Buying a Franchise in India: Check the Terms on Opening Delays

When buying a franchise, the opening date may appear fixed, but there can be a gap between getting the premises ready, securing the brand’s approval and starting to trade. Meanwhile, rent, staff wages and loan interest continue to accrue. For anyone entering India’s franchise market, the opening timetable needs to appear not just in the sales presentation, but in the agreement, alongside responsibilities and the consequences of delay.

1. Break the opening timetable into clear stages

An assurance such as “the outlet will open soon after signing” is not enough to build a budget around. First, establish when the clock starts: on signing, taking possession of the premises, design approval or another specified event. If the starting point is unclear, the two parties may work to different deadlines.

Ask the brand for a joint action plan. For each stage, record the responsible party, required documents and deadline. For example:

• When must the buyer provide measurements of the premises and details of available facilities?
• When will the brand supply the design, and how quickly will it respond to proposed revisions?
• How should completion of the fit-out be reported?
• When will the pre-opening inspection take place, and how will any shortcomings be communicated?
• Once those shortcomings have been addressed, when will final approval to trade be given?

If the agreement uses open-ended wording such as “to the brand’s satisfaction”, ask for an objective checklist as well. Otherwise, new requirements could emerge even after the work is complete. It should also be clear on what grounds deadlines can be extended and whose written approval is required.

2. Distinguish the cause of a delay from responsibility for it

Not every delay is the buyer’s fault, and the brand is not responsible for every delay either. The agreement should distinguish at least three situations: delays caused by the buyer, delays caused by the brand and events beyond both parties’ control.

Suppose you submitted all the necessary information on time, but the brand did not approve the design. Would your opening deadline automatically move back, or would you need separate permission? Could you be treated as being in breach of contract during that period? Get answers to these questions in advance.

Conversely, if the fit-out is your responsibility and your contractor falls behind, the brand may treat this as your delay. Leave a reasonable buffer between your contractor’s deadline and the deadline in the franchise agreement. Simply putting the same date in both documents does not protect you.

Read the clause covering events beyond the parties’ control, too. Which events does it cover, how soon must notice be given, and what steps are expected to minimise the delay? Do not assume that a shortage of funds or an ordinary supply problem automatically qualifies. Any relief will depend on the actual wording and circumstances.

3. Calculate the costs that continue before opening

Do not assess a delay solely by the extra fit-out bill. Prepare a separate monthly list covering rent, maintenance, staff wages, security, electricity standing charges, insurance and financing costs. Add equipment storage costs and the risk of stock ordered in advance spoiling.

Then calculate the cash required in your budget for the planned opening date and possible later dates. Which payment deadlines will remain unchanged even if sales have not started? Loan repayments may begin before the outlet opens. Obtain a written repayment schedule from the lender; do not mistake the brand’s assurances for the bank’s agreement.

In particular, check the agreement for the following:

• Do minimum monthly fees start on opening or on signing?
• Will the contract term continue to run down during a delay?
• Is there provision to defer fees or extend the term if the brand causes the delay?
• Are claims for additional costs subject to any caps or exclusions?

These concessions are not automatic entitlements. They need to be negotiated and included in the signed document.

4. Put legal safeguards in place and keep evidence of delays

India has no dedicated franchise law, mandatory nationwide pre-sale disclosure document or central franchise registration system. It would therefore be wrong to assume that a special franchise remedy automatically applies to opening delays. General business registrations and local compliance requirements may still apply.

The Indian Contract Act, 1872 provides the main framework for contractual performance, breach and remedies. Section 55 addresses the effects of failing to perform on time; the consequences also depend on whether performance by the specified time was an essential term of the contract. Section 73 concerns compensation for loss caused by a breach. Compensation is not automatic: causation, loss, the contract terms and efforts to mitigate the loss will all matter.

Ask a lawyer to review the opening-related clauses together. Clarify how notice of delay must be given, the opportunity to remedy a breach, the final acceptable opening date and the remedies available after that date. Keep emails, approved designs, inspection reports and payment records in date order. If you proceed despite a delay, also seek advice on expressly reserving your claims or rights.

Practical takeaway: Before signing, summarise the opening stages, responsible parties, costs of delay and agreed written remedies on one page. Do not treat a timetable as a firm commercial commitment unless responsibility and consequences are clearly defined.