International Franchising in Bangladesh: Law, Fees, Tax and Structuring in 2026

Franchising Bangladesh: the 2026 legal framework

International franchising Bangladesh deals rest on a simple legal fact: there is no franchise statute. No disclosure document is prescribed, there is no franchise registry and no cooling-off period applies. A franchise is instead assembled from general law: the Contract Act 1872 for the bargain, the Trademarks Act 2009 and the Copyright Act 2023 for the brand and the system, the Competition Act 2012 for territorial and supply restraints, and a foreign exchange regime that decides whether the franchisor is actually paid.

This guide is for foreign franchisors, master franchisees and Bangladeshi groups taking on international brands. It covers the governing law, Bangladesh Bank's consolidated circular of 30 September 2026, the Invest Bangladesh Authority's role in fee remittances, withholding tax and VAT after the Finance Act 2026, key clauses, termination and disputes, and how franchising compares with a joint venture, a licence and a distribution agreement.

Summary: Bangladesh has no franchise-specific law. A franchise is a contract under the Contract Act 1872 combined with a trademark licence recorded through the registered user procedure, copyright and know-how licences, and competition-law limits on territorial and supply restraints. Paying the franchisor is the hard part: Bangladesh Bank requires banks to process royalty, technical and franchise fees under the Invest Bangladesh Authority's guidelines, with endorsed contracts, a 6 per cent ceiling on royalties without approval, staged payment of large franchise fees, withholding tax and 15 per cent reverse-charge VAT.

Key point: FEPD-1 Circular No. 40 of 30 September 2026 confirms that section 27 of the Invest Bangladesh Act 2026 requires enterprises to apply to the Authority to pay royalty, technical and franchise fees abroad, and that banks may remit within the 2021 guideline limits only on the terms of a contract endorsed by the Authority.

At a glance

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Table of Contents

How franchising Bangladesh law works without a franchise statute

Many jurisdictions regulate franchising directly, with pre-sale disclosure, registration or relationship laws that restrict termination. Bangladesh does none of this. The parties are free to agree their own terms, subject to the general limits of contract law and the statutes that govern the assets licensed and the money paid. That freedom shifts the burden onto drafting: protections a statute would supply elsewhere, such as a cure period, must be written into the contract.

There is, however, a working definition. The guidelines on outward remittances of royalty and franchise fees, now applied through Bangladesh Bank's 2026 consolidated circular, define a franchise as a type of licence giving the franchisee access to the franchisor's proprietary knowledge, processes, intangible assets and trademarks so that it can sell a product or provide a service under the franchisor's name.[5] That is the definition the remitting bank and the Invest Bangladesh Authority will apply when the first invoice is paid.

The legal stack behind every franchise

Any franchising Bangladesh analysis runs through five layers. Contract law governs formation, restraints, penalties and termination. Intellectual property law governs marks, manuals, software and recipes. Competition law polices exclusivity, tying and resale prices. Foreign exchange law decides whether fees can be remitted, and tax law how much reaches the franchisor. Data protection now adds a sixth layer for systems built on loyalty programmes and apps. Our overview of commercial law in Bangladesh maps the general statutes.

Fee categories the guidelines recognise

The guidelines recognise technical assistance fees, technical know-how fees, franchise fees, royalty fees and outlet opening fees. A franchise fee is the fee for the right to enter into or continue a business under a franchising agreement; an outlet opening fee is charged for each new unit; royalties are continuing payments for use of the brand or other intellectual property.[5] Each label carries different remittance rules, so use them precisely.

The Contract Act 1872 and the franchise agreement

A franchise agreement is enforceable as an ordinary contract, and its object must be lawful under section 23 of the Contract Act 1872.[1] General principles are in our guide to contract law in Bangladesh; three provisions decide most franchise disputes.

Restraint of trade and non-compete clauses

Section 27 declares void every agreement restraining anyone from exercising a lawful profession, trade or business, saving only a seller of goodwill who agrees not to compete within specified local limits.[1] There is no general reasonableness test of the English kind. A covenant barring a former franchisee from running any restaurant or shop is therefore exposed. In-term exclusivity, confidentiality, a ban on using the franchisor's marks and know-how, and non-solicitation of staff are far more defensible.

