State-run retail chain Lanka Sathosa plans to adopt a franchise model to sell goods under its brand name as part of a wider restructuring, Trade Minister Wasantha Samarasinghe told Parliament, EconomyNext reported.
The Minister set out the scale of the problem the restructuring is meant to address. Sathosa has accumulated:
- Rs. 24 billion in losses
- Rs. 14 billion owed to suppliers
- more than 200 retail outlets trading at a loss
The government is closing non-viable branches, upgrading 100 shops and moving toward a franchise system supported by better supply chains.
“While restructuring 100 branches, we must establish a system to move into a franchise model and sell goods under the Sathosa brand name,” Samarasinghe told the House.
Warehousing and working capital
Implementing the model requires modern storage, the Minister said, noting that a proposal has been submitted to the budget for an upgraded warehouse in Welisara. The government has also sought Rs. 2.5 billion from state banks to address working capital and inventory problems.
MP Ravi Karunanayake endorsed the shift and pressed for it to go further, urging the government to franchise hundreds of outlets to end the working capital shortage.
“The franchise model is correct. Please give 424 outlets on a franchise basis or take supplier credit, and then you will not face a working capital issue.”
Karunanayake also cautioned against centralised warehousing, warning that holding heavy inventory leads to pilferage and erodes the thin margins supermarkets operate on — a caution that cuts against the Welisara proposal the Minister had just described.
Samarasinghe replied that the government is considering constructive ideas on warehousing and distribution, but rejected calls to hand state operations over entirely to private supermarket conglomerates.
Where this sits
The announcement follows the chain’s closure of 31 outlets across 2024 and 2025, several of them after landlords reclaimed premises. The loss and supplier-debt figures given to Parliament are new, as is the franchise plan.
Readers should note that “Lanka Sathosa franchise” is a headline that has appeared before in a different context: an earlier administration announced a plan to build thousands of Sathosa-branded franchise outlets through existing private grocers. The current proposal is a restructuring of the existing network under Minister Samarasinghe, and the two should not be read as the same programme.
Not reported
The filing does not say how many of Sathosa’s outlets would be franchised, when the model would start, what terms franchisees would be offered, or over what period the Rs. 24 billion in losses accumulated. It does not say whether the Rs. 2.5 billion from state banks has been approved, or what becomes of staff at branches being closed. EconomyNext is the only verified newsroom this desk found carrying the parliamentary exchange.
Sources: EconomyNext.
