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Just Other Articles - Master Franchising Arrangements In India
Multiple factors encourage the global brands to enter into master franchising arrangements for India including benefit of acquaintance of the master franchisee with local environment; local sales and marketing expertise of the master franchisee; ready availability of sales and marketing channel
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
s; reduced investment; sharing of expenses; negligible government approvals; no requirement to recruit local workforce and consequently lower financial risk. Further, the regulatory restriction on retail trading by foreign companies is a major factor for boom of master franchising arrangements
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
in India.
Master Franchising Agreements:
Due to the nature of the business and consideration involved, the Master Franchise Agreements are fairly complex documents. A typical master franchise arrangement enables the master franchisee to develop the business in the territory under the franchis
Master Franchising Agreements:
Due to the nature of the business and consideration involved, the Master Franchise Agreements are fairly complex documents. A typical master franchise arrangement enables the master franchisee to develop the business in the territory under the franchis
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
or’s brand name and trademark with or without permission to manufacture the products locally, provides guidelines for operation of business and specifies returns for the franchisor. Depending on the arrangement, a Master Franchise Agreement would ordinarily govern:
· Permission and restriction
· Permission and restriction
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
on use of trademark within the territory;
· Transfer of technical know how concerning manufacturing, advertising or marketing;
· Financial returns to the franchisor, including royalty and fee for services;
· Appointment of sub-contractors to manufacture and sub-franchisee to sell the produc
· Transfer of technical know how concerning manufacturing, advertising or marketing;
· Financial returns to the franchisor, including royalty and fee for services;
· Appointment of sub-contractors to manufacture and sub-franchisee to sell the produc
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
ts at different locations within the territory;
· Control over the sub-contractors and sub-franchisees through master franchisee;
· Manufacturing process including approval of samples and quality control;
· Provision of dedicated staff by the franchisee;
· Appearance of the franchise stores
· Control over the sub-contractors and sub-franchisees through master franchisee;
· Manufacturing process including approval of samples and quality control;
· Provision of dedicated staff by the franchisee;
· Appearance of the franchise stores
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
and training of sales executives;
· Annual market penetration targets;
· Minimum stock purchase/import obligations;
· Joint marketing, sharing of advertising cost and support by the franchisor;
· Periodic reporting by the franchisee;
· Duration, renewal or termination of the arrangement;
· Annual market penetration targets;
· Minimum stock purchase/import obligations;
· Joint marketing, sharing of advertising cost and support by the franchisor;
· Periodic reporting by the franchisee;
· Duration, renewal or termination of the arrangement;
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
· Events of default, pre-termination notice to correct, termination, etc.;
· Exit options, if any or both parties do not wish to continue;
· Post termination obligations including assignments of trade contacts; return/destruction of advertising material, liquidation of unsold inventory, raw
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
aterial and destruction of sub-standard products, if any;
· Provisions governing confidentiality, warranty, intellectual property protection and insurance.
The rightful consideration of the brand name owners to establish and maintain market reputation compels them to stage-wise describe the i
· Provisions governing confidentiality, warranty, intellectual property protection and insurance.
The rightful consideration of the brand name owners to establish and maintain market reputation compels them to stage-wise describe the i
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
nherent processes and prescribe their participation in crucial decisions.
Formalizing a Master Franchise Arrangement:
Most franchisors usually provide their standard Master Franchise Agreement to start with and ask the franchisee to suggest revisions (though they may not appreciate many revis
Formalizing a Master Franchise Arrangement:
Most franchisors usually provide their standard Master Franchise Agreement to start with and ask the franchisee to suggest revisions (though they may not appreciate many revis
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ions by the franchisee in the interest of uniformity of standard agreements across all territories).
From a contractual standpoint, while formalizing the agreements, a franchisee must try and bridge all potential gaps by identifying and analyzing maximum “what if?” situations. Attempt to consi
From a contractual standpoint, while formalizing the agreements, a franchisee must try and bridge all potential gaps by identifying and analyzing maximum “what if?” situations. Attempt to consi
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
der the scheme of arrangement detailed in the agreement vis a vis your financial, technical, manufacturing, marketing, human resource, sales and business planning capabilities. The practicality of targets and schedules is essential to avoid a default situation later on.
From a financial standp
From a financial standp
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
int, while analyzing initial and running costs, the franchisee should include the costs of acquiring the requisite technical know-how and skills to operate the business; import of initial inventory; transportation of material; establishment, lease rentals and maintenance of franchise stores; tr
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
anslation/adaptation of manuals; local market research; salaries and professional fees. The franchisee may seek flexibility over payments to the franchisor and modification of business and other targets from time to time.
From the standpoint of foreign exchange regulations, an Indian franchise
From the standpoint of foreign exchange regulations, an Indian franchise
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
e can remit royalty towards license of trademark upto the amount of 1% of domestic sales and 2% of exports without prior government approval. If the licensor also provides technical know how to the Indian licensee, the Indian company can remit royalty upto 5% of domestic sales and 8% of exports
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
and lump sum payment of upto US$ 2 million without prior government approval. In case both trademark license and technical know how are provided, the payment for technical know how subsumes royalty for trademark license. Payment of royalty above the percentages specified above would need prior
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
government approval.
The Indian franchisee shall also review the agreement from the standpoint of efficient tax structuring. In view of the wide definition of the term “franchise” for purposes of service tax, the fee payable under a typical Master Franchise Agreement would attract service tax.
The Indian franchisee shall also review the agreement from the standpoint of efficient tax structuring. In view of the wide definition of the term “franchise” for purposes of service tax, the fee payable under a typical Master Franchise Agreement would attract service tax.
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
Further, if the agreement prescribes for transfer of technical know how to the franchisee, or any special service required for any purpose including designs, drawings, publications and provision of technical personnel, the corresponding payment may be subject to research and development cess.
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
In certain arrangements it may therefore be advisable to separately specify the trademark license fee and royalty, franchise fee, fee for technical know how, etc. Separate agreements may reflect a less complicated picture of payment structure thereby avoiding tax disputes. However, in view of
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
complexity of the issues involved and the potential financial and legal exposure, due care and caution must be exercised by the franchisee while formalizing Master Franchise Agreements and assistance from professionals or colleagues having working experience of licensing agreements is advisable
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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