People nowadays are considering starting a business in a novel way. A start-up business is another term for new ways to start a business. It is not necessary for all new businesses to succeed. The failure rate of new businesses is very high.
Because most new businesses fail and pose risks, there is a growing trend in Nepal for franchise businesses.
A franchise is a well-known and proven way of launching a business in Nepal. Among the most popular franchise industries are transportation, beauty, fast food, education, wellness, mail delivery, clothing, and health care. There are numerous low-cost franchise opportunities in Nepal.
This article describes how to register a franchise business in Nepal, as well as “What is a Franchise Business?” and the Documents Needed for Franchise Business Registration.
What exactly is a franchise business?
In the 1920s and 1930s, the first food and hospitality franchises were established in the United States of America.Food franchises included well-known brands such as McDonald’s, Hilton, and Day’s Inn, which gradually gained popularity and development in Nepal. A franchise business is one in which the franchise owner licenses the operation to others.
This kind of business may sell products, provide services, and do a variety of other things. A franchise is a business model and marketing concept that allows a company to expand.
Small business owners can own a piece of an established operation by entering into a contractual relationship with the licensor/franchisor. Small business owners can own a piece of an established operation through franchising.
It is one of the most effective platforms for foreign companies and brands to enter the Nepali market. A franchisor (franchise brand) participates in the process and provides conceptual, structural, legal, and training support to the franchisee in exchange for an upfront start-up fee and royalty payments (owner of the franchise outlet).
Common Franchise Structures
In general, every business has a franchise.
It is necessary to consider what types of businesses are actually taking place.
In Nepal, the following franchise businesses are active.
Food and drink
Fast food restaurants are becoming franchise businesses in Nepal. KFC and Nepalis, for example, are creating and selling franchises for their own fast food chain. The Nepalese franchise burger house and crunchy fried chicken. You can open a franchise of a popular fast food restaurant around the world.
Business Services
In the business and accounting system, there is a trend of operating a franchise business. For example, in South Asia, there is a site called Daraj, and in Nepal, there is a pathao, which is a Bangladeshi business registered in Nepal.
One of the most common types of franchise is the UPS Company and franchise business. The franchisee not only sells a specific product, but also manufactures and delivers the product or service in accordance with the franchisor’s proprietary ingredients and/or practices, with the help of the franchisor.
Fitness and Health
The popularity of fitness centers for bodybuilding and fitness is growing in Nepal. Several foreign gyms operate a health and fitness business in Nepal. They are franchise businesses, and the successful gyms provide consistent service. Fitness classes courses are also planned.
Healthcare organizations can be franchises as well. Planet Fitness, The Vitamin Shoppe, and Home Helpers Home Care are examples of health franchise businesses.
Distribution Partnerships
The franchisee purchases the right to manufacture and/or sell a branded product, or a portion of a product, in accordance with the franchisor’s practices and standards. Manufacturing franchises and product franchises are the two most common subtypes of distribution franchises.
Under this program, automotive manufacturers (Hyundai) have assisted in the establishment of plants in various countries. Beverage manufacturers (for example, the Coca-Cola company) Coca-Cola, for example, collaborates with manufacturing franchises to produce the syrup used in their soft drinks.
The syrup is then sold to a bottling company, which adds water and carbonation to the drinks, bottles them, and distributes them.
Hyundai and other multinational corporations have contributed to the establishment of companies for parts and assembly in various countries. During the manufacturing process
Franchises for Jobs
Job franchises are service-based franchises. A job franchise, as an owner-operated franchise, involves the franchisee’s direct involvement in the day-to-day operation of the business and costs significantly less than a fast food or hotel franchise.
Here are a few examples of job franchises: Services for cleaning Lawn care for homes, A specialty coffee mobile coffee business Activities, clubs, and classes for children Repairs and accessories for cell phones Plumbing Pool upkeep Event planning Travel company.
Conversion Franchises
This is the process by which an independent business becomes a franchise. This is a business that was previously operating and was later changed. The franchisor approaches someone who already owns a business, such as pizza delivery, estate agency, or hairdressing, and suggests they ‘convert’ to the franchisor’s brand.
Franchises for Investment
Usually the most expensive type of franchise. Investors put large sums of money into franchised businesses and hire professionals to oversee them, such as managers and team leaders. Franchisees view these businesses solely as investments, relying on their employees and managers to do the heavy lifting.
Franchisees typically select large-scale businesses such as hotels, restaurants, and grocery chains because of their ability to generate income on a larger scale. An ‘investment franchise’ is one in which a franchisee invests a large sum of money in a franchise, such as a hotel.
The primary benefit to the franchisor is that the elusive franchisee and location are discovered, while a competitor is removed from the local market. The franchisee gains an advantage by improving their business through better branding, better operating systems, and ongoing support.
Often, the franchisee will not work in the franchise at all and will instead hire a professional management team to run the business. An investment franchisee will typically have management experience with a large professional team.
An investment franchisee may run a number of fast food outlets, employing not only managers for each outlet but also a general manager to oversee the operation.
Why is a franchise business necessary?
Business formula that is ready to use
A franchise business is one that has been established and accepted by others. In this case, the mantra is to accept the ready-made business formula. In this market, tested products and services, as well as established brand recognition, are accepted, and investment is attracted.
