Acquiring a Business
Options available to new entrepreneur:
Brand new business
▪ Market research
▪ SWOT analysis
▪ Requirements: Hard work, dedication, market demand, management competence, sufficient
capital investment
Franchise
▪ A franchise is a system or agreement. Distribute specific products on specific terms
according to existing business model.
▪ Franchisor: Supplier / owner
▪ Franchisee: Buyer / distributor
▪ Fees:
o Franchise fee: Initial cost to buy franchise and secure the name.
o Royalties: Monthly amount (% of turnover) for right to use trademark, techniques
and products.
o Levies: Fixed monthly payments for advertising, training and administrative support.
▪ Advantages to franchiser:
o Expand business quickly without large capital investment.
o Franchisees will succeed.
o No staff problems as franchisee is the owner.
▪ Disadvantages to franchiser:
o Training and support difficulties.
o No direct control.
o Administrative duties to collect royalties and control brand.
▪ Advantages to franchisee:
o Good chance of susses due to admin support, training, developed systems and
goods name of franchiser.
o Benefit with bulk purchases and supplier negotiates.
o Easier to raise funds from banks due to good reputation.
▪ Disadvantages to franchisee:
o High franchise fees and royalties.
o Strict prescriptions.
o May not receive required support.
Legal regulation of franchises – FASA (Franchise Association of South Africa)
Business Studies Acquiring a Business | 1
Options available to new entrepreneur:
Brand new business
▪ Market research
▪ SWOT analysis
▪ Requirements: Hard work, dedication, market demand, management competence, sufficient
capital investment
Franchise
▪ A franchise is a system or agreement. Distribute specific products on specific terms
according to existing business model.
▪ Franchisor: Supplier / owner
▪ Franchisee: Buyer / distributor
▪ Fees:
o Franchise fee: Initial cost to buy franchise and secure the name.
o Royalties: Monthly amount (% of turnover) for right to use trademark, techniques
and products.
o Levies: Fixed monthly payments for advertising, training and administrative support.
▪ Advantages to franchiser:
o Expand business quickly without large capital investment.
o Franchisees will succeed.
o No staff problems as franchisee is the owner.
▪ Disadvantages to franchiser:
o Training and support difficulties.
o No direct control.
o Administrative duties to collect royalties and control brand.
▪ Advantages to franchisee:
o Good chance of susses due to admin support, training, developed systems and
goods name of franchiser.
o Benefit with bulk purchases and supplier negotiates.
o Easier to raise funds from banks due to good reputation.
▪ Disadvantages to franchisee:
o High franchise fees and royalties.
o Strict prescriptions.
o May not receive required support.
Legal regulation of franchises – FASA (Franchise Association of South Africa)
Business Studies Acquiring a Business | 1
