Govt nixes franchise route for multi-brand retail stores

Global retail giants entering India will not be able to use the franchise route to set up shop. Providing clarity to global retail giants such as Tesco, Carrefour, Walmart on investment norms in multi-brand retail, the Commerce and Industry Ministry today said the “front-end stores set up by the multi-brand retailers will have to be company-owned and -operated.

The mandatory 30 per cent sourcing from small industries will be counted only for sales through the front-end stores. Retailers will also have to compulsorily put 50 per cent of their investments in back-end infrastructure specifically for the chain they are setting up.

The clarifications come nine months after the investment policy was announced. Despite allowing 51 per cent foreign direct investment in multi-brand retail trading, few players had come forward to invest in the sector, given the lack of clarity on investments. Several retailers had sought clarification especially on the clause on 30 per cent sourcing from small and medium enterprises.

Clarifying, an official release from Department of Industrial Policy and Promotion said: “As such, a multi-brand retailing entity cannot engage in any other form of distribution.”