In Short
- A master franchisee manages multiple franchises and recruits sub-franchisees within a region.
- The role provides opportunities for growth but involves significant responsibilities and costs.
- Master franchisees benefit from royalties but must meet strict performance criteria.
Tips for Businesses
If you have extensive industry experience and want to manage multiple franchises, consider becoming a master franchisee. However, ensure you’re prepared for the responsibilities, including recruiting and overseeing sub-franchisees, managing your own franchise, and meeting the franchisor’s performance standards. Carefully assess if this role aligns with your skills and long-term goals.
When planning to buy a franchise business, you may come across the opportunity to join a franchise as a ‘master Should I Become a Master Franchisee?
When considering the purchase of a franchise, you might encounter the option to join as a ‘master franchisee’. This role carries more responsibility than that of a