When a franchisee has significant funds to invest in a franchise opportunity, one option is to take on what is known as a master franchise licence. This means that they oversee other franchises within a specified country or region. It, essentially, offers a degree of power to people who can afford to invest in a business network.
Many master franchise licences are granted for international expansion, but a master franchisee can be based domestically as well. If a franchisor wants to explore the route of international expansion, they sometimes choose a master franchisee who is from the region they are expanding into. This is an excellent way of bridging any cultural differences that occur between markets. A competent master franchisee can offer instant local knowledge that helps greatly during the early stages of expanding a franchise business overseas.
A master franchisee differs from a regular franchisee in that they have autonomy to appoint, train and receive a portion of fees from regular franchisees. A Master Franchise Agreement (MFA) is an agreement that allows the master franchisee to have the right to own more than one establishment and also gives them the right to sub-franchise other units to independent business. Of course, they also have access to the company’s brand, business structure, training, support systems and much more.
Before a master franchise is granted, research must be conducted across a whole country or region to determine whether the product or service could appeal to a wide range of consumers locally or globally. If it is a viable business opportunity, the master franchisee could generate a significant income – a model is already in place for marketing and selling the product or service so all they need to do is replicate a successful business model across new territories. If there are many franchisees interested in buying a franchise, this is even better. Company outlets can spread quickly and the franchise can make a strong impression in the market.
It is important to note that since master franchisees require a sizeable investment, the franchisor’s vetting process will be more intense. Prospective master franchisees should ensure they have all financial statements and other documents in place so that this stage goes as smoothly as possible. A franchisor will typically expect a master franchisee to be skilled in management, sales and marketing. They should have a network of business connections already established within their local community.
Master franchises should ensure that their franchise agreement is straightforward and that they know what it covers and what his or her role is in the business. The contract will include how much power the master franchisee has, when they need to renew their contract and what region or area they have control over. It is advisable to have a solicitor read over the document before anything is signed or confirmed.
Running a master franchise is a huge responsibility that should not be undertaken lightly. Patience, an entrepreneurial flair and long-term vision are three traits that are required to succeed. A master franchisee will effectively be running two separate businesses – they have to ensure that franchises are running successfully across a country or region which is not an easy task. Good support and insight are available from the franchisor and a significant return on investment is likely.
Click here to learn more about master franchise opportunities!