FRANCHISING & LICENSING LexCounsel, Law Offices IN INDIA LexCounsel, Law Offices 1

LexCounsel, Law Offices Different Routes for entering the Indian market: Wholly-owned subsidiary company; or Joint venture company; or Branch Office; or Franchise Business model. LexCounsel, Law Offices 2

GENERAL OVERVIEW OF FRANCHISING LexCounsel, Law Offices IN INDIA Contributing Factors for Franchising Wave in India: Huge consumer base of over a billion people; Booming economy with flourishing urban & middle class consumers; Brand awareness and quality consciousness; Abundance of human resources; Entrepreneurial skills. LexCounsel, Law Offices 3

LexCounsel, Law Offices Fact Assessment: Impressive growth of around 30-35% over the last 4-5 years; An estimated annual turnover of US$ 4 billion; there are close to over 70,000 franchisee in the Indian market; Contributes approximately 9% of the GDP of the country; It is the second fastest growing industry in India; and It has been successful in approximately 35 different sectors. LexCounsel, Law Offices

LexCounsel, Law Offices What is Franchising: LexCounsel, Law Offices 5

LexCounsel, Law Offices The Franchisor licenses the right to use his business format for a limited period of time. Franchisee does not gain any interest in the ownership of the format or the associated marks. LexCounsel, Law Offices

LexCounsel, Law Offices - No difference between the outlets of the Franchisor and the Franchisee, as regards: decor of the outlets; selection of goods or services; and staff uniforms. LexCounsel, Law Offices 7

ADVANTAGES OF FRANCHISE TO FRANCHISOR LexCounsel, Law Offices Gains Franchisee’s knowledge of the territory; Access to local sales channel and marketing expertise; Reduces investment; Minimum government approvals; LexCounsel, Law Offices 8

Freedom from recruitment of local workforce; and Accelerated network growth and profitability.

ADVANTAGES OF FRANCHISE TO FRANCHISEE LexCounsel, Law Offices Opportunity for the young entrepreneurs to associate with a known and credible brand; Opportunity to develop the business on assured business model and become successful; and Gains from the Franchisor the entire business concept with network of technical, managerial and training support. LexCounsel, Law Offices

LexCounsel, Law Offices MODELS OF FRANCHISING There are three distinct models of franchising: Product Distribution Franchising involving a co-operation for the distribution of goods, mostly in retail business; LexCounsel, Law Offices 11

LexCounsel, Law Offices Trade Name Franchising where the Franchisee uses the trademark/business name of the Franchisor in order to sell its own product or services; LexCounsel, Law Offices

LexCounsel, Law Offices Business Format Franchising a combination of the other two types of franchising using the Franchisor’s trademark/business name in order to distribute the Franchisor’s goods or services. LexCounsel, Law Offices

LexCounsel, Law Offices LEGAL FRAMEWORK No consolidated franchise specific legislation. Important laws which affect the franchise arrangement in India are: The Indian Contract Act, 1872; The Competition Act, 2002; The Trade Marks Act, 1999; The Copyright Act, 1957; The Consumer Protection Act, 1986; Labour and Taxation Laws; and The Foreign Exchange Management Act, 1999. LexCounsel, Law Offices 14

SIGNIFICANT CONTRACTUAL AND LEGAL ISSUES LexCounsel, Law Offices Enforcement of obligations and non- compete covenant; Payment Terms & Taxes; Duration, Renewal & Termination of the Franchise Agreements; LexCounsel, Law Offices 15

LexCounsel, Law Offices Post Termination Issues; Governing Laws and Implementation of Laws; Agency Issues; and Consumer Protection & Anti-Competition. LexCounsel, Law Offices

LICENSING & USE OF INTELLECTUAL PROPERTY RIGHTS Important aspects of a Licensing Arrangement : Registration; Use/license and Scope of the License; Misuse/unauthorized use of the Trade Mark; and Protection. LexCounsel, Law Offices 17

LexCounsel, Law Offices ENTRIES OF BRANDS THROUGH FRANCHISE BUSINESS MODELS ASSISTED BY LEXCOUNSEL Nike is one of the leading sportswear and equipment supplier based in the United States. LexCounsel, Law Offices 18

LexCounsel, Law Offices Salvatore Ferragamo, is one of the world’s leading fashion brands in luxury goods. The group is active in the creation, production and distribution of shoes, leather goods, apparels, silk products, fashion accessories like eyewear and watches and fragrances for men and women. LexCounsel, Law Offices 19

LexCounsel, Law Offices Fratelli Rossetti is one of the leading Italian companies in luxury footwear field. Levi’s, is a worldwide known brand of apparels. Recently, it has also launched its footwear range in India. LexCounsel, Law Offices 20

LexCounsel, Law Offices Tommy Hilfiger, is one of the leading multinational designer brand. Lotto Sport Italia, is an Italian sports apparel manufacturer. LexCounsel, Law Offices 21

LexCounsel, Law Offices Dockers, is a leading brand of business casual clothing for men and women. H2O+, is one of the leading brands of skin care products. LexCounsel, Law Offices 22

LexCounsel, Law Offices Paul Smith, is a clothing brand owned by leading English designer Sir Paul Smith. Florsheim, is one of the world’s leading shoe brand. LexCounsel, Law Offices

LexCounsel, Law Offices SEEMA JHINGAN & DIMPY MOHANTY PARTNERS LEXCOUNSEL, LAW OFFICES C-10, GULMOHAR PARK NEW DELHI 110 049 INDIA TEL: +91-11-41662861 FAX: +91-11-41662862 E-mail: lexcounsel@lexcounsel.in LexCounsel, Law Offices 24