Nandos shop. Image credit lovealdershot.co.uk

Nandos shop. Image credit lovealdershot.co.uk

ZIMSEC O Level Commerce Notes: Retail Trade: 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

To access more topics go the Commerce Notes page.

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