What is a master franchise agreement? It’s essentially a contract that allows an entrepreneur to manage and grow an operation across an entire region, under the umbrella of an established franchisor. The entrepreneur, or ‘master franchisee’ effectively takes on the role of a franchisor in the region – recruiting and training franchisees, as well as providing them with ongoing support and ad hoc assistance. The master franchisee will also be able to decide whether they want to manage any franchise units within the region themselves or have all of them operated by individual sub-franchisees.
Why would a franchisor want to put up a master franchise for sale? It’s simple. It allows them to expand at a rapid rate and raise the profile of their overall brand while experiencing limited personal risk. Establishing a master franchise is also a tried and tested method for breaking through to a new audience in a different country.
If you’re interested in investing in a master franchise, you should know that you’ll have to meet certain criteria. Franchisors want entrepreneurs with extensive experience with franchise sales, marketing, and operations. It’s almost impossible for someone who has never been a standard franchisee to be accepted as a master franchisee. So if you don’t have the above attributes, you should consider building your skills and experience by investing in a standard franchise. Then, when you’re ready, you can look for a master franchise for sale that will suit you.
Of course, there are many master franchise opportunities out there, and you’ll need to know what to look for. To begin, take the time to research each possibility you come across carefully. You must be sure that the franchisor offering the master franchise has a proven business model and plan that will enable you to run a successful franchise network in a region. What’s more, you need to determine the level of demand for the products and services you and your franchisees will be offering in the region in which you’ll be based.
For instance, if you were purchasing a master franchise in the UK, you’d need to confirm that UK residents would be interested in what you’re providing. As part of this process, you should request that the franchisor give you a master franchise disclosure document so you’re aware of all the related financial figures. If everything checks out, you should sign the agreement.
Master franchise agreements are more complex than standard franchise agreements. This is because a master franchise involves three different parties. These being the franchisor, the master franchisee – you, and the sub-franchisees who’ll operate under you. Within the contract will be a breakdown of the payments that sub-franchisees must make to you in order to join the network, as well as the ongoing royalties that they must provide. The income generated by this will be split between you and your franchisor. But rest assured that the percentage you’ll receive will be clearly defined within the agreement.
It’s also important to realise that master franchise agreements are generally far longer than standard franchise contracts. They usually last for a minimum of 10 years, but they can then be renewed if both you and the franchisor are happy to continue working together. Moreover, even though you’ll be a master franchisee, you’ll still have goals that you have to achieve. For example, your franchisor will likely require you to arrange for the opening of a specific amount of franchises within a particular time period – stipulations such as this will also be written in the agreement.
Finally, you should keep in mind that there are almost always rules regarding operating a master franchise based in another country. These rules would most likely mean that you wouldn’t be able to manage a master franchise in the UK, while you were living in the United States, for example.
As the leader of a master franchise, you’ll receive ongoing support from your franchisor, have the right to use your franchisor’s intellectual property, and also earn extra income. This will be generated by the royalty fees and other payments from your sub-franchisees. It’s possible that you’ll keep up to 75% of this capital, while the remainder is passed on to your franchisor. In addition to this, you’ll be able to enhance your earnings even further by offering additional services to your franchisees such as staff training and consultations.
Once you take over your master franchise, you’ll essentially be a franchisor for an entire region. This means you’ll be in charge of multiple sub-franchisees who’ll report to you directly. However, this doesn’t mean you’ll be responsible for each individual franchise. Your sub-franchisees will still be independent business owners who are motivated to achieve the highest standards to improve their own earnings. This means you’ll have plenty of time to focus on your own business. Plus, as you’ll be the one offering entrepreneurs the chance to join your master franchise network, you can ensure that all of your sub-franchisees are suitably skilled.
As you manage your master franchise, you’ll learn how to help entrepreneurs develop and grow their own businesses. Then, once you’ve completed your tenure as a master franchisee, you’ll have all the knowledge you need to reach even greater career heights.
If you’ve got queries regarding master franchise opportunities and whether they’re suitable for you, get in touch with Franchise Fame today. Our team will be happy to provide you with advice and guidance, or even help you find a master franchise in the UK or another location.
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