Starting a franchise business can seem to be a lucrative opportunity. You’re already getting the benefit of starting your business with someone established. Therefore, as a business owner, you may think that not much is needed. However, it is important to note that in order to run a successful franchise, you should take into consideration all the factors.
If you want to open a franchise, you must connect with the business owner, check if they have the franchise model, analyze their license procedure, prices, and so much more. Running a franchise isn’t as easy as it seems because a lot goes into it.
Let’s understand the entirety of the process of franchising business in 2025.
When Will the Franchise Business Become Successful?
A major reason most people prefer business process outsourcing franchise is because of the popularity of the brand. Different businesses across different sectors and industries offer lucrative business opportunities that can bring you great benefits.
However, it is important to identify which one would prove to be the most useful. Thus, the success of the franchise won’t come overnight, but a lot of factors need to be taken into consideration.
Some of the key factors that have a huge role in the franchise becoming successful include the following:
Industry Type
The type of industry you’re in will have a huge role in determining whether the franchise business will be a hit or a miss. Considering the immense popularity of franchise business models, several businesses are offering it across different industries. Therefore, you will have to analyze the industry type so that you can make the right choice. Some franchises, such as those for home-based businesses, do not make enough profit. On the other hand, businesses that are already booming are likely to make more profit.
Financing
Financing is one of the most important factors that can often determine the success of your business process outsourcing franchise. Different types of financing options are available in the market. The interest that you’ll have to pay for the finance determines how much you’re making. Therefore, if you have taken a loan to start your business and you must pay it off, then it might take some time for you to come into the profitability zone.
Knowing Your Goal
To determine whether or not you’ve made a profit in your business, you need to know what your business goals are. As the business grows, the equity share will also grow. If your future goal is to sell the franchise, it may not make that big of a difference to determine the profitability. You can take a look at the net worth of your business model to determine how much profit you’ll be making. With different variables available in the market, determining the profitability of your franchise model can be slightly difficult.
Who Runs the Franchise?
The profitability of the franchise will vary significantly depending on who runs the franchise. For example, a manager-run franchise is very different from an owner-run franchise. While determining the costs, it is essential to understand which would bring in more profit. In the case of a manager-run business process outsourcing franchise, you’d have to hire someone, so the expenses will be slightly more.
Additional Expenses
When starting a business outsourcing process franchise, it is very common for additional expenses to arise. A lot of new franchise owners do not usually consider the bottom line while starting the business. You will have to consider different factors such as taxes, business profits, loan expenditures and more to determine the actual cost. Once everything has been paid off can the final profit amount be calculated.
Legal Structure of Franchise Business
While understanding the process of franchising business in India, it is important that you consider the legal structure. Different taxes have an impact on it. These laws are made to comply with the legality under business law and industry-specific laws. Thus, specific rules and laws govern the franchise business in India. These include:
- Indian Contract Act, 1872
- Consumer Protection Act, 1986
- Monopolies & Restrictive Trade Practices Act, 1969
- Competition Act, 2002
- Trademarks Act, 1999
- Foreign Exchange Management Act, 1999
Franchise Agreement Structure Impact on GST
In the franchise model, one business party allows the other party to use their intellectual property (business model) in exchange for some royalty payment. Franchising often differs in terms of licensing. When one party is allowing the other party to enter the franchise model, they must be allowed to use or provide a license for using their intellectual property.
The franchisor may take royalty payments and franchise fees from the franchisee. The GST however will be charged depending on the type of service which is being offered by the franchisee. Moreover, it is also important to determine whether these services are taxable under any Act or not. The application and use of GST laws have been clarified as per the Authority of Advance Ruling.
Process to Start Franchise Business in India in 2025
Considering the fact that franchise businesses can be beneficial, it is important to learn how to start it. Operating with the right goods and services can play an important role in bringing about profit.
The process of franchising business in India in 2025 are as follows:
Step 1: You must connect with the franchisor and understand what their requirements are. You must look into their business arrangements, fees and documentation. Furthermore, also check what kind of support they will be offering for businesses. If any detail is not mentioned on their website, you can talk directly with the franchisor.
Step 2: Once the initial discussion is done, you will need to get on preparing all the documents. Submitting the right documents within the timeline ensures that the franchisor will approve the application sooner. The franchise application must be filled out and submitted on time. Furthermore, it is also important to provide a Letter of Intent along with the proposed business model. Other documents required will be valid government ID proofs and proof of the space that you have rented for business.
Step 3: Now that you have submitted all the documents, you will have to meet the franchisor. This is a sort of interview round where the franchisor will go through your application and determine if you’re suitable for the position. Moreover, they will also assess if you are a good fit for their brand and reputation or not.
Step 4: Once everything has been finalized, you will have to sign the documents. While signing the franchise agreement, it is extremely crucial that you look into the smallest details. You must go through the franchise agreement and its terms and conditions properly before making the choice. You’ll have to consider the franchise fee and royalty free. Moreover, also goes through the details that provide information on what can lead to the termination of a business. Also, make sure to check the products and supplies.
Read More: What is Rule 143 of GST?
Conclusion
When starting a franchise business, it is important to take all these factors and the process of franchising business into consideration. Taxation and GST are very important factors to consider because of the new changes. You will have to look into the changes that this has to offer because it can have a huge impact on your profitability. It is advisable that you go through the details and make the choice for your business accordingly.
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FAQs
Is the GST registry important for franchise business?
Yes, GST registration is crucial for franchise businesses. All the franchisors must register for the GST. They can charge the GST fees depending on the fees that the franchisee has paid.
Can I claim GST on franchise fees?
The franchise services are taxable. Therefore, you’ll be eligible to claim the fees. However, it is important that the conditions of fulfilment must be met as per Section 16 of the CGST Act and CGST Rules.
How much is the income tax rate for franchise businesses?
The franchise businesses must pay income tax of up to 30% on their business profit. However, specific technical service fees are also provided under the tax treaty.
Is TDS applicable for franchise fees?
No, TDS isn’t applicable to franchise fees. It is advisable to record the revenue shares and adjust the expenditures to determine the actual costs.
Can I run my business without GST?
Whether or not you can run your business without GST depends completely on the annual turnover. GST has a minimum threshold limit for the location and type of businesses. Businesses that make a turnover of less than Rs 40 lakhs in goods and Rs 20 lakhs in services may not register for GST in the initial phases.
