Written By: Gouri Ghosh

Nepal has become an attractive business destination. The economy of Nepal continues to grow each year. The largest contributor to its economy is the service sector. It generates over 60% of Nepal's GDP. In addition, the government is promoting the growth of private business sectors and foreign investments. With the increasing urbanization in cities, more business opportunities are emerging.

The urban people’s lifestyle is changing in nepal. The income levels are increasing. Tourism activities have increased. As a consequence, there is increasing demand for businesses such as branded restaurants, cafes, retail stores, health care, and education businesses. Nepal has over 29.16 million people. It also has over 3.22 million businesses.

For this reason, franchise in the Nepali market is becoming popular day by day. Many local as well as foreign firms are opting for the franchise system to expand their business. There are many franchise opportunities in Nepal. If you are searching for the best franchise in Nepal, then this is the right time for you to do so.

Types of Franchise Models in Nepal

Not all franchises operate the same way. It is important for you to know the various franchise models before investing in the business.

Product Distribution Franchise

You distribute the franchisor’s products using their brand name. The emphasis is on the sale of the products. This franchise model is prevalent in automobile, beverages, and consumer goods.

Business Format Franchise

This is the most popular franchise model in Nepal. In this case, you get the brand, business format, training, marketing, and operations of the business. This is used by most food, coffee, retail, and education franchises.

Master Franchise

In this case, you are given the franchise to develop the business in a specific region or throughout Nepal. You are given the opportunity to open new outlets and franchise others.

Guide to Setting Up a Franchise in Nepal

Step 1: Assess the Market in Nepal

The first thing investors must do when deciding to set up a franchise in any country is to research the market.  If they choose the right location, they become profitable.

Assess:

• Make sure whether the people in Nepal will like your products and services.
• See existing businesses and where is the gaps.
• You have to know about your target audience and their demography
• Where there is sufficient foot traffic and visibility for your business.
• Whether customers will be able to afford your products and services.
• Search for industries that have a bright future in Nepal.

Step 2: Select the Right Franchise Brand

Selecting a good franchise is an essential step that needs proper thought and effort. Not only focus on brand’s reputation. Compare all kind of franchise categories which are available in nepal market then choose as per your requirement.

Consider:

• Select a brand that has the trust of the customers.
• More experienced businesses often have tested business models.
•  Learn about the one-time fee for becoming a franchisee.
• Inquire about monthly/annual payments to the company.
• Verify the total investment cost of franchise in Nepal

Step 3: Contact with a Franchisor

When you decide the particular franchise then you have to connect with franchisor and understand the whole application process.

 It will give both of you an idea whether there would be a match between the two.

Some of the things involved in this step include:

• Franchise-inquiry: Fill and Submit the enquire form . ask about the franchise details.
• Meeting: In meeting talk about the investment and ROI from this business.
• Business proposal: Discuss your business experience and the plans for financing.
• Finances: Prove that you have sufficient funds for starting up the business.
• Business plan: Show your business strategy if necessary.
• Site selection: Work together with the franchisor in choosing a good site for the business.
• Preliminary negotiations: Talk about fees, territory, support, and other relevant things.

Step 4:  Trademark

When you registering in a foreign brand make sure its trademark is already registern in mepal franchise market. This simple step help you for future issues.

It will help you:

• Make sure brand availability: you will sure that the brand is registered or not.
• Prevent disputes: Prevent future disputes with the trademark owner.
• Identify potential problems: Find possible problems in advance, which may cause refusal.
• Spare your time and money: Save time and avoid additional costs.

This step is optional but highly recommended for international franchises.

Step 5: Register the Trademark ( Nepal)

The foreign trademark does not have any protection in Nepal. Thus, if you open an international franchise in Nepal, you need to register the trademark in the Department of Industry.

The procedure of trademark registration usually involves the following actions:

• Trademark application: File the trademark application and documents.
• Examination: Review the trademark application in the Department of Industry.
• Publication: Publish the trademark to allow the public to object.
• Registration certificate: Get the trademark certificate upon approval.

Trademark registration protects your brand and is an essential legal action for most foreign franchise businesses.

Step 6: Register Your Business

Before running your franchise, your first step should be registering your company in Nepal. Most people go for the Private Limited Company due to its popularity.

These are the processes that involve:

• Reservation of the Company Name: Select a company name and reserve it.
• Preparation of the MOA: Prepare the Memorandum of Association with the objectives of your business.
• Preparation of the AOA: The articles of association will state the mode of conducting the business.
• Company Registration: The necessary documents should be submitted to the office of the Company Registrar.
• Certificate of Incorporation: After registration, you will receive the company registration certificate.

After your company registration, you can move to the next process of tax registration, getting government approvals, etc.

Step 7: Franchise Agreement

After registering your company, the next step will be signing the franchise agreement. It is the most significant legal document in your contract with the franchisor. Ensure you read all clauses of the document.

The franchise agreement should clearly mention:

Franchise rights: Details about the rights you have to conduct the franchise.

