A master franchise is like running a normal franchise but on a larger scale.
A master franchise will be run by a master franchisee who will be an investor. They will hand over a large fee to enable them to have the rights to use the brand name of the franchisor and run the business in a dedicated region. As a master franchisee, they will then have to employ other franchisees in that same region to grow the brand. That master franchisee will then have to account for future and ongoing training along with any additional support. Therefore, the master franchisee is a mini-franchisor who will benefit from the franchisees by keeping most, if not all, initial fees and any extras paid in their region.
This type of franchising is generally used for international expansion into the market. A business may choose this option because they believe it will create fast growth in their company without putting in their own capital and taking that risk.
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THE LOGISTICS OF MASTER FRANCHISING
The master franchisor has to be able to set up a specific number of franchises within a certain period as per the agreement made with the initial franchisor. Agreements made with master franchising are more complicated than the usual form of franchising because there are different parties involved, including; the master franchisor and franchisee and sub-franchisees. A typical master agreement will last on average between 10 to 20 years. If the master franchisor and franchisee are in different countries, then there will need to be a special consideration of the different laws in each country. This is why there needs to be specialist franchise advisors in place when it comes to the contracts being signed and exchanged.
Also Check Out: Benefits of being a master franchisee
WHAT MAKES A GOOD MASTER FRANCHISEE?
It is important if the franchisor is wanting to set up a master franchising model for their business, that they look into finding a master franchisee who is already experienced and qualified in this type of business model for international expansion. This will reduce the costs of trying to train and set up an infrastructure in other countries. If the franchisee knows what they are doing, particularly in their country of choice to set up, then this helps with any cultural differences and sourcing any employees and suppliers locally.
THE BENEFITS OF MASTER FRANCHISES
1) The master franchisor will have a large financial gain from selling the rights to their brand to the master franchisee, from this they will also be able to expand their company into other countries without having to do the market research themselves of entering a new economic environment.
2) The master franchisee has the advantage of using a well-established household. They will also receive the support that a franchisee would usually obtain from the franchisor. The franchisee will get a great deal from this such as utilising the international marketing that the master franchisor will be doing in general, using any of the latest technological advanced systems the business has as a whole in place and any increases in profits made.
3) The master franchisee will usually get fees from the franchisees in their region from 40 to 75%.
4) This sort of model is a great partnership for both the master franchisor and franchisee. The franchisee will be willing and motivated to sell as many stores as possible to the right people. As the franchisee is responsible for all the money that goes towards training and additional support they will want the very best selection of people to sell within their region. If those people in their units are doing well, it means that the master franchisee will have a bigger reward in regards to royalties.
5) The master franchisor can offer all the skills that they have learnt over the years such as leadership and managing multiple organisations. Even though the franchisor is not directly involved in the day to day running of the franchises they can be there to offer any support to the master franchisee.
Master franchising is not for the faint hearted or for those just starting out. A significant amount of capital has to be put on the table for rights to the master franchise branding as well as the money that is needed to break into a new region or country. The master franchisors need to have strong management organisational skills and any experience in that particular industry will only help more.
For further information on how you can get started with master franchising then take a look around the Franchiseek global franchise directory today.