Curbs On Foreign Brand Franchises May Be Eased

The Economic Times:

Foreign brands seeking to enter India through franchise arrangements can breathe easy. With pressure mounting from various departments concerned over the possible impact on exports and technology inflows, the government is likely to go slow on the proposed curbs on franchisee operations aimed at checking loopholes in the FDI policy on single-brand retail.

Curbs, if any, would be restricted to some areas, such as the services sector, senior officials said. This could have a bearing on the entry of major brands including Starbucks and Wal-Mart. RBI would be involved in drafting the proposed policy, which will be handled by the Department of Industrial Policy & Promotion (DIPP). The apex bank would come up with suggestions on amendments to FEMA to plug the gaps in the policy on franchisee operations.

The focus of the current exercise is to streamline the policy on franchisees without ruffling feathers. While services, especially retail services, are being examined carefully to prevent breach of single-brand FDI norms, officials feel master franchisees should not be allowed to operate retail outlets on their own without getting approval from the Foreign Investment Promotion Board (FIPB). Such activities should not be on the automatic route, which is handled by the RBI, they feel.

Premium brands such as Chanel, Ferragamo, Valentino, Tiffany are among those who have entered India through the franchise route. Others like Gucci, Tommy Hilfiger and FCUK are also expected here soon since purchasing power is increasing and Indian consumers have shown a strong appetite for high-end brands. Starbucks, for example, is waiting in the wings – seeking entry through the franchise route. More.

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