Buying a Franchise in India: How to Check Territorial Rights

Choosing a good location is not enough when buying a franchise. You also need to know whom the brand can authorise to sell in the same area, where they can operate and which sales channels they can use. Clear territorial rights are a foundation for cooperation within a franchise network. An ‘exclusive territory’ promised in a brochure does not automatically protect you: its meaning, exceptions and remedies for breach must be set out in the agreement.

1. Understand what an ‘exclusive territory’ really means

First, ask whether you are simply being granted the right to operate an outlet at one address, or whether you will also be protected from competing outlets within a defined area. These are different things. Being the first franchisee in a city does not give you exclusive rights across that city.

Get written answers from the brand to these questions:

• Can the franchisor open its own outlet in the area?
• Can another franchisee, an affiliated company or an authorised retailer sell there?
• Are shopping centres, airports, railway stations and institutional premises exempt?
• Will a smaller-format outlet, a temporary sales outlet or a delivery-only kitchen be treated differently?

Rather than relying on words such as ‘sole’, ‘exclusive’ or ‘protected’, have the prohibited activities clearly defined. For example, a clause stating only that ‘no other franchise will be granted’ does not necessarily prevent the company from opening its own outlet. Specify separately which entities and outlet formats the protection covers.

2. Define geographical boundaries and sales channels

Include the territory’s definition in a signed schedule to the agreement. This can include a map, roads marking the boundaries, relevant PIN codes (India’s postcodes) and geographical coordinates where needed. Simply referring to a set distance from the outlet is ambiguous: will that distance be measured in a straight line or by road?

A PIN code can cover a large area. Agree how your rights will be preserved if municipal boundaries or PIN codes change. Make clear which takes precedence if the map and written description differ.

Next, examine online sales separately. Customers in your territory may buy through the brand’s website, mobile app or third-party delivery platforms. Ask:

• Which outlet will receive a customer’s order, and how will orders be allocated?
• Can another nearby outlet deliver within your territory?
• Will you receive any share of centralised online sales?
• Who will handle orders from institutional and wholesale customers?

Do not assume that you will automatically receive a share of sales made through a shared online platform. If a share is agreed, record how it will be calculated, what sales statements you will receive and when payments will be made.

3. Check existing rights and future plans

Before paying to reserve a territory, ask the brand for a list of nearby operating outlets, approved locations and territorial rights already granted. A list of open outlets alone is not enough: someone else may already hold the right to open an outlet in the same area in future.

In particular, check that the entity offering the agreement has the authority to grant rights in your territory. If it is granting a sub-franchise on behalf of the main franchisor, ask for evidence of that authority. If confidentiality is an issue, have your lawyer review the relevant extracts.

Ask existing franchisees how boundary disputes and order allocation are handled in practice. These conversations should corroborate the documents, not replace them. If a potential conflict emerges, have the agreed resolution included in a signed schedule.

4. What protection does Indian law provide?

India has no dedicated franchise law, compulsory franchise registration or franchise-specific government regulator. Nor is there a requirement to provide a standardised franchise disclosure document before a sale. You therefore need to request territorial information yourself. General business registration requirements and activity-specific approvals may still apply.

The Indian Contract Act, 1872 applies to matters such as contract formation, performance, misrepresentation and breach. The absence of a separate disclosure regime does not mean that a brand is free to provide false information. Legal remedies may be available depending on the circumstances and evidence; not every false statement has the same legal consequences.

Territorial restrictions, exclusive distribution arrangements and other vertical agreements may be reviewed under the Competition Act, 2002. Granting an exclusive territory is not automatically unlawful: its effect on competition and the applicable legal tests matter. The Trade Marks Act, 1999 concerns the use of a brand’s trade marks, but permission to use a trade mark does not itself grant a monopoly within an area.

5. Turn protection into measurable contractual terms

Territorial protection may depend on meeting sales targets or opening the outlet within a set period. Clearly define how targets are calculated, the assessment period, the reporting basis and the opportunity to remedy any shortfall. Also agree how supply disruptions caused by the brand or delays in location approval will affect those targets.

Check whether the franchisor can unilaterally alter the territory or widen its exceptions by changing the operations manual. Set out requirements for written consent to changes in your rights, advance notice of a proposed new outlet, a designated person responsible for complaints and a timetable for resolving them. Have a lawyer review the provisions for corrective action or compensation if a breach occurs; do not assume these remedies are automatically available.

Practical takeaway: Before paying, make sure you have three things together: a signed territory map, a list of sales channels and exceptions, and a clear procedure for handling breaches. These—not verbal assurances—are the working foundation of your territorial rights.