Liquidated damages and penalties

Section 73 allows compensation for loss naturally arising from breach, and section 74 limits recovery of a sum named in the contract to reasonable compensation not exceeding that sum.[1] A pre-estimate based on lost royalties over the remaining term stands on firmer ground than an arbitrary figure, so record the calculation in a schedule.

Franchise, agency or something else

If the local party sells in the franchisor's name and on its account, it may be an agent. Section 205 then requires compensation where an agency agreed for a period is revoked without sufficient cause, and section 206 requires reasonable notice.[1] A true franchisee trades on its own account, owns its stock and takes customer risk. State the intended model and keep the operating terms consistent with it.

Protecting the brand: trademarks, copyright and know-how

A franchise is a licence of intellectual property wrapped in an operating system. If the franchisor's rights are not registered and documented locally, the structure rests on passing off and contract, which are slow tools against a determined former franchisee. Brand protection is the first workstream, not an afterthought.

Register before you license

Practitioners advise that a mark should be registered before it is licensed, and that a licence must be recorded with the Department of Patents, Designs and Trademarks to be effective against third parties.[13] File early for the word mark, logo and sub-brands in every relevant class, including services classes for restaurants, retail and education. The procedure is in our guide to trademark registration in Bangladesh.

Registered user recording for franchising Bangladesh networks

Sections 44 to 48 of the Trademarks Act 2009 create the registered user system. A person other than the proprietor may be registered as a registered user, and its permitted use is deemed to be use by the proprietor. The proprietor and proposed user apply jointly in writing, supported by the written agreement or an authenticated copy and the proprietor's affidavit.[2] Deemed use matters because section 42 allows removal of a mark not used in good faith for a continuous period of five years.[2]

Under section 46 a registered user may call on the proprietor to sue an infringer and, if the proprietor does not act within three months, sue in its own name with the proprietor joined as defendant. Section 47 allows the Registrar to vary or cancel the registration, including on the proprietor's application, and section 48 confirms the user acquires no assignable right.[2] Enforcement is covered in our guide to trademark infringement in Bangladesh.

Copyright, manuals and know-how

The operations manual, training materials, store designs, software and marketing content are copyright works. Section 45 of the Copyright Act 2023 governs licences granted by the owner, and the Act provides for registration of assignments and licences with the Copyright Office.[3] Grant the licence expressly, reserve local adaptations to the franchisor, and record significant licences; see our guide to copyright law in Bangladesh. Recipes, specifications and pricing models are protected only by contract and discipline: limit disclosure, take individual confidentiality undertakings and keep core formulations with the franchisor. Patentable processes are covered in our note on patent registration in Bangladesh.

Competition Act 2012 limits on franchise restraints

Franchise systems depend on vertical restraints, and franchising Bangladesh agreements are no exception. Section 15(1) of the Competition Act 2012 prohibits any agreement concerning the production, supply, distribution, storage or acquisition of goods or services that causes or is likely to cause an adverse effect on competition or creates monopoly or oligopoly in the market.[4]

Tying, exclusivity and resale price maintenance

Section 15(3) deems tie-in arrangements, exclusive supply agreements, exclusive distribution agreements, refusal to deal and resale price maintenance anti-competitive where they have an adverse effect on competition. Resale price maintenance excludes an agreement that clearly allows lower prices to be charged.[4] The test is effect-based, so a modest network is unlikely to raise concern, but a dominant brand that ties franchisees to its supplies or fixes their prices should take advice. Recommended or maximum prices are safer.

The intellectual property carve-out

Section 15(4)(i) preserves the right to restrain infringement of, or impose reasonable conditions for protecting, intellectual property rights.[4] Brand standards and quality controls therefore have a statutory footing if they are reasonable and genuinely tied to the brand; market sharing between franchisees with no brand rationale does not. See our guide to competition law in Bangladesh.

Remitting franchise fees: Bangladesh Bank and Invest Bangladesh rules

For a foreign franchisor, the decisive question in franchising Bangladesh structures is whether the fees can be paid. Section 5 of the Foreign Exchange Regulation Act 1947 bars payments to non-residents unless permitted, and the permissions sit in Bangladesh Bank's circulars. The general framework is in our guide to foreign exchange regulations in Bangladesh.

