A Master Franchise happens when an investor goes all in. These franchisees pay big money to develop business opportunities in a specific territory. They recruit new franchisees, train them and offer support. Master franchise opportunities cover a number of new businesses over a set period of time. Here is some more great information about this franchise opportunity.
What is a Master Franchise Company?
American franchise companies use this system to rapidly expand and sell franchises. A Master Franchise Company is a major part of international expansion for the parent company. But becoming a master franchisee requires significant capital.
As you might expect, there is a master franchise system they need to navigate. A great resource is Franchise Update Media.
What is the difference between a franchise and a master franchise?
The master franchise usually goes international or national with their business. These are run by franchisees who look after a specific area and need to provide guidance while recruiting other owners. Master franchising is about taking more responsibility than a franchisor. They are tasked with area development.
A franchise opportunity is a smaller business. There is less control over what happens as far as expansion in a specified territory. A franchise is more concerned with the business of a single entity. A single franchisor has a narrower focus.
What are the benefits of Master Franchise?
A master franchisee must take on additional roles to support sub-franchisees. It is more work to support franchisees, but there are many benefits when the marketplace works together. As the following:
- It is an investment decision based on a proven business model. A master franchisor gets the benefit of an established brand. You want to move into a new territory, but with a name that is recognized and a business model that works. You benefit from a proven system. Calculations covering areas such as own unit economics are visible.
- You get an exclusive territory. Most of the terms of the master franchise agreement provide for this. A master franchisee buys that kind of exclusivity. And international expansion saves money on labor and regulations.
- You get control. The master franchisee is authorized to supervise. You have your own business. But at the same time, you are the intermediary between the franchisor and the franchisees you recruit.
- You get the benefit of established intellectual property and Branding. The brand is more than likely already established in a certain territory. You may use it pursuant to the Master Franchise Agreement. You can also benefit from the already established intangible property.
- You get new profits. With master franchising, you get a percentage of the original franchise fee. In addition, you will also receive a share of ongoing royalties. And you can add it to what you make from a master franchisee’s existing business.
Who makes an ideal Master Franchisee?
A master franchisee must have the following qualities to be successful. Remember that any kind of franchise ownership requires hard work as well. To operate a certain territory, you must have these characteristics. These are different from other forms of franchising.
- A business background. This is slightly different from unit franchising. A master franchisee must work with several different sub-franchise companies. Determination and confidence are important for this type of area developer.
- A passion for the brand. The master franchisee is the brand ambassador in another location or country. These people must be leaders to inspire multi-unit franchisees by training and supporting them.
- The ability to grow the business. The franchise brand must be considered. However, good candidates have enough capital to sustain a venture for 3 to 5 years.
- Confidence. Master franchisees must be able to achieve specific goals over a certain time frame. They must project a positive confident attitude to themselves and the other franchisees. And they need soft skills to deal with sub-franchisees and local employees.
- They must be decisive. These types of franchise systems can be challenging. Candidates must be able to make difficult and simple decisions. They deal with an infrastructure abroad as ambassadors for a well-known brand.
How do you start a master franchise?
A Master Franchisee usually has some experience in marketing and sales. A large percentage of successful people have an existing infrastructure and business. Starting one depends on a successful franchisor–franchisee relationship.
This means that you have to open and operate a few stores of your own as a franchisor. After that, you can start offering franchise rights to sub-franchisees. Then you sign a master franchise license. It gives you rights to a large area.
There are a few other options once you get comfortable. For example, you can turn a motivated employee into a mini-franchisor.
How much do Master Franchisees earn?
Going from franchisor to master franchisee means being paid differently. There is no salary or fixed income because they are not employed by the franchise company. They enter into a contract with the parent company to serve and sell individual sub-franchisees in various areas.
They do not receive normal income or normal sales commissions. They get a cut of the franchise sales. It may include property fees, training fees, initial franchise fees and ongoing royalty fees. For the master franchisee, the customer is the sub-franchisee under them.
What is a Master Franchising Fee?
This is the fee that the master franchisee pays initially to the parent company. The Master Franchise Fee is similar to other franchise fees payable. The FTC regulates the entire system nationwide. Generally, these fees are not negotiable due to the Federal Trade Commission rules that govern them. These differ depending on the franchisor.
What is the difference between a master franchise agreement and a site development agreement?
It is important to know the difference between these. There is a difference between a master franchise agreement and an area development agreement. First and foremost is the cost to the franchisor. Area developers do not pay high investment fees. But at the same time, they don’t get much of the sub-franchise income.
The other big difference is who is responsible for developing regions directly. In most cases, it is the area developer. Support and training is provided by the franchisor. These developers help because they are required to open some places in a certain time frame and in a certain territory.
The agreements cover various areas of responsibility. The area representatives working under that agreement have no agreement with the franchisees. Their focus is more on being an area developer.
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