Master franchising, like other forms of franchising, involves two parties: franchisor and franchisee. The only difference in a master franchise agreement is that the master franchisee is franchisor over a territory. This means that, inside of that specified region or territory, the master franchisee is in charge of bringing on new franchisees. As the master franchisee is, in essence, acting as franchisor, they are also required to provide training and support to their sub-franchisees.
What does a Master Franchisee do?
All franchises have a franchisor that relies heavily on the franchisees to broaden and strengthen the brand recognition of the company. In exchange for this commitment to the brand, the franchisor is required to provide constant support, training, relevant know-how, marketing expertise, and an effective, tested business model. Many networks of franchises rely on managers who specialise in business development. These managers cater to the needs of the franchisees within their specific territory. In other cases, a master franchisee will be the middleman between the franchisees and the franchisor. They are in charge building and developing the franchise in that area.
What does a master franchisee do in their day-to-day?
There are many ironies in becoming a master franchisee. As a master franchisee, you are not employed in the management side of company, although your role requires you manage an entire region. Despite being responsible for supervising and assisting the franchisees on the payroll in your area, you yourself are not on the payroll.
There are certain responsibilities that a franchisor has that would also be expected of you, including recruitment of new franchisees, ensuring compliance with the franchise agreement and ongoing support to the new members of the franchise.
Keep in mind, you’re expected to manage your region while also managing your own franchise.
It goes without saying that master franchisees ought to be driven and motivated to grow their business. It requires good people management skills and business acumen.
What are the advantages?
The main benefit that master franchisees receive is a royalty percentage. This is a percentage of all fees paid by franchisees in that region. It can be anywhere from 40% up to 75%.
The initial fee that master franchisees pay in order to run a region of their own is normally substantial. However, once a solid system of franchisees has been built up, the financial benefits can be huge
While making money is certainly a benefit of the role, some master franchisees go even further and become influential in the business as a whole.
Just like all franchise agreements, it’s fundamental that there be transparency between the parties in regards to what is expected of each party. If the parties cannot rely on each other, the role of a master franchisee will be a difficult one to fill. Speak to a franchise solicitor about reviewing the disclosure document to make sure it includes all the necessary information needed to become a master franchisee.