The 30 September 2026 consolidated circular

FEPD-1 Circular No. 40 of 30 September 2026 consolidates the rules on outward current account remittances other than imports and transport. It updates FE Circular No. 37 of 30 September 2025, repeals earlier instructions except the GFET Volume 2 reporting rules, is issued under section 20(3) of the 1947 Act and is valid for one year.[5] Agreements signed now should expect a new circular in 2027 and should not hard-code current limits.

Section 27 of the Invest Bangladesh Act 2026

The Invest Bangladesh Act 2026, Act No. 104 of 2026 dated 16 July 2026, replaced BIDA with the Invest Bangladesh Authority; section 27 deals with royalties and fees, and section 28 with registration of private-sector industrial projects.[6] Circular No. 40 records that section 27 requires approved industrial enterprises to apply to the Authority to pay royalty, technical and franchise fees abroad, and that private-sector industrial enterprises defined in section 28 need its approval.[5]

Banks apply the guidelines BIDA issued by circular of 3 March 2021, whose Schedule 1 sets the amounts remittable without the Authority's approval. Each remitter nominates a single bank branch, which must confirm that source tax, VAT and other levies have been paid, check that it is the branch named in any approval, verify the documents and refer any doubt to the Authority.[5]

The 6 per cent ceiling and franchise fee instalments

Schedule 1 allows royalty, technical know-how and technical assistance fees without approval up to 6 per cent of the previous year's sales, excluding VAT, as declared in the income tax return, or, for projects under implementation, 6 per cent of the accumulated C&F value of imported machinery.[5] Above 6 per cent, prior approval is needed even for an endorsed contract, judged on economic impact, linkages, employment, technology transfer and skills.[5]

Franchise fees above USD 0.1 million are remitted in instalments: 50 per cent of the approved claim in the first year, 30 per cent in the second and 20 per cent in the third.[5] A franchisor expecting a large upfront development or master franchise fee should build that profile into its pricing or restructure the consideration.

Contract endorsement and the online route

The no-approval route depends on endorsement. The local enterprise must apply to the Authority to endorse the contract immediately after signing and before any remittance; one endorsement supports repeated remittances within the endorsed schedule, and any amendment needs re-endorsement. Remittances are post-service, against a completion certificate from the franchisor, and the bank sends the file to the Authority for post-facto verification.[5]

The contract must state the purpose of payment, the scope and justification of the fees, when they become payable, the amount or calculation basis, the payment schedule, the agreement's validity and the services with a delivery and acknowledgement procedure, and every page must be signed or initialled by both parties.[5] Since January 2026 approvals run through the One Stop Service portal with a seven-working-day service target.[7]

Advance fees, related parties and routes that do not work

Advance payments need prior approval in every case, with technical fees of up to USD 10,000 per agreement allowed once a year and applications backed by a bank guarantee, affidavit or other security. Where the franchisor is a parent, sister or subsidiary of the payer, a third-party assessment confirming arm's length pricing is required.[5]

General allowances are not a back door. The training and consultancy allowance of 1 per cent of sales or USD 100,000 sends royalty and franchise fees back to the Authority's guidelines; the annual allowances for IT, e-commerce and SME firms expressly exclude them; and the group service facility capped at 10 per cent of net profit does not cover remittances that need a competent authority's permission.[5] Units in export processing areas and hi-tech parks have their own 6 per cent limits.[5]

Tax on franchise fees: withholding, VAT and deductibility

In franchising Bangladesh arrangements, every payment to a foreign franchisor carries income tax withholding and VAT on the imported service, and banks will not remit until both are evidenced.[5] The full schedule is in our guide to withholding tax in Bangladesh.

Withholding tax on royalties and franchise fees

PwC's summary, reviewed on 31 July 2026, gives 20 per cent on royalties, licence fees and intangibles paid to non-residents, 10 per cent on technical services paid to non-individual non-residents, and 10 per cent on royalty, franchise and licence payments to residents.[8] Treaties usually cut the royalty rate to 10 per cent, including those with the United Kingdom, United States, India, Singapore, China, Japan and the UAE; the Malaysian and Thai treaties allow 15 per cent.[8] Treaty rates require an NBR certificate.[10]

The Finance Act 2026 made withholding suffered by a non-resident without a permanent establishment a final tax, and treats royalty and technical fees earned in the regular course of business as business income.[9] [10] A franchisor whose staff spend long periods supervising outlets should test whether it has a permanent establishment.

