Franchise Business in India: Cost, Requirements & How to Start (2025)

If you’re dreaming of starting your own business but don’t want to take the risk of building everything from scratch, a franchise business in India might be your golden ticket. With India’s franchise industry growing at 30–35% annually and expected to reach ₹7,000+ billion by 2025 (Franchise India report), this model is booming across food, retail, education, health, and services.

How Does a Franchise Business Work in India?

“India’s franchise market is expected to grow at a Compound Annual Growth Rate CAGR of over 30%, reaching $150 billion in the next few years.” — Studies Overseas Editorial Team, Industry research publication, franchise market analysts

The franchise business model in India creates a partnership between two vital players: the franchisor and franchisee. This setup helps businesses grow faster while brand consistency stays intact across locations. Let me show you how this partnership works in India’s business landscape.

1. Franchisor vs Franchisee Roles

The franchisor owns the original business and has built a successful brand and business model. The franchisee invests money to run a business under the franchisor’s brand name. Their roles differ in specific ways:

Franchisor’s responsibilities:

1. Develop and protect the brand name and trademarks
2. Create and refine the business model and operational systems
3. Set quality standards and ensure compliance across all franchise locations
4. Provide training and ongoing support to franchisees
5. Handle national or regional marketing and advertising

Franchisee’s responsibilities:

1. Make the original investment to set up the business
2. Manage day-to-day operations at their location
3. Hire and train staff according to franchisor guidelines
4. Implement local marketing strategies
5. Maintain quality standards as defined by the franchisor

Indian franchisors usually grant exclusive master franchise rights to one franchisee for the entire country or pick multiple franchisees for different regions. The franchisee works as an independent contractor rather than the franchisor’s employee or agent.

2. Revenue sharing and royalty model

The financial relationship involves several payment types:

1. Initial Franchise Fee: A one-time payment that lets the franchisee use the franchisor’s brand, business model, and support systems.
2. Ongoing Royalties: Most Indian franchises ask franchisees to pay a percentage of gross sales, usually 3-15% based on industry and brand value. These payments fund continued support, field experts, marketing campaigns, and other franchise-wide programs.
3. Marketing Fees: Money goes toward centralised advertising and promotion budgets to build brand awareness.
4. Renewal Fees: Payments needed to extend the franchise agreement after its original term.

Indian franchisors might use different royalty structures, such as:

• Fixed royalty amounts, whatever the sales
• Higher percentages for prime locations
• Lower percentages as sales volumes grow
• Transaction-based fees for each product sold
• Zero-royalty models where revenue comes only from product sales to franchisees

3. Support provided by franchisors

Indian franchisors offer complete support to help franchisees succeed:

1. Training Programs: Regular training covers business operations, product knowledge, customer service, and management skills.
2. Operational Support: Standard operating procedures (SOPs), on-site support through field representatives, and state-of-the-art systems for inventory and sales management.
3. Location Selection: Help in finding perfect locations that match the target audience and business needs.
4. Marketing Assistance: National advertising campaigns, local marketing strategies, and promotional materials drive customer growth.
5. Quality Control: Regular checks and audits maintain brand standards across franchise locations.

What Are the Costs Involved in Running a Franchise?

Starting a franchise in India requires you to look beyond the advertised costs. The franchise world has something for everyone, with investments ranging from a modest ₹50,000 to premium options exceeding ₹3 crore.

1. Franchise cost vs total investment

Here’s what you need to know about the complete financial picture of a franchise:

• Franchise Fee: You’ll need to pay upfront fees between ₹1 lakh to ₹30 lakhs based on the brand’s reputation and sector. This payment lets you use the franchisor’s trademark and business system.
• Original Setup Costs: Your basic setup needs:
  1. Lease payments and renovations
  2. Equipment and supplies
  3. Technology setup
  4. Initial inventory
• Recurring Costs: Regular expenses include:
  1. Royalty fees (4-15% of monthly revenue)
  2. Marketing fund contributions (2-5% of sales)
  3. Working capital for 3-9 months

Most franchisors want proof that you can keep the business running for at least 6 months.

2. Hidden costs to watch out for

Your total investment might increase by 15-30% due to often overlooked expenses. Here’s what you should budget for:

• Security Deposits:
  1. Rental deposits (6-12 months of rent)
  2. Utility deposits (₹10,000-50,000)
  3. Property maintenance (₹15,000-30,000)
• Licenses and Permits:
  1. FSSAI license (₹2,000-7,500 for food businesses)
  2. GST registration (₹5,000-15,000)
  3. Shop establishment license (₹1,000-10,000)
• Launch and Marketing:
  1. Grand opening events (₹50,000-3,00,000)
  2. Local advertising beyond the marketing fund
  3. Promotional discounts affecting initial profitability
• Travel and Training Expenses:
  1. Staff training costs
  2. Travel expenses for franchise training