Many Nepalis live abroad, are accustomed to foreign cultures and lifestyles, and are aware of the brand, which is one of the most difficult aspects of launching a startup. The nepalis will look up the name of your company. This demonstrates to potential buyers that the brand is well-established and trustworthy.
Obtain trademark and logo license
Those who want to start a Franchise business can use an existing logo or trademark or sell a product or service under the franchisor’s business name. The franchisee typically pays the franchisor an initial start-up fee as well as annual licensing fees in exchange for acquiring a franchise. Knowledge of the franchisor’s business,
Profits increase as a franchise owner
- While doing independent business, there may or may not be profit, but doing franchise business is profitable.
- Customers choose franchise business because they are aware of the brand brand awareness, despite the fact that it is expensive.
- Despite the high costs of franchise fees and ongoing royalties paid while running the business, you will see a high return on investment almost immediately after opening the location.
Franchise training
Because the Nepalis may lack experience, they may be forced to bear the loss. However, before beginning the franchise business, training is provided. Nepali I lack industry-specific experience. Schedule a training session with a franchise business operator to learn how to run your brand new franchise business.
Things to consider about before signing a franchise contract
TIME FACTOR
Many factors must be considered when conducting Franchise contracts: Franchise agreements are complicated and unique to each franchisor. A franchise agreement typically includes three types of payments to the franchisor.
- First, the franchisee must pay the franchisor an upfront fee to purchase the controlled rights, or trademark.
- Second, the franchisor is frequently compensated for providing training, equipment, or business consulting services.
- Third the franchisor receives ongoing royalties or a percentage of the operation’s sales.
You invest to earn profit.
You must reach an agreement after deciding on a timeframe when conducting a franchisee agreement.
A franchise contract is comparable to a business lease or rental. The franchisee does not own the business. Franchise contracts typically last between five and thirty years, depending on the contract.
A necessary component of franchise agreements
Things to think about when conducting a franchise agreement
Franchise fee
A franchise fee is an upfront cost paid by a prospective franchisee to operate the franchise. The franchise fee varies depending on the individual, service, and item. If we reach an agreement with the foreign franchise company, the costs will be high. If you work with a Nepalese company, the cost is reasonable.
Initial investment
It must be clear how much money is to be invested when conducting a Franchise agreement. The initial investment includes costs such as royalties, real estate, and inventory.
Franchise agreement components
7 factors must be considered in the Franchise agreement.
- Pricing,
- Products,
- Equipment,
- Business Hours,
- Decor and signage, and
- Marketing Location are all factors to consider.
- Franchise owners create such guidelines in order to provide quality services everywhere. These guidelines are intended to create consistency so that each franchise looks the same in every location.
Nepal Franchise Registration has a legal framework in place for franchise business registration.
The franchisor is not required by Nepali law to be registered with any professional or regulatory authority prior to entering into an agreement for this purpose.
The Nepali Trademark Act, on the other hand, makes it easier to record a trademark’s registered user.
Nepal Franchise Business Contract
A franchise is founded on a franchise agreement, with the exception of the obviously necessary elements of financing, infrastructure, and other necessities. The type of agreement used for this purpose varies depending on a variety of factors, including format, control, franchisor type, and others.
Franchisees may impose disclosure requirements in the contract, subject to legal constraints. The franchisor’s misrepresentation in this case facilitates the franchisee’s ability to file both a civil lawsuit for damages and a criminal complaint for false statements of fact and criminal breach of trust.
Disclosing Standards
Certain countries have disclosure laws that require franchisors to provide franchisees with all necessary information prior to signing any contracts. In Nepal, pre-disclosure obligations are used, with the aforementioned franchise agreement encapsulating specific disclosure requirements.
The franchise agreement also specifies whether this requirement applies to sub-franchisees. Emphasize that the proposed contractual connections are subject to common law norms in this case.
There are no specific formats or obligations for ongoing disclosures in the absence of any disclosure requirements.
Opening a Franchise in Nepal
Business Recognition in a Particular Market
- One of the most important requirements for any aspiring entrepreneur looking to break into the business world is niche identification.
- Market Selection for sustainability and revenue generation.
- Conduct a thorough market and city-specific analysis before making an informed decision.
- Be informed that popular niches are more susceptible to fierce competition.
Legal Issues
Once you’ve decided on a specialty, get legal approval from the Ministry of Commerce, Trade, and Industry as soon as you sign the franchise agreement with the appropriate company.
If the franchise is located outside of Nepal, choose a reputable company that can assist you with any problems that may arise.
Business Licensing Is Required
The most important consideration when launching a franchise in Nepal is now presented. To operate legally, you would need a separate license and registration. If you own a restaurant chain, for example, you must register your company.
Corporate Tax Responsibilities
Tax Liabilities
Every business owner should be aware of the tax implications. As a result, we ask that you emphasize the same and are knowledgeable about the various tax regimes that apply to your company.
To operate legally, you would need a separate license and registration. Every business owner should be aware of the tax implications.
As a result, we ask that you emphasize the same and are knowledgeable about the various tax regimes that apply to your company.
Conclusion
We have been providing legal assistance with the Franchise business agreement while registering the Franchise business. Please contact us if you want to register the Franchise business.
Should you have any questions, please do not hesitate to contact us at +977-9849517735 or by email: info@corporatelawyernepal.com
Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.
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