Buying a Franchise in India: Check Your Adviser’s Role and Fees

When choosing a franchise in India, an adviser or intermediary can help you compare brands and negotiate terms. But introducing you to a brand and carrying out independent due diligence in your interests are different services. To build trustworthy relationships within the franchising community, first establish who the adviser’s client is, where their payment comes from and where their responsibilities end. Do not sign a service agreement simply because the brand they recommend is popular.

1. Establish who the adviser represents

Someone who describes themselves as your adviser may also act as a sales representative for a brand. This arrangement is not inherently wrong, but their financial interests may influence your choice. Clarify their role and payment structure at the outset.

Ask for written answers to these questions:

• Does the adviser charge only you, or do they also receive commission from the brand?
• Do they receive separate payments when an application is submitted, an agreement is signed or an outlet opens?
• Are the recommended brands their paying partners?
• Will they also compare brands from which they receive no payment?
• Do they or their associates have a financial interest in any of the businesses they recommend?

Receiving commission does not make advice worthless. The problem arises when a sales recommendation is presented as an impartial assessment. Ask why a brand has been selected in light of your budget, local demand and the time you can commit. Also ask which alternatives were rejected and why.

2. Understand India’s legal framework and the adviser’s authority

India has no separate, comprehensive franchising law, central franchise register or mandatory franchise-specific pre-sale disclosure document. A private certificate issued by a franchise adviser is no substitute for government franchise approval. Nor does ordinary business registration amount to a government guarantee of the quality of their advice.

The Indian Contract Act, 1872 is a key legal basis for matters involving service agreements, free consent, misrepresentation, fraud and breach of contract. Its provisions on agency may also be relevant to the adviser’s appointment and authority to act on behalf of a brand. Depending on the circumstances, goods and services tax legislation, the Trade Marks Act, 1999 and other general laws may also apply.

If an intermediary claims they can reduce fees on the brand’s behalf or guarantee a particular term, obtain direct confirmation from an authorised representative of the brand. A brand logo in a presentation is not sufficient evidence. Get written confirmation of whether the intermediary merely makes introductions, can negotiate, or also has authority to make binding commitments. Remedies for false statements will depend on the facts and evidence; do not assume you will automatically be entitled to a refund in every case.

3. Link fees to clearly defined work and outcomes

Review the adviser’s service agreement separately from the franchise agreement. It should not rely on vague phrases such as ‘full support’. It should clearly specify which tasks are included, such as preparing a shortlist of brands, producing a comparison report, arranging meetings and reviewing documents. Agree a deadline and a responsible person for each task.

Before accepting the fees, clarify the following:

• What work does the initial payment cover, and when will it be treated as earned?
• What triggers a success fee: an introduction, signing an agreement or another defined milestone?
• Are travel, legal reviews and taxes charged separately or included in the quoted fee?
• How much will remain payable if you do not choose a brand?
• How will fees be settled if the service is incomplete or the appointment is terminated?

Pay particular attention to any clause requiring you to pay a fee if you choose the same brand after ending your relationship with the adviser. Specify in writing how long this obligation lasts, which brands it covers and any exceptions for brands you were already in contact with. Check that the name of the entity receiving payment matches the service agreement and invoice.

4. Retain responsibility for independent due diligence

Ask the adviser to provide supporting evidence for every significant conclusion. Forwarding a brand’s sales presentation is not independent financial due diligence. Their report should distinguish between information supplied by the brand, information that has been verified and anything that remains unverified.

Have your own independent lawyer review the agreement and your accountant assess the assumptions behind the investment. Speak directly to existing franchisees. Introductions selected by the adviser may provide useful information, but do not base your decision solely on those contacts. Keep records of discussions, proposals, reports and fee receipts.

Practical takeaway: Before appointing an adviser, get a one-page written summary of their role, payments from both you and the brand, agreed tasks and termination terms. Good advice supports your decision; it is not proof that due diligence has been completed on your behalf.