3. Cost comparison: High vs low investment franchises

Different franchise categories need varying levels of investment:

Low-Cost Options (Under ₹10 lakhs):

• Amul Ice Cream: ₹2-5 lakhs with 20-50% gross margins
• DTDC Courier: ₹50,000-₹2 lakhs
• Patanjali Store: ₹2-7 lakhs

Mid-Range Franchises (₹10-50 lakhs):

• Subway: ₹65-75 lakhs
• Raymond: ₹25-40 lakhs with 20-25% profit margins
• FirstCry: ₹20-30 lakhs with 18-20% profit margins

Premium Investments (Above ₹50 lakhs):

• McDonald’s: ₹6.6-14 crore with approximately 30% margin
• KFC: ₹96 lakhs-₹2 crore with 7-8% profit margins
• Tanishq: ₹1-2 crore with 10-15% profit margins

What Are the Legal and Operational Requirements?

_{Image Source: Legal Dalal}

The Indian legal landscape lacks specific franchise legislation. A successful franchise operation needs proper compliance with existing laws, and this is a vital part of the business.

1. Business registration and GST

Your franchise business needs proper registration:

1. Choose business structure: Register as a private limited company or limited liability partnership based on your investment scale and risk appetite.
2. Get mandatory registrations: Apply for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) to comply with tax requirements.
3. Complete GST registration: You need GST registration when your turnover exceeds ₹20 lakhs (₹10 lakhs in special category states). GST registration matters because franchise fees and royalty payments attract 18% GST.
4. Sector-specific licenses: You must secure permits like FSSAI for food businesses, an education affiliation for tutorial centres, or other relevant authorisations.

2. Franchise agreement essentials

A complete franchise agreement becomes your main legal protection since there are no dedicated franchise laws:

1. Grant of franchise rights: The agreement should define rights to use the franchisor’s brand name, trademarks, and business system.
2. Territory and exclusivity: The geographical area where you can operate needs clear boundaries along with exclusivity rights.
3. Fees and royalty structure: Your agreement should list initial franchise fees, ongoing royalty payments, schedules, and calculation methods.
4. Intellectual property usage: Rules about using trademarks, logos, and proprietary materials must be clear.
5. Term, renewal, and termination: The agreement duration, renewal terms, and termination conditions need a clear definition.

3. Location and space compliance

Your physical space must meet franchisor standards and local regulations:

1. Zoning verification: Check if the property allows business use before signing any lease agreements.
2. Lease documentation: The lease agreements should be in your name with franchisor approval rights.
3. Layout compliance: Your store layout, signage, and branding elements should match franchisor specifications.
4. Local signage rules: Some states want business names displayed in the local language on signboards.

4. Hiring and training staff

Building your team means following both franchisor requirements and employment laws:

1. Clarify employment relationship: Your employees should know they work for you, not the franchisor. This helps avoid joint employer liability.
2. Complete training: You and the core team must finish the franchisor’s mandatory training programs.
3. Comply with labour laws: Register for Provident Fund and Employee State Insurance Corporation (ESIC) when applicable.
4. Document procedures: Your operation manuals and training schedules should match franchisor standards.

How to Choose the Best Franchise Business in India?

“India offers a diverse and growing landscape of high-return franchise opportunities across key sectors like food & beverage, education, and retail.” — Bandana Gupta, Business analyst and franchise market expert

Your choice of franchise can make or break your business experience. India’s franchise market will grow 30-35% each year and reach ₹11.7 lakh crore by 2024. This makes picking the right franchise a vital step.

1. Factors to think about before choosing

Start with self-assessment. Take time to assess:

• Your interests, strengths, and talents
• The work-life balance you want
• How much risk can you handle, and your financial capacity
• Your long-term goals and exit plan

Someone who loves food might not do well with a tech franchise, even if it makes good money. List down industries you actually care about and match them with what you know and can do.

Get a full picture of the market. Look at:

• What your local market needs
• Who else competes within 3-5 km
• How much people spend and what they want
• Local cultural trends that matter

Take a deep look at the franchisor. Breakdown:

• Their brand’s reputation
• How long they’ve been around (like Orane with 15+ years in beauty training)
• Total number of outlets (100+ locations shows stability)
• What current franchisees say about their time with the brand

2. Top industries for franchising in 2025

These franchise sectors show the most promise in India for 2025:

Food & Beverage: Quick-service restaurants, cafés, and cloud kitchens lead the market. Brands like Domino’s and Chai Point offer strong returns because Indians want convenient dining options more than ever.

Education & Training: India’s push for skill development has helped education franchises like beauty training institutes grow faster. The tech and beauty sectors keep changing, which creates more opportunities for these franchises.