VAT on imported franchise services

Imported services remain subject to 15 per cent reverse-charge VAT, payable by the importer as output tax. The bank deposits it by a-challan at remittance, and the challan serves as the tax invoice and, where the service is an input, supports credit.[9] State whether fees exclude VAT and whether withholding is grossed up. See our guide to VAT in Bangladesh.

The deductibility cap and transfer pricing

KPMG's 2026 guide lists royalty and technical fees exceeding the lower of 15 per cent of disclosed net profit or 6 per cent of disclosed turnover as disallowed expenses.[10] A loss-making franchisee can therefore pay royalties it cannot deduct. Where franchisor and franchisee are associated, the royalty must also meet the arm's length standard; see our guide to transfer pricing in Bangladesh.

Key franchising Bangladesh clauses in the franchise agreement

The agreement must run the relationship and satisfy the bank, the Authority and the tax office. Global templates rarely do the second job unadapted. Our checklist for commercial agreements in Bangladesh applies; the franchise-specific clauses follow.

Grant, territory and development

Identify the marks by registration number, the licensed system and the territory. For multi-unit and master franchise deals, set a development schedule and tie exclusivity to meeting it, keeping exclusive territories proportionate to the investment because section 15 tests them by effect.[4]

Fees, payment mechanics and conditions precedent

Separate the initial fee, outlet opening fees, royalties, marketing contributions and technical fees, because each has its own remittance treatment.[5] Make endorsement and registered user recording conditions precedent to the first opening. Provide for amounts that cannot lawfully be remitted, such as accrual in a local account, rather than treating them as an automatic default.

Standards, supply and audit

Write brand standards, approved suppliers, training and inspections as quality controls linked to the marks, within the section 15(4) carve-out.[4] Audit rights should cover sales records, because the 6 per cent ceiling is measured on sales declared in the income tax return.[5]

Customer data, term and transfer

The Personal Data Protection Act 2026, Act No. 63 of 2026 dated 10 April 2026, applies extraterritorially in defined cases and requires safeguards for cross-border transfers.[14] Allocate data responsibilities and ownership on exit; see our guide to data protection law in Bangladesh. Align the term with the endorsed contract's validity, since changes need re-endorsement, and give the franchisor approval rights over transfers and changes of control.[5]

Termination and post-termination protection

With no franchise relationship law, termination rights are what the contract says, subject to the Contract Act. List the events precisely: non-payment, uncured breach of standards, insolvency, unapproved transfer and damage to the brand. Where the arrangement could be characterised as agency, provide expressly for notice, because sections 205 and 206 otherwise import compensation and reasonable notice.[1]

Post-termination provisions carry the real protection: immediate cessation of use of the marks, de-branding within a fixed period, return of the manual, transfer of numbers, domains and social media accounts, and an option over branded stock and fittings. Apply to cancel the registered user entry under section 47.[2] Do not rely on a broad post-term non-compete, which section 27 is likely to void.[1] Invoice accrued royalties promptly, because they remain remittable only within the endorsed contract and Schedule 1 limits.[5]

Dispute resolution: arbitration, commercial courts and injunctions

The Commercial Courts Act 2026, Act No. 23 of 2026 dated 10 April 2026, lists franchising agreements, distribution and licensing agreements, joint venture agreements and claims under the Trademarks Act and Copyright Act among commercial disputes. Section 7(1) requires pre-suit mediation unless urgent interim relief is sought.[11] See our guide to the Commercial Courts Act in Bangladesh.

Most international franchisors prefer arbitration. For a foreign seat, section 3(2) of the Arbitration Act 2001 applies sections 45 to 47 on recognition and enforcement of the award in Bangladesh.[12] Name the seat, rules and language, and preserve the right to seek urgent injunctions in Bangladesh against misuse of the marks, often best pursued as a trademark claim. See our guides to drafting an arbitration clause and enforcing foreign arbitral awards.

Franchise vs joint venture vs licensing vs distribution

Franchising is one of four common entry models. The choice turns on how much control the brand owner needs, whether it will invest capital and how it expects to be paid, and each model sits under different remittance rules. On a phone, scroll the table sideways.

