Franchises

• Franchising


  A business model where a franchiser sells the brand name of a well established firm to a franchisee to expand.
• Franchisor


  The person/business who sells the brand name and the license to run the business under that brand name.
• Franchisee


  The person/business who buys the brand name and the license to run the business under that brand name.
• Advantages for a franchisor


  • Easy method to expand as the franchisee will handle the business.
  • Business becomes more popular.
  • Earn more money through franchising fees and royalty payments (heart of profits)
• Disadvantages for a franchisor

  • Mistakes of the franchisee can affect the brand reputation negatively.
  • Quality & standards may change.
• Advantages for a franchisee

  • Less risky as the business is popular.
  • Training provided by franchisor.
  • Already tried & tested methods.
  • Guaranteed customer base.
• Disadvantages for a franchisee

  • Very expensive franchising fees and the reed to share profits.
  • Lack of freedom.
  • May loose the dealership if the franchisor is not satisfied.
• Franchise system


  A business model where a franchisee is granted the right to use a business's name and trademark.
• Franchise system is governed by the principles of contract law in Sri Lanka.
• The dear-ship between the franchisor and the franchisee results in the Franchise Relationship (Contract)