Is a Franchise License Mandatory to Start a Business in India?

Starting a franchise business in India is one of the most popular ways to enter entrepreneurship with lower risk and higher support. But before you invest, one of the most common questions is: Do you need a franchise license to start a business in India?

1. What is a Franchise License?

A franchise license is a legal agreement where the franchisor (brand owner) gives the franchisee (investor) the right to use their brand name, logo, business model, and systems.

• It is not the same as a government-issued license.
• It is a business contract between the franchisor and the franchisee.
• It covers usage rights, royalty, support, and territory exclusivity.

2. Is a Franchise License Mandatory in India?

Yes — if you are opening a franchise of a recognised brand, you must have a franchise license agreement.

• Without it, you cannot use the brand’s name, logo, or products.
• It legally protects both franchisor and franchisee.
• However, apart from this, you may also need government licenses (GST, FSSAI for food, trade license, etc.).

3. What Happens if You Don’t Get a Franchise License?

Starting a franchise without a license can cause serious issues:

• Legal disputes with the franchisor.
• Financial penalties for unauthorised use of a brand name.
• Difficulty in scaling your business since vendors and banks require legal contracts.
• Loss of customer trust if they find out your outlet is unauthorised.

4. What Other Licenses Do You Need Along with the Franchise License?

Depending on the type of business, you may need:

• FSSAI License – if it’s a food business (restaurants, cafes, kiosks).
• GST Registration – for tax compliance.
• Trade License – issued by local municipal authorities.
• Shops & Establishment Act License – for operating a store/office.
• Health & Safety Certificates – for gyms, salons, and healthcare franchises.

5. Who Issues a Franchise License in India?

• Unlike business licenses, a franchise license is not issued by the government.
• It is signed directly between the franchisor and the franchisee.
• The contract is usually registered under the Indian Contract Act, 1872, for legal enforceability.

6. How Much Does a Franchise License Cost?

The cost varies depending on the brand:

• Small brands: ₹50,000 – ₹2 lakhs (one-time fee).
• Medium brands: ₹2 – ₹10 lakhs.
• Top national/international brands: ₹10 lakhs – ₹50+ lakhs.
• Apart from this, franchisors may charge royalty fees (3% – 10% of revenue).

7. How to Apply for a Franchise License?

1. Visit the franchisor’s official website.
2. Fill in the franchise application form.
3. Share personal, financial, and property details.
4. Get approval from the franchisor.
5. Sign the franchise license agreement.
6. Register the contract legally.

8. Case Study: Amul Franchise License

Background:
Priya, a homemaker in Pune, wanted to start a business with limited investment. She applied for an Amul Parlour franchise.

Franchise License Details:

• License fee: No royalty, only security deposit.
• Investment: ₹2–5 lakhs (setup & stock).
• Validity: 5 years, renewable.

Result:

• Monthly sales: ₹4–5 lakhs.
• Net profit: ₹40,000–₹70,000/month.
• Investment recovered within 12–15 months.

Amul’s no-royalty franchise license model makes it one of the most profitable low-cost options in India.

Conclusion

A franchise license is absolutely mandatory if you want to operate under a recognised brand in India. It not only gives you legal rights but also ensures you get support, training, and brand credibility.

However, remember: the franchise license is just one part of the process. You also need to comply with local government permits like GST, FSSAI, and trade licenses, depending on your business type.

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