Franchises are becoming increasingly popular in the business world. Sri Lanka, a country that has shown a 3.2% economic growth in 2018 and also a GDP of USD.88,901 shows potential for successful investment. The total population as of 2018 was 21 million. In addition, on average, 2.4 Million tourists arrive in Sri Lanka. Also, the concentrate of the population is in the Colombo District which provides a huge demand for good quality products & services.
The idea of franchising is not a new concept for Sri Lanka. As we go back in history, we see some popular franchises that operated from the country which turned out to be quite successful.
One such company is Singer sewing machines. Singer has been is Sri Lanka since 1877 where sewing machines went on sale in a store in Colombo. At present Singer PLC is a large diversified company and it remains a member of the worldwide franchise of Singer America.
Another popular franchise is Coca-Cola which was first introduced in Sri Lanka in April, 1971. This is an outline of how the franchise functions. Here is an insight of the functions of a franchise business:
What is a franchise business?
It is a process in which the owner of a business also known as the “franchiser”, sell the rights, business logo, name and model to third party retail outlets owned by independent businessmen who act as third party operators known as “franchisees”. This has become an extremely common way of doing business.
Mc Donalds, Subway, DHL, TGIF, Mothercare, are some of the examples you find in Sri Lanka.
Investing in a franchise business
Franchisee should pay an initial fee to gain rights to the business, training and equipment necessary in order to start the franchise. Once the business is in progress, the franchisee should pay the franchisor royalty payment. This is done either on a monthly, quarterly or annual basis. The amount is calculated as a percentage of the gross sales made by the franchise.
After the contract is signed, the franchisee opens a business similar to the mother company. The franchisor will provide necessary direction.
Advantages a franchisee would enjoy:
- All costs, trial & error has been already done and a clear model is implemented. All you need to do is maintain it.
- Lower commercial failure rates. (5% failure rates & 90% report profitability)
- Back up from experienced persons
- Access to technology
- Brand name, customer loyalty has already been established.
- No complete independence. You have to follow the mother companies’ requirement.
- Policies and procedures set by franchiser should be followed
- Paying on going fees
- The business is inter connected and that means what someone might do wrong will tarnish your reputation as well!
There are many areas to consider when choosing the best franchise, the main consideration would be “how much money will I make?”
This is where the FDD (Franchise Disclosure Document) comes into play. It gives you the financial disclosure you would need in order to proceed.
After much consideration to the facts above then there are some clear-cut points to follow:
Firstly, ask your self how committed you are in opening the franchise that you desire. You need to put it a sense of self-discipline and be willing to work weekends and long hours if need be. Furthermore, you need to ask yourself, how much money am I willing to part to establish the business. Also, if you have enough assets, savings etc.
Then picking a franchise consultant to assist you and guide you will benefit you. A good idea would be to organize a discovery day where in depth meetings are carried out by franchisor and many potential franchisees. A very important area of consideration is the Location. How accessible are you to your customers and traffic conditions are some points to consider.
Once you have chosen the franchise that you want to invest on then you need to secure funding & signing of the contract will be done consequently. All necessary permits and insurance and other documents must be in place. Then hiring & training of staff would be the final step before the gran opening of the franchise.
In Sri Lanka we notice lots of potential in the areas of Food, travel & leisure, education, beauty & fitness and of course apparel.
Here are a few franchises & the required investment already available in Sri Lanka:
- YOKO JAPAN – $45,000
- EASY WINE/ EASY BEER – $160,000
- PUNCTURE SAFE – $18,850
- KRISPY KREME DOUGHNUTS -$275,000
- BLUEFROG – $109,730
While these need big amounts of investment, there are some others that require less:
- ES PASCO -$500
- JAMIE & FISHBALL -$500
- AMUL -$1,100
- FAST CLEAN -$3000
You can get more information’s about several other franchise business in Sri Lanka.
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