The terms and conditions of the franchisee agreement are to to be scrutinized properly.

If the terms and conditions are not suitable or not feasible then there is no point in entering into an agreement with the franchise.

Therefore it is necessary to have the conditions of the franchise properly scrutinized by a local consultant and you may also seek advise to redraft the agreement suiting to your requirement and legally valid so that you can challenge the same legally in court of law at a later stage if a necessity arises.

Since the other party will not invest or operate the showroom and lacks financial strength, a standard franchise model would expose you to risks such as losing control over stock, recovery issues, and GST complications. Instead, document the arrangement as a consignment or revenue-sharing and management agreement, making it clear that ownership of all stock, fixtures, and equipment remains with you until proceeds are deposited. Operate through a joint-signatory bank account and, where possible, obtain your own GST registration in Assam so billing remains in your name; if not, structure them only as a disclosed selling agent. Include clauses for immediate repossession of goods, prohibition on subleasing, and secure a guarantor or other tangible security, as blank cheques alone will not offer real protection.

You have to include such averments in the said agreement and draft it carefully. If possible take assistance of the advocate in the same

You must have arbitration clause for resolution of all disputes 

2) ask franchisee to provide bank guarantee to protect your investments in stocks etc 

• Use multiple agreements: brand licence, stock supply (consignment), property investment, revenue sharing.

• Keep stock in your name, take bank/personal guarantee, and insure assets.

• Add clauses for no sublease, immediate recovery, joint signatory bank account, and arbitration in your city.

• For GST, register as supplier/service provider or use Casual Taxable Person GST in Assam to bill in your name.

Given your scenario—opening an apparel multi-brand showroom in Assam under a franchisee arrangement where you (the franchisor/investor) will bear all investment and operate the space, with the franchisee neither investing nor having sub-leasing rights—here is clear advice on structuring your franchise agreement and safeguarding your business interests.

Clearly define both parties, the scope of business, and specify that the franchisee will not invest capital, nor have rights to sublease, alter, or transfer the property or stock. State unambiguously that all investment in property, fixtures, inventory, and branding is made by you, the franchisor. Include clauses that the franchisee acts only as an operating agent or licensee and never gains title or ownership in the stock. All goods remain property of the franchisor. Use “Consignment Stock” clauses if applicable, with provisions for regular audits to prevent misappropriation. Mandate periodic reconciliation and book audits and include the right to remove stock or terminate the agreement upon breach.

Expressly prohibit the franchisee from transferring, renting, licensing, or otherwise encumbering the business premises or inventory. Incorporate indemnity and penalty clauses for unauthorized dealings. Define the revenue sharing percentage and the mechanism for monthly accounting and remittance. If rent is capped at 8-9%, link payments strictly to gross or net sales as reported and verified by you. Billing may be executed in the franchisee’s name, but clarify that the underlying inventory title is always yours. Consider using escrow or separate bank accounts to avoid commingling of funds.

You can retain GST registration in your name if you are the supplier or principal. Structure the arrangement as a “franchise-managed showroom on consignment” so that GST invoices, statutory filings, and compliance remain your responsibility. If statutory billing in the franchisee’s name is unavoidable, ensure a clear agent agreement is in place so that sales proceeds and tax reporting flow through to you. Consult your accountant for precise GST language to confirm your position as owner or supplier and the franchisee as agent or operator.

While blank cheques may provide some security, they are legally risky and often unenforceable. Instead, take adequate security bonds, demand guarantees, or obtain personal indemnities rather than just cheques. Include clear default and termination protocols in the agreement enabling you to freeze operations, recover stock and investments, and liquidate any dues. Require written monthly accounting and immediate reporting of operational issues.

Specify operational standards, brand guidelines, and compliance requirements. Include non-disclosure, non-compete, and no-sublease obligations. Retain rights for inspection, audit, and recall of inventory and business premises at any time.

