Page 35 - Business_Studies_F5

Student's Book Form Five

Ease of securing finance: An already Risk from other franchises: Failure of one
established brand in franchising makes franchise may cost other franchises as
it relatively easier to secure finance from the investor may lose an entire chain of
lenders due to brand awareness. investments due to poor image of any one

Less risk of failure: Since the franchisee of the franchises.
FOR ONLINE READING ONLY
operates a business that has been tested Lack of financial privacy: The franchise
already in the market and has a known agreement will likely stipulate that the
brand, all these create a favourable business franchisor can oversee the entire financial
environment for a franchisee to succeed. ecosystem of the franchise. This lack
Training offered to franchisee: Training of financial privacy can be seen by the
provided by the franchisor compensates franchisee as a disadvantage. However, it
for the need for experience. may be less of an issue if financial guidance
is welcomed.
Disadvantages of franchise
The following are the disadvantages of Activity 2.3
the franchise: Use any reliable source to identify
Little room for creativity: Franchisees are franchises available in Tanzania and
not entirely in control of their businesses, explore the benefits of those franchises
they cannot make decisions on producing to the community and economy.
or delivering products the way they prefer
without approval by the franchisor.

Higher initial cost: The initial cost in most Exercise 2.3
franchising agreements is relatively high. 1. How does franchise differ from
This may be a disadvantage for small other forms of business unit?
businesses as they need to meet some 2. Describe the challenges encountered
compliance costs in the country where the by franchises in Tanzania.
franchisor needs to operate in.

Potential for conflict: While one of the
benefits of owning a franchise is the
network of support received from the Joint ventures
franchisor, it also has the potential for Joint venture is when two or more
conflict. This is because any close business companies form or create a single legal
relationship can result in misunderstanding, entity in which each party owns shares in
especially when there is an imbalance of the newly formed company. It is aimed
power among the parties involved. At times at pursuing a common goal for a specific
the parties may not be able to get along in period where the enterprise’s risks and
such circumstances. rewards are also shared according to

Business Studies for Advanced Secondary Schools 26

30/06/2024 19:02:30
Business Studies FORM 5.indd 26 30/06/2024 19:02:30
Business Studies FORM 5.indd 26