Franchise of Foreign Brand (Foreign Trademark) in Nepal

Distribution and sales of the product and services worldwide to grow new future revenue and profit of the business is the major benefit of the franchising foreign brand. The way to sell products and services and enhance the brand as a global competitor is a major interest that helps in the growth of the market and diversification of the business to reach new customers.

In Nepal, both global and national brands can run franchise businesses. Foreign Investment and Technology Act 2019 (2075) (FITTA); Patent, Design, and Trademark Act 1965 (2022) (PDTA); Foreign Exchange (Regulation) Act 1962 (FERA) govern, regulate and control foreign brand franchise process and operates business in Nepal.

The procedure of Franchising of international brand

Franchising an international brand in Nepal consists of some procedures to be completed for the proper regulation of the business. No foreign trademark can be independently registered, so for the franchise of a foreign brand, it needs to be registered as the local brand in the respective country.

In Nepal, foreign direct investment and limits are restricted under some rules of payment and related laws.

Registration of Trademark (Foreign Brand) in the Department of Industry
Execution of Franchise Agreement with Foreign Company and Local Company
Approval of Franchise Agreement and Related Agreement if any from the Department of Industry

Initially, it is better to research the market demand and find the perspective market solution. Research about the interest and franchise options of the business is also important. The business agreement, regulations, requirements of the organization depending upon the standards need to be measured before the franchise agreement.

Keep in mind,

It requires 9 to 13 months for trademark registration in Nepal.
The department of the industry will not approve a franchise agreement unless the foreign brand's trademark is registered.
If the foreign trademark is not registered locally in the Department of Industry, then legitimacy and protection of the trademark are not considered.
The original trademark of the foreign trademark with no changes needs to be registered in a foreign jurisdiction

Franchises are available in any sector where foreign investment is permitted. It is also permitted in Nepalese sectors where foreign investment is limited. Cultural differences, political instability, policies, infrastructure, and many more affect the franchise in Nepal.

Documents required for franchising process:

Original copy of the application of licensing of foreign brand.
A notary certified copy of foreign registration certificate of licensor including memorandum and article of association of the foreign company
Certified copy of the translation of MOA, AOA and incorporation in the Nepali language
Two copies of the franchise agreement and other agreements if any exist
A copy of the certificate of incorporation including memorandum and article of association of a local company
A copy of bio-data and complete company profile with detailed information and citizenship of the foreign party
A copy of the industry registration certificate of a local company, information of authorized representative in Nepal
A copy of the minute of the board of the local company and foreign company
A copy of the power of attorney

Licensing term period and rate of royalty of foreign trademark (franchise)

There is no particular regulation for the foreign trademark license instead, DOI permits trademark licensing for a period of 5 years and can be renewed upon request for the same period of time by issuing an application.

Similarly, the royalty fee is also not specified by any governing law. DOI limits the rate of royalty based on the gross sale or net profit to 1% up to 5%.

Using foreign or domestic trademarks is required to be kept under a ceiling of and not exceeding 10% of net profit or 6% of selling price for royalty or licensing fees for the production of liquor and beer (excluding government tax).

Fee for the repatriation of licensing fee

With the approval of Nepal Rastra Bank, the licensor of a foreign trademark can repatriate licensing or royalty fees abroad by selling the share or products under the prevailing law of Nepal after the clearance of taxes and accordance with the prevailing law of Nepal.

The major documents necessary for the approval of foreign trademark licensing are a franchise agreement, a document indicating computation of the amount due to the foreign technology supplier certified by an auditor, and a certificate of payment of income tax on royalty.

The amount that can be repatriated to the respective country for foreign investment