India's Largest Database on New Projects
Govt
plans franchisee law to ease global retail entry
The
Centre is considering a franchisee law aimed at fast resolution of disputes
between brand proprietors and their domestic partners. As of now, all franchisee
agreements are subject to the Indian Contract Act and if there are any disputes,
they go through the Indian Arbitration Act or the International Arbitration Act,
which may take a lot of time, energy and money.
The
proposal is expected to be put before the empowered sub-committee of the
National Development Council headed by Prime Minister Manmohan Singh. Members of
the sub-committee include finance minister, agriculture minister, commerce
minister, consumer affairs minister, minister of law & justice and deputy
chairman of the Planning Commission. The chief ministers of Maharashtra, Tamil
Nadu, UP and West Bengal are also members of the committee. The committee is
expected to finalise the proposal before the NDC meeting, which is likely next
month.
Experts
accept that in the absence of foreign direct investment in the retail sector,
foreign brands are appointing master franchisees (an Indian company) to sell
their labels in India for a fee. The master franchisees, in turn, appoint local
franchisees, who own and operate stores across the country. Even though most of
the brands are sold on the franchisee model, there are no specific laws
governing this.
Domestic
firms including the Tatas, Reliance and Bharti are expected to invest over $22bn
in organised retailing in the next five to six years. Law aimed at quick
resolution of disputes between proprietors and local partners National
Development Council panel to clear proposal.
Source:
Economic Times