What are the main characteristics of a master franchise?
The master franchise business model is a relationship between three parties: the franchisor, the master franchisee and the franchisees recruited into the network. As a sort of “middleman” between the franchisor and franchisees in a given location, the master franchise characteristics include the ability to recruit and train franchisees and help them develop their own territories, look after the dedicated territory, and manage the fees paid to the franchisor.
Consequently, if you are wondering how master franchising work, it’s important to understand the relationship between the three parties. A master franchisee is allocated a much wider set of rights to develop the franchise brand in new markets than a franchisee is. This may mean that a master franchisee may need to conduct their own market research into the new location and carefully study the legal regulations of that territory to ensure full compliance with the laws there.
What is the difference between a single franchise and a master franchise?
The primary difference between a master franchise and a single franchise lies in the responsibilities that each parties have and the duration of their agreements.
Master franchisee, as a sub-franchisor for a certain country (for example) will be responsible for recruiting and training new franchisees to come on board and run their own individual units. Franchisees, on the other hand, are simply responsible for running their units and delivering the products or services of the franchisor.
In terms of agreement length duration, a master franchisee is in it for the long term. This can mean anything from 15 to 20 years. Meanwhile, a franchisee can join a franchisor for a period of three to five years, in many cases, with the option to extend.
What are the main characteristics of a successful master franchisee?
A successful master franchisee can be defined as one that possesses a combination of relevant industry experience as well as personal characteristics. Generally, industry experience such as running or managing a business before will come in handy. However, personal qualities are very important for a master franchisee’s success. These include having passion for the brand, being entrepreneurial in nature, being a visionary, being honest, trustworthy and reliable, having a strong work ethic, having adequate financial resources to expand the business, flexibility, communication and dedication, a team player, someone with a good reputation in their country, and others.
Does a master franchise require a significant investment?
The master franchise investment entails a significant commitment. These individuals are expected to commit to the parent brand and expand it for a period of up to 20 years (or more). In addition, they will be required to invest their energy and time into training new franchisees. Hence, a master franchisee’s investment is not only determined by monetary means but also time and other resources as well.
How do you know if you are ready to begin master franchising?
Becoming a master franchisee is not for everyone. To know whether you are ready for this major leap, you will need:
- A strong belief in the parent brand and its values.
- Be capable of replicating the same business model in a new territory.
- Invest a lot of time and money into the venture, which you should be able to commit to.
- Have the desire to enforce consistency across the franchisee units, be familiar with local laws and customs as well as have previous experience in managing.
- Past experience in franchising will be an advantage.
How much does a master franchise cost?
The average cost of a master franchise will be calculated based on factors such as:
- The new location that is being expanded into
- Market research costs
- Local rules and regulations for business ownership and business set-up fees
- Lawyers and professional consultant fees
- Translation and localisation of content
- Transportation/shipment of materials and/or necessary equipment
- New equipment
- Cost of premises
- Staff and recruitment fees
- The potential monetary value of business expansion per new unit launched
- Licensing fees
- Local infrastructure set-up costs
