Good question! Do you render Distribution Services in India as part of your business? If you do, then this article will be beneficial to you. You’ll be on a much safer side with the law when you understand the implications of franchise regarding your business. This article will be giving you a sneak peek into what you need to know as it relates to Distributorships Opportunities and Franchise rules.
Is Distributorship Similar to a Franchise?
A regular distributorship is just an agreement with someone who deals in the supply of goods within a specific location; the distributor handles the supply alone. The usual distributors could supply anything from cells phones to cars as well as large equipment. Hence, most people who supply goods fall into the distributorship category of business partnerships.
A distributorship can be mistaken for a Distributorship Franchise when certain conditions are met; and if that ever happens, the operators of that business will be expected to fulfill every obligation that binds a franchise. So if you run a distributorship, here are a couple of interesting things you need to clarify; hopefully, you do not want your distributorship to be mistaken for a franchise:
Are you using the trademark of the brand you are partnering?
Are you supplied those goods strictly on the “bona fide” wholesale charges alone?
Do your partners give you any marketing or training support?
If at least one out of these three conditions isn’t met, then your distributorship cannot be deemed a franchise by law. These requirements are to be fulfilled before a business partnership is assumed a franchise. Other additional criteria could disqualify a business partnership from being regarded as a franchise though. Let us have a look at them in the subsequent section of this article.
More Exemptions from the Franchise Rule
This part of the post is to make us further understand that even after a business partnership has met the basic requirements mentioned above, it still stands a chance of being exempted from fulfilling the obligations of a franchise.
Are you partnering with a more experienced company? If yes, that agreement could be exempted from the franchise rule. That is because these rules are meant to protect weaker and smaller businesses is such partnerships.
A complete regulation analysis should be applied to the business model to confirm if it is covered by every aspect of the Franchise rule such as Automobile Dealer franchise act, the petroleum marketing practices act or the state liquor laws.
It is true that franchise is a licensing agreement, though not all licensing agreements can be referred to as a franchise. To be on the safe side regarding how you explore specific Business Opportunities in India, try looking into every agreement papers and establish if the above conditions have been met or not.