When a joint venture is the better structure

A joint venture suits a brand owner that wants equity upside, board control and a partner's real estate or distribution network. Returns come as dividends, remitted under a separate route. But if the foreign partner also licenses its brand or know-how to the joint venture company, those fees fall under the same guidelines and 6 per cent ceiling.[5] Structuring, deadlock and exit are covered in our guide to joint ventures in Bangladesh, and investor protections in our guide to foreign investment law in Bangladesh.

Licensing, distribution and hybrids

A straight licence gives the licensee more freedom and the licensor less control, under the same registered user, copyright and remittance rules as a franchise. A distribution agreement is buy-sell: the supplier is paid for goods through import payments, avoiding the royalty ceiling but giving little control over the brand, and exclusive distribution is tested under section 15(3).[4] Hybrids, such as a subsidiary acting as master franchisee, work if every payment stream is mapped to its own legal basis, tax treatment and remittance route, and the documents do not contradict each other.

Step-by-step: launching a franchise in Bangladesh

Brand protection and remittance approvals sit on the critical path of every franchising Bangladesh launch and should start before the first outlet lease is signed.

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Mistakes to avoid in franchising Bangladesh deals

• Licensing an unregistered mark: the franchisor depends on passing off and the franchisee cannot use section 46.[2]
• Signing a global template unchanged: it will lack the content the guidelines require.[5]
• Remitting before endorsement: the no-approval route needs an endorsed contract and post-service invoices.[5]
• Royalties above 6 per cent without a plan: the excess needs prior approval.[5]
• Expecting the whole fee upfront: fees above USD 0.1 million are staged over three years.[5]
• Relabelling royalties as consultancy: general allowances exclude them.[5]
• Ignoring the tax gross-up: withholding, VAT and the deduction cap change the economics.[9] [10]
• Relying on a post-term non-compete: section 27 makes it weak.[1]

What to watch in 2026 and 2027

Three developments will shape franchising Bangladesh practice. The Invest Bangladesh Authority may reissue the 2021 guidelines under section 27 of the 2026 Act; until then Circular No. 40 applies them.[5] [6] Circular No. 40 expires after a year, and its 2027 successor may change limits.[5] And the commercial courts will show whether franchise disputes resolve faster at home than abroad.[11] Build in change-in-law clauses and alternative payment mechanisms. If you are planning a launch, restructuring a network or facing a blocked remittance, contact TRW.

Frequently asked questions

Does Bangladesh have a franchise law?

No. There is no franchise statute, disclosure regime or registry. Franchises are governed by contract, intellectual property, competition and foreign exchange law, and franchising agreements are a listed commercial dispute under the Commercial Courts Act 2026.[1] [11]

Does a franchisee need to be recorded with the trademark office?

It should be. Sections 44 to 48 of the Trademarks Act 2009 provide for registered users, and recording is treated as necessary for the licence to bind third parties.[2] [13]

How much royalty can be remitted without approval?

Up to 6 per cent of the previous year's declared sales excluding VAT, or 6 per cent of imported machinery C&F value before operation, on an endorsed contract. More needs the Authority's approval.[5]

Can an initial franchise fee be paid in one instalment?

Only up to USD 0.1 million. Larger fees are remitted 50, 30 and 20 per cent over three years.[5]

Who approves franchise fee remittances after BIDA was merged?

The Invest Bangladesh Authority, under section 27 of the Invest Bangladesh Act 2026, applying the former BIDA guidelines of March 2021.[5] [6]

What withholding tax applies to fees paid abroad?

20 per cent on royalties to non-residents, usually 10 per cent under a treaty with an NBR certificate; for a non-resident without a permanent establishment it is a final tax.[8] [10]

Is VAT charged on fees paid to a foreign franchisor?

Yes. Imported services carry 15 per cent reverse-charge VAT, deposited by the remitting bank by a-challan.[9]

Are post-termination non-compete clauses enforceable?

Generally not. Section 27 of the Contract Act 1872 voids restraints of trade except on a sale of goodwill; rely on confidentiality, de-branding and non-use of the marks.[1]

Can a franchisor fix the franchisee's retail prices?

It is risky. Resale price maintenance is deemed anti-competitive under section 15(3) of the Competition Act 2012 where it harms competition, unless lower prices are clearly allowed.[4]

Where are franchise disputes resolved?

In the commercial courts after pre-suit mediation, or by arbitration where agreed; foreign awards are enforced under sections 45 to 47 of the Arbitration Act 2001.[11] [12]