Buying a Franchise in India: Responsibility for Customer Complaints

Customers buy because of the brand, but often bring their complaints to the local outlet. If a product is faulty, a service is incomplete or an online order goes wrong, the franchisee may need to respond immediately. Before entering a franchise network, therefore, examine not only the sales process but also the arrangements for resolving complaints. The fact that a brand has a customer support centre does not automatically remove your responsibilities or costs.

1. Distinguish legal responsibility from brand policy

India has no separate, comprehensive central franchising law, mandatory pre-sale disclosure document or central franchise registration system. The relationship between the parties is governed primarily by their contract. The Indian Contract Act, 1872 provides the main framework for contract formation, performance, breach and available remedies. Do not, therefore, rely solely on verbal assurances about support with complaints.

For customer matters, the Consumer Protection Act, 2019 is important. It contains provisions covering defective goods, deficiencies in service, unfair trade practices and, where applicable, product liability. The liability of manufacturers, product sellers and service providers may depend on their roles and the facts of the case. Do not overlook the possibility of a complaint being brought against both the franchisor and the franchisee.

A clause between you and the brand stating that the other party will handle all complaints does not automatically limit customers’ statutory rights. Equally, both parties are not automatically liable for every complaint. Ask a lawyer to review the actual sales and service arrangements and clarify each party’s role. In food businesses, additional legislation such as the Food Safety and Standards Act, 2006 may also be relevant.

2. Document responsibilities from purchase to resolution

Ask the franchisor to explain the entire customer journey: who accepts the order, whose name appears on the invoice, who takes payment and who provides the service? The process may differ for purchases made at the outlet, through the brand’s app and on other online platforms.

Ask for clear answers to these questions in the agreement or its supporting documents:

• Who will initially log the complaint and acknowledge receipt?
• In what circumstances can local staff replace a product or issue a refund?
• Which cases require the brand’s approval, and what is the response deadline?
• Who is the next point of escalation if the brand does not respond in time?
• Who will communicate the final decision to the customer, and where will the record of closure be kept?

For example, a customer may pay through the brand’s app but collect the goods from your outlet. You could then be responsible for receiving the complaint without having the authority to issue a refund. Ask for the authority and system access you need to fulfil your responsibilities.

3. Check separately who bears the cost of refunds and faulty products

Accepting a complaint and paying to resolve it are two different things. Use an example to ask the franchisor to explain the full process: a customer receives a faulty product supplied centrally, and the outlet replaces it. How will the replacement goods, return transport and any money refunded to the customer be accounted for?

Review these cost items separately:

• Money refunded to the customer or a service repeated free of charge;
• The cost of inspecting, repairing, returning or disposing of the product;
• Reimbursement from the supplier and the evidence required to claim it;
• Additional customer support provided at the brand’s direction.

For each item, obtain written confirmation of who pays, which documents are required and the settlement deadline. Avoid a situation where you have provided a remedy to the customer but reimbursement from the brand remains outstanding indefinitely. Simply stating ‘no returns’ in a purchase policy is not a substitute for statutory remedies. At the same time, a customer merely changing their mind is different from receiving a faulty product.

The standard refund process may not be enough for a safety-related complaint. Also ask about procedures for stopping sales, setting aside the affected batch and notifying the brand immediately.

4. Test how the arrangements work before signing

Ask the brand for sample complaint-handling records with customers’ personal details removed. Check whether records show when a complaint was logged, when a decision was reached and when the refund was completed. Ask existing franchisees whether they receive genuine support with difficult cases or whether customers keep returning to the outlet.

Run through a hypothetical complaint: a customer receives a faulty item on a public holiday, the local manager is absent and central support cannot be reached. Who makes the decision? If there is no clear answer, the arrangements need improvement.

Make sure the final documents specify the version of the complaints policy, your access rights, the limits of staff decision-making authority and responsibility for keeping records. Customers’ personal information should be shared only as necessary and in accordance with applicable privacy rules. Also clarify how records of outstanding complaints will remain accessible later.

Practical takeaway: Before buying, work through a complaint on paper from initial logging to final resolution. Wherever the responsible person, decision-making authority or allocation of costs is unclear, obtain written clarification before signing.