Franchising: how Indian food and retail brands grow

The brand, called the franchisor, owns the name, recipes, systems and training. The franchisee is a separate business that pays to use them and runs an outlet at its own cost. The franchisee pays for the premises, fit-out and staff, and the brand supplies the playbook, and often the key ingredients or products.

The customer sees one brand and does not usually know who owns the outlet. For the brand, each new outlet needs little of its own cash, so it can add outlets faster than it could by opening stores itself.

Fees vary by brand and deal, and each agreement is negotiated. Most food and retail franchises combine a few charges. These are general patterns and not set rates.

Fees are usually spelled out in the agreement along with the length of the term and the renewal terms. A franchisee should ask whether the royalty is charged on gross or net sales, and what happens to the outlet and its stock if the agreement ends.

• Upfront franchise fee: a one-time payment for the right to open.
• Royalty: a regular share of sales, often a few percent, paid to the brand.
• Supply margin: the brand may earn by selling ingredients or products to the outlet.
• Marketing contribution: a share of sales for brand advertising.
• Setup costs: fit-out, equipment and deposits that the franchisee pays directly.

A master franchise gives a partner the rights to a whole territory, such as a country or a region, instead of one outlet. The master franchisee opens outlets itself or sells unit franchises to others within that territory. It is a common way for an Indian brand to enter a foreign market without setting up a local company.

Under this arrangement, the brand usually receives a fee and a share of revenue, and sets targets for the number of outlets and the timeline. As a live case, StopDown covered Wow Momo entering Sri Lanka through Softlogic Corporation as master franchisee, with the UAE named as the next market.

India has no law written only for franchising, as of November 2026. A franchise agreement is an ordinary contract under the Indian Contract Act, 1872. The brand name and logo are protected as trademarks under the Trade Marks Act, 1999, and the franchise agreement works as a licence to use them.

Other laws apply to the pieces. GST applies to franchise fees and royalties. Food outlets need licences from the food safety regulator, FSSAI, and local permits. Fees paid to or received from other countries come under the Foreign Exchange Management Act, 1999 and RBI rules, so a master franchise abroad has to follow them. Contracts differ, so each deal must be read on its own terms.

Brands often keep owned outlets in key cities, where they want tight control, test new menus and show the standard. They use franchises in places where they lack local knowledge or cash. The mix also changes reported numbers: owned outlets add the full sale to revenue, while a franchised outlet adds only the fees and product sales to the brand.

So two brands with the same number of outlets can report very different revenue. When comparing them, check how many outlets are owned and how many are franchised.

For the brand, a franchised outlet usually earns less per outlet than an owned one, but costs far less. Its return is high compared with the capital it puts in. For the franchisee, the outlet needs to cover rent, staff, ingredients and royalty, and still leave a profit.

Weak outlet economics are the main risk. If a franchisee does not make money, outlets close, and the brand's name suffers. This is why careful brands look at same-store sales and at how long an outlet takes to pay back its setup cost.

Quality is the first risk. The brand answers for every outlet, so uneven food, service or pricing harms everyone. The second is the quality of partners: a master franchisee that opens slowly can hold up a whole market. The third is the dependence on one partner in one country.

Currency also matters in foreign deals, because fees paid in local money are worth less if that currency falls against the rupee. Brands handle these risks through audits, training, targets and exit terms in the agreement.

In owning, the brand pays for everything and keeps all profit. In a dealer model, the dealer buys products and resells them, with little say from the brand over how the shop looks or operates. In a franchise, the outlet follows the brand's complete system, from menu to uniforms, and the brand takes a fee on every sale.

This is why franchising suits food and service brands, where the experience must feel the same everywhere. Dealer models suit durable products such as vehicles and appliances, where the main need is a place to sell and service the product.

Announcements usually state the number of planned outlets and the partner's name, but often leave out the fee, the royalty and the exit terms. They also rarely say how many outlets already earn a profit. Those facts decide whether the plan is likely to work.

It helps to compare a plan with the brand's record. Has the brand opened the outlets it promised earlier? How many closed? Are existing franchisees renewing? Answers to these questions say more about the model than a new target does.

A foreign master franchise can also take time to start. The partner has to find sites, hire and train staff, set up supply of ingredients and meet local food rules before the first outlet opens, so the timeline between signing and the first sale can be long.

Look for what has actually been signed and what is only a plan. Check the type of right granted: single unit, area or master franchise. Look at the targets, such as the number of outlets by a date, and whether the brand puts in any money. Treat outlet targets as plans and not results. This is general information and not advice, and legal terms should be checked with a professional.