• Territory: Indicates the geographical area within which the business can operate.
• You have to pay franchise fee
• Royalties: Describes the royalty fees that will keep coming your way.
• Marketing fees: Indicating your participation in the marketing of the brand.
• Training fees: Indicates the training sessions that will be offered by the franchisor.
• Operating standards: The operating standards that will guide you when operating the business.
• Property-rights: From this rights you protect your trademark, logos of your brand

Understand the legal rights before invest any franchise is necessary in nepal.

Step 8: Get Department of Industry (DOI) Approval

When you invest in a franchise(foreign) in nepal you need DOI approval. According to the Foreign Investment and Technology Transfer Act (FITTA) 2019, most of the foreign franchise agreements are considered technology transfer agreements.

The application normally contains:

Franchise agreement: Submit the executed agreement between yourself and the franchisor.

• Trademark information: Submit documentation showing that the trademark is either registered or filed with the trademark office in Nepal.
• Submit your Company Registration Certificate, MOA, and AOA.
• Power of Attorney: If an authorized person submits the application on your behalf, this will be needed.
• Other supporting corporate information: Submit any other document required by the DOI.

 Once this approval is obtained, you can proceed with the rest of the registration procedures.

Step 9: Register the Industry (If Applicable)

In nepal when you start any franchise you have to registered as per Industrial Enterprises Act.This step is usually applicable for those enterprises engaged in manufacturing industries.

Industry registration may be necessary for:

• Manufacturing industry: Industries engaged in manufacturing or processing of goods.
• Big commercial companies: Companies that come under certain legal provisions.

All franchises do not need to have industry registration. Before making any investments, check whether industry registration is mandatory for your business sector.

Read : Top Franchise in Nepal

Step 10: Opening a Business Bank Account

After the registration open bank account (buniess purpose) in a commercial bank in nepal.

Maintaining business and personal finances separately will help you greatly in accounting and tax compliance.

The uses of a business bank account include:

• Capital investments: Depositing initial investments made in your business.
• Business expenses: Rent, utilities, payments to suppliers, etc.
• Payment of franchise fees: Payment of initial fees of the franchise to the franchisor.
• Royalties: Making royalty payments periodically as per the agreement.
• Tax payment: Payment of VAT, income tax, and other taxes.

In case there is any foreign investment, all money transfers should be done according to Nepal Rastra Bank (NRB).

Step 11: Tax Registration

Before opening franchise you have to registered IRD. It is Inland Revenue Department. This is a mandatory step and helps you to conduct your business without any problems regarding compliance

You need:

• PAN (Permanent Account Number): For nearly all businesses that are registered in Nepal.
•  VAT registration: If your business qualifies for VAT registration.
•  Income tax registration: It allows your business to pay taxes and make returns annually.
• From starting you need a good account system that help you to run smoothly.
• Effective accounting makes things easy for expense management, filing of tax returns, and performance analysis of your business in Nepal.

Step 12: Get Local Business Licenses

It is important that before starting your franchise, you get all the licenses and permits required for your business.

You will need:

• Business license in the municipality: This is required to operate within the municipality.
• Tourism license: This is for tourism businesses.
• Environmental approval: This is needed for businesses having any environmental effect.
• Additional licenses depending on your business activity.
• Before start any franchise in nepal ckeck local policies and regulation

Step 13: Setting up of the Franchise Outlets

After completing all the required processes, get ready with your outlet to start operations. All franchisors offer the Standard Operating Procedures (SOPs).

Typically, the following will be involved:

• Store fit-out: Finish the store construction and fit-out.
• Interior designing: Design according to the franchisor’s approved design.
• Installation of equipment: Install necessary equipment for the business.
• Procurement of inventory: Procure products and supplies before opening.
• Install software: Set the billing system for your business
• Branding and Signage: Install approved logos and branding.
• Recruitment of staff: Recruit people to operate the business.

Prepared outlet leaves a good impression on potential customers.

Step 14: Launch the Franchise Business

After fulfilling all the necessary steps legally, you can now launch your business in Nepal. Plan your business launch to attract customers right away.

Things to do before launch:

• Trial run: Do trial run before official launch.
• Staff Training: Train the staff for the launch.
• Marketing campaign: Advertise your business before launching.
• Grand opening: Make arrangements for opening-day deals and activities.

Documents Required to Start a Franchise in Nepal

Investment cost for Franchise in Nepal (Estimated)

Conclusion

Establishing a franchise in Nepal can be a very profitable option. This will help the entrepreneur create a business with a brand name.

Choose the right industry and franchise format. Have good knowledge of the market and take the legal process.

In Nepal, there is increasing demand for franchises in the industries of food, retail, education, and services. Find out the most popular franchise in Nepal and choose the best franchise in Nepal.

A franchise will give you brand recognition and tried and tested processes. Good management will help create a successful business.

Disclaimer: The brands mentioned in this blog are the recommendations provided by the author. FranchiseBAZAR does not claim to work with these brands / represent them / or are associated with them in any manner. Investors and prospective franchisees are to do their own due diligence before investing in any franchise business at their own risk and discretion. FranchiseBAZAR or its Directors disclaim any liability or risks arising out of any transactions that may take place due to the information provided in this blog.