How to Resolve Franchisor-Franchisee Conflict Legally

How to Resolve Franchisor-Franchisee Conflict Legally

India does not have any specific laws on franchising. A broad definition of transfer of technology covers franchising. Thus, the legal framework for new franchisers interested in setting up master franchises in India exists in terms of brand protection and rules regarding payment of franchise fees. When franchisors enter India, they are governed by a number of different national and regional statutes and codes rather than a single comprehensive statute. Here are few laws that help resolve conflicts between franchisors and franchisees: (BBGV1462021)

1. Contract Act-
By nature, every franchising relationship is bound by a contract, hence the Indian Contract Act, 1872 is applicable to all franchising arrangements. Under the Contract Act, a “contract” is an agreement enforceable by law. Most conflicts relating to the act are as a result of ‘Restraint of trade;’ when franchisees are restricted from entering into a contract with another franchisor.

2. Competition Law-
The Competition Act disallows arrangements with respect to production, supply, distribution, storage, acquisition, or control of goods or provision of services that may cause an adverse effect on the competition in India (especially on local companies). The conflict, therefore, does not arise between the parties involved in the contract. It is between the franchisor and the law, making it even more challenging to deal with. However, there have been cases in India where judgments have been passed in favor of foreign companies in this matter.


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