You may use standard franchise agreement templates as a reference but incorporate these customized clauses. Engage a legal expert to review your agreement before execution to ensure enforceability and clarity. If you need assistance drafting clauses or customizing the agreement for Assam, including GST and inventory protections, I am available to provide detailed templates and guidance.

Please feel free to contact me for a consultation to review and finalize your documents to fully protect your investments, stock, and legal position.

Structure of Relationship

From your facts, the franchisee is essentially a front-end license holder only (providing name, permits, and legal entity for billing), while you are making all real investments (stock, interiors, rent, manpower).

➡️ A pure franchise model doesn’t fit here because the franchisee contributes nothing and yet gets billing rights. You should instead structure this as a Revenue Sharing / Consignment-cum-Management Agreement where:

• Stock remains your property until sold.

• Franchisee is only acting as a sales conduit on revenue share.

• Clear acknowledgement that no ownership in stock, IP, or property rights passes to the franchisee.

2. Safeguards for Stock

• Insert a Retention of Title Clause (ROT):
  “All stock supplied by the Franchisor shall remain the absolute property of the Franchisor until actual sale to end-consumers. The Franchisee shall hold such stock as trustee/bailee.”

• Franchisee must maintain separate stock records and cannot pledge, hypothecate, or alienate goods.

• Right to conduct surprise stock audits.

• Franchisee to give an indemnity for any loss, theft, or misappropriation.

• Possibility of insurance in your name, cost borne by franchisee.

3. Property & Investment

Since you are funding the interiors, property setup etc.:

• Have a separate Investment Agreement / Side Letter confirming that fixtures, fittings, interiors belong to you, and you can remove them if the agreement is terminated.

• Restrict sub-lease rights: clearly state franchisee has no right to create third party rights in property or goodwill.

4. Revenue Sharing Model

• Agreement must specify exact % share (8–9% of net sales).

• Sales reports must be reconciled daily/weekly via software access to you.

• Money collected must be remitted to your account first, with franchisee share settled monthly — never the other way around.

5. Billing & GST Risks

This is the most sensitive issue since GST invoices will be in franchisee’s name. To safeguard:

• Consider running the entity in your own LLP/Company’s name and simply give the franchisee a management fee. This avoids risk.

• If you must bill under their GST:

  • Have a Tri-partite Agreement where all stock is on consignment to franchisee.

  • Franchisee undertakes to transfer tax credits and reports transparently.

  • You maintain back-to-back indemnity: if they misuse GST or fail to remit dues, they are liable.

⚠️ Note: Merely taking a blank cheque is weak protection if the franchisee has no financial strength. Courts know cheques are often misused in such business disputes. Better is to take:

• Post-dated security deposit via Bank Guarantee (if possible).

• Personal Guarantee of directors/partners.

• Charge on movable assets (fixtures, stock).

6. Termination & Exit

• Right to terminate immediately for: stock diversion, non-payment, fraud, or damage to goodwill.

• On termination: franchisee must surrender premises access, stock, and all records within 24–48 hrs.

• You may appoint another franchisee in the same city without restrictions.

7. Practical Suggestion

Honestly, given franchisee’s weak financials, it is safer to avoid full GST billing in their name. Either:

• Operate directly under your own GST (preferred), with franchisee just earning commission/rent.

• Or, set up a separate SPV (LLP/Company) jointly, where you hold majority control. That way, billing is under your controlled entity, and you don’t lose stock ownership.

👉 Next Step: I can draft you a Franchise-cum-Consignment Agreement where all these protections are built in. It will ensure:

• Ownership of stock & investment is with you.

• Franchisee cannot misuse billing or property rights.

• Your GST position is protected.

• Exit is quick and enforceable.
  Thanks & Regards 
  Adv. Aman Verma
  Legal Corridor

- You can take assistance from any lawyer for the drafting of the agreement 

- Further, the said agreement must contain a clause for the safeguard of your investment