Health & Wellness: Fitness centres, pharmacies, and health-focused food brands are expanding quickly. Apollo Pharmacy needs ₹10-20 lakh investment and gives 15-20% profit margins.

Retail & E-commerce: FirstCry (₹20-30 lakh) offers 18-20% profit margins by serving India’s growing middle class.

3. Best franchise business in India by category

Low Investment Options (Under ₹10 lakhs):

• Amul (₹2-6 lakh): 20-50% profit margin
• Courier services like DTDC (₹2-6 lakhs)
• Tea cafés like Chai Break (₹3-5 lakhs)

Medium Investment (₹10-50 lakhs):

• Lenskart (₹25-40 lakh): 25% profit margin
• Apollo Pharmacy (₹10-20 lakh): 15-20% profit margin
• Education franchises like Arena Multimedia (₹20 lakh)

Premium Franchises (Above ₹50 lakhs):

• Food giants like Burger King, KFC, and McDonald’s
• Hotel franchises like Hilton and Marriott
• Premium retail brands with strong market presence

4. How to assess franchise ROI

ROI calculations help you see if a franchise makes financial sense:

Step 1: Know your total investment

• Initial franchise fee
• Setup costs (equipment, renovations, inventory)
• Working capital that lasts 6 months minimum

Step 2: Figure out potential revenue

• Review the franchisor’s Average Unit Volume (AUV)
• Check with existing franchisees in similar areas

Step 3: Add up all operating costs

• Rent and utilities
• Royalty payments (usually 4-15% of revenue)
• Marketing fees (1-5% of sales)
• Staff salaries and training

Step 4: Know when you’ll make money

• Good franchises should give at least 15% ROI
• Premium franchises like Vivafit aim for 25% ROI

Step 5: Plan for hidden costs

• Tech upgrades
• Regular renovations
• Insurance and compliance costs

What Is the Process to Start a Franchise in India?

Starting a franchise business in India takes a well-laid-out process that needs careful planning and execution. The path from your original idea to opening day builds a strong foundation that leads to franchise success.

1. Self-assessment and budget planning

An honest self-evaluation plays a vital role before you look at franchise opportunities:

1. Assess your entrepreneurial strengths – Your personality, skills, and experience should line up with your chosen franchise sector
2. Define your priorities – Think about work hours, location, and family commitments
3. Review your passion for the business – Franchisees succeed more often when they truly believe in their products or services
4. Set a realistic budget – This includes franchise fees, setup costs, and 3-6 months of operating capital

Self-assessment helps you avoid mistakes that can get pricey. Franchisees who skip this step often struggle with businesses that don’t match their strengths or interests.

2. Research and due diligence

Deep investigation of potential franchisors remains non-negotiable:

1. Request franchise disclosure documents from shortlisted brands
2. Contact multiple existing franchisees – Ask them about profitability, support quality, and challenges they face
3. Verify franchisor claims – Check revenue projections, break-even timelines, and support systems
4. Research market demand in your target location – Learn about local demographics and competition
5. Review franchise growth patterns – Look for steady expansion rather than explosive growth

Franchise experts suggest talking to at least five current franchisees before making your decision.

3. Application and approval process

The formal application starts after you select a franchise:

1. Submit original application – Complete the franchisor’s standard form with personal and financial information
2. Attend discovery day – Visit the franchisor’s headquarters to meet the team and learn about the brand
3. Prepare for interviews – Show your understanding of the business model and financial capacity
4. Await approval – Franchisors review applicants based on financial stability, business experience, and cultural fit
5. Negotiate terms where possible – Some aspects may be negotiable, though most franchise agreements are standardised

4. Legal documentation and setup

Legal and operational groundwork begins after approval:

1. Consult a franchise attorney to review all agreements before signing
2. Register your business entity – Usually as a Proprietorship, LLP, or Private Limited Company
3. Complete necessary registrations – Including GST, PAN, TAN, and industry-specific licenses
4. Secure your location – Follow franchisor guidelines for site selection and approval
5. Draft and sign the franchise agreement – This detailed document governs your relationship with the franchisor

Indian franchise agreements fall under various applicable laws, including the Indian Contract Act 1872 and the Trademarks Act 1999.

5. Launch and operations

The operational phase starts once legal requirements are complete:

1. Complete franchisor training programs – For you and the core team members
2. Set up your location – Follow brand standards for layout, equipment, and branding
3. Recruit and train staff – Use franchisor training materials and procedures
4. Plan your grand opening – Set aside 20% of your first year’s marketing budget for launch
5. Implement operating systems – Include inventory management, POS, and customer service protocols

Conclusion

Starting a franchise business in India in 2025 is a smart way to become an entrepreneur with less risk compared to building a startup from scratch. With options ranging from budget-friendly outlets like Amul to premium ones like McDonald’s, there’s something for every budget. Just do your homework, calculate ROI, and choose a brand that matches your passion + budget.

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