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For Franchisees

Master Franchising: Entering the Franchise Game at a Higher Level

By 24/04/2017 No Comments

Hsien Naidu:

Master franchising is a form of the franchisor-franchisee relationship in which the master franchisee essentially becomes a mini-franchisor for a specified territory. Instead of growing a business one store at a time, master franchising allows the master franchisee the opportunity to grow a new business in a relatively short time. Within that territory, the master franchisee is responsible for marketing the brand, building corporate owned outlets, recruiting of franchisees, training them, and providing ongoing support to each franchisee they sign.

Whilst helping the franchisor grow and develop its brand, the master franchisee receives a large percentage of the initial franchise fee and ongoing royalties collected from the sub franchisees. As much as 50 percent can be retained by the master franchisee in exchange for the services rendered by the master franchisee to the sub unit franchisees. It should be very clear that the master franchisee is in the business of developing the number of units in their given territory and not simply opening their own outlets. In exchange for the privilege of being able to sub franchise, the master franchisee is usually required to agree upfront to a minimum development schedule, which can include owning and operating their own units.

Some advantages of being a master franchisee of a brand in a given territory:
Master franchising offers the investor an opportunity to be a part of a business concept that has already been fully developed and can usually receive the support and expertise from the franchisor as well as access to new systems and technologies.

Being a master franchisee requires larger up-front investments, being assigned a master franchise license is the first step for more extensive growth potential than a single unit or even a multi unit franchise. Also, the master franchisee earns income by keeping a share of the up-front fees as well as through ongoing royalties that individual franchisees pay. Sometimes the master franchisee can also earn an override on a product that is distributed. This format of growth allows both the franchisor and the master franchisee to grow using other investor’s funds to contribute to the growth of the franchise system, regardless if they are at the level of master franchisee or franchisor.
In addition, as a master franchisee, you may be able to hire others to help you build the business as an additional source of income, while still working at your job or running another business.
Master franchises are difficult to find, and when presented with an opportunity, it is necessary for the potential master franchisee to make certain that the particular opportunity proves to be a good match in terms of the prospective master franchisee’s interests and goals, financial or otherwise.
Often master franchise opportunities can be sourced on the international franchise circuit. Depending on the brands, they can come from more developed countries like the USA, Singapore, Korea, Japan, Europe and Australia.

On the look out for suitable franchise partners are F&B brands like Royal Copenhagen, Cookieman, Tea Temple, Ramen Champion, Pezzo, Manhattan Fish Market and Chippy. Enrichment, Training and education brands like People Impact, Acumen, Mulberry preschool, Blossom and Red School House. On the Retail and services, brands like the cleaning professionals known as Crestclean, Quality stationers like The Paper Stone and shoe retailers, Fabuloxo seek partners that can offer local know how to expand their brands in various markets.

Regardless of the master franchise opportunities selected, once the potential master franchisee has narrowed down to their chosen franchise, it is important they thoroughly understand the terms of the agreement. Be sure to research the system thoroughly in order to make certain that the business model has a solid foundation and has the potential to grow in the target market.
In conclusion, master franchising can be a wonderful way to franchise, build a franchise organisation, a great return on your investment. However, risks still abound. It helps if the potential master franchisee buys into a proven franchise system and it does not hurt for them to get some expert advise along the way to serve as a sounding board.

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