If you are considering opening a franchise, you may have come across the term master franchise, and wondered exactly what it means. In this guide, we explain in detail what a master franchise is and discuss the benefits of opening a master franchise.
What is a master franchise?
A master franchise is a franchising agreement in which the master franchisor agrees to give control and the rights to a franchise in a specific territory to a person or business. This method is commonly used by large franchises who wish to expand their franchise to new areas and locations, for example, a different county, city or country.
One of the most recognisable and successful master franchises is the fast-food giant McDonald’s. By becoming a master franchise McDonald’s have been able to successfully spread their franchise around the world. Although the core products of McDonald’s are the same in every location, each franchise adapts the menu and marketing of their restaurant based on their location. For example, in Muslim countries, all pork products are replaced with beef, fish or chicken. Similarly, the Happy Meal toys will vary around the world depending on what is popular with the children in that location. McDonald’s is a perfect example of a master franchise handing over their name, products and pricing to a franchisee, but giving them the freedom to market and adapt their services based on their location.
You can browse all master franchises at Franchiseek.
Why become a master franchise?
For master franchises, having a franchisor set up a new location allows them to quickly and speedily spread their products/services to a new area with very little initial capital risk. Master franchises also benefit from local franchisor knowledge and do not need to complete extensive area or customer research, as the local franchisor will already be familiar with an area, allowing them to choose a popular location and market the franchise more effectively. This allows master franchises to bridge cultural gaps and language barriers successfully.
Why become a master franchisee?
The relationship between master franchisee and franchisor is mutually beneficial. The franchisee is able to buy an already established business that perhaps already has recognition in their local area and a franchisor is able to benefit from the geographic expertise of the franchisee and bring their franchise to a new area successfully. The relationship between master franchisor and franchisee is so successful as both partners get to benefit from the expertise of the other.
Benefits of a master franchise for a franchisor
The franchisor will receive a large upfront sum when they sell the right to their franchise to a franchisee. This helps provide a massive boost to their cashflow.
Selling a master franchise allows a franchisor to expand to a new location without having to have extensive knowledge of an area.
Benefits of a master franchise for a franchisee
In today’s digital world, brand names can quickly spread around the world and become instantly recognised. By opening a master franchise, you benefit from opening a business with a strong, established reputation and recognisable brand name. Without a strong brand behind you, you risk opening a business that people do not trust or forget about due to lack of recognition and reputation.
With a master franchise, you receive just as much support and guidance as you would receive from a standard franchise. This can include everything from start-up products and materials to advice and guidance. Often when opening a master franchise, you are entering into a community as the master franchisees from around the world connect and support one another.
With a master franchise, you purchase the right to sell a franchise in a specific area. If you are approached by another franchisee who would like to sell in your area, for example at another location within your city, you may be eligible to receive ongoing loyalty fees from another franchise if you choose to allow them to set up their business in your territory.
This allows a franchisee to take on a role similar to a franchisor and recruit new franchisees to start businesses within their area. This is not a necessity, however, and some master franchisees choose to simply focus on their own franchises.
What do you need to become a master franchisee?
The below criteria are not essential, but useful traits to possess if you are considering becoming a master franchisee.
Having strong local knowledge and understanding your target customer base is extremely useful for anyone hoping to become a master franchisee. This ensures that you will be able to adapt the marketing techniques of a master franchise successfully to your area and make your business a hit locally.
Although there are many economical benefits to opening a master franchise, being passionate about a business will help you to feel fulfilled in all aspects of business ownership.