Franchising

Franchising

• A franchise is an agreement in which a retailer (franchiser) gives the right to another trader (franchisee) to use the name of the business and to sell the franchiser’s products in a given geographical area e.g. Chicken Inn

Advantages of Franchising

The franchisee can:

• enjoy freedom and profit of the business
• have high chances of success since the business (franchiser) is well known or advertised well
• enjoy legal protection from the franchiser
• no need to build his own reputation
• receive cheap supplies and training of staff from the franchiser
• save on foreign currency needed to import goods and services as this is often done by the franchiser
• be assisted by the franchiser in:

1. -raising capital for the business
2. -keeping accounting records
3. -choosing the location of the business
4. -advertising products and services
5. -developing the product

Disadvantages of a franchise

• The franchisee has to pay the franchiser a share of his profit based on the franchisee’s sales
• High initial charges by the franchiser may be expensive to the franchisee
• Franchisee has little freedom to determine management procedures
• Franchisee has to comply with rules and procedures of franchiser

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