Franchise”. Such limits will be equivalent to the funds available from “Franchise” with ……………………………… at any point in time and will keep reducing with every transaction corresponding to the value of transaction. ……………………………… will enhance the limit of Franchisee by amounts received by it from “Franchise” from time to time.
……………………………… will publish commission structure and earning of the ”Franchise” from time to time in the web site ………………………………. The details of all transactions done by “Franchise” will be available on the web, login ID and password of which will be provided to “Franchise” by ………………………………. “Franchise” will keep enough funds with ……………………………… so as to cater all transactions to provide services to the customers.
All the services falling within the purview of this agreement will be made to “Franchise” based upon standard conditions of sales as set by ……………………………… for all its “Franchise” outlets from time to time. Such conditions will generally be in line with conditions that are placed upon ……………………………… by various service providers and also as a result of business decisions, legal and contractual requirements.
”Franchise” will keep providing the services within the purview of this agreement through their outlets exclusive with ………………………………. ”Franchise” will not enter into direct agreements with any other services providers, aggregators, distributors or any similar entity in India for this purpose, for the duration of this agreement.
The Intellectual Property rights including the concept of delivery of services will rest with ……………………………… or its suppliers or service providers.
……………………………… and ”Franchise” shall conduct their business at all times, in accordance with the applicable statutes, regulations, notification etc., Issued by the Government or any other statutory authority.

Section 4: Confidentiality

“Franchise” shall keep all information of confidential nature received from the ……………………………… in whatever form as strictly confidential and shall not disclose it to third Parties without the prior written consent of ……………………………… during the term of this Agreement.
“Franchise” agrees not to disclose revenue Information without ……………………………… prior written consent.

Section 5: Limitation of liability

The Parties shall not be liable for any incidental, special, indirect or consequential damages arising out of or relating to this Agreement.

Section 6: Terms

This Agreement comes into force on the date of signing this Agreement and shall continue for one (1) year after this date. This agreement may be extended on the mutual agreement of both parties, unless earlier terminated in accordance with the agreement by paying renewal fee to ……………………………… by “Franchise”.

Section 7: Termination

This agreement may be terminated by either party at any time, without assigning any reason by giving prior written notice of ninety (90) days.
……………………………… shall be entitled to terminate this agreement, with immediate effect upon happening of one or more of following:
Any breach or violation of any of the terms and conditions of this agreement by the “Franchise”, if within seven (7) days of written notice from RMS E-Services India Pvt. of the breach or violation, such breach or violation is not cured, provided that no cure period shall be applicable for the violation of any applicable law.
Failure of the “Franchise” to provide the services to the customers as per the expectations of ……………………………….

Section 8: Applicable Law

This aggrement is governed by and constructed in accordance with the laws of india.

Section 9: Dispute Resolution and Jurisdiction

Any dispute, controversy or claims arising out of or relating to this Agreement or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the provisions of the [Indian] Arbitration and Conciliation Act, 1996.
The arbitral tribunal shall be composed of three arbitrators, one arbitrator appointed by ………………………………, a second arbitrator appointed by “Franchise” and a third arbitrator to be appointed by such arbitrators.
The place of arbitration shall be at ……………… and any award whether interim or final, shall be made, and shall be deemed for all purposes between the Parties to be made in ……………………..
The arbitral procedure shall be conducted in the English language and any award or awards shall be rendered in English. The procedural law of the arbitration shall be Indian law.
The award of the arbitral tribunal shall be final, conclusive and binding upon the Parties, and the provisions of the [Indian] Arbitration and Conciliation Act, 1996 shall apply.
The rights and obligations of the Parties under, or pursuant to, this Clause, including the arbitration agreement in this Clause, shall be governed by and be subject to Indian law, and the agreement shall be subject to the exclusive jurisdiction of the courts at Hyderabad.

This Agreement has been executed on the date set forth herein in two (2) copies of which the Parties have taken one each.

For ………………………………, For ……………………………….

Authorized signatory Authorized signatory

Witness 1 Witness 1

Signature: Signature:

Name : Name :

Address : Address :

Witness 2 Witness 2