How franchising can help expand your business

This has cost implications to the franchisee, especially where the franchisor supplies the raw materials.

Particularly so if the franchisee can access cheaper raw materials.

Confidentiality is a major issue in franchises and confidentiality agreements have to be signed containing restrictive clauses in favour of the franchisor.

Such covenants may limit a franchisee from opening a similar business within a certain time-frame after expiry of the franchise.

The franchisor has a duty to train the franchisee’s staff.

The area of operation under a franchise is regulated and the agreement also stipulates if the license is exclusive or not.

In as much as the franchisee may feel the pressure of having to reach set targets, if the business is vibrant and profitable he also rakes in a lot of profits.

The books of account have to be kept at a standard suitable to the franchisor as the consideration for this arrangement is a percentage of the revenues earned.

Franchises are therefore attractive to both parties as well as the consumers, especially the upper class for whom quality is a central issue.

Upper class consumers in third world countries are highly restrained geographically in reaching supply.

An international franchise would bridge the distance and save many buyers shopping trips abroad to meet their luxurious needs.

International franchises are also good for the economy due to tax earned, increase of employment and building of infrastructure and utilities.

In some sectors like health it boosts provision of vital services to the citizens.

While there is no specific legislation on franchises, the Common Law of Contract regulates the conduct between the parties therefore issues like capacity of the parties, consideration and a meeting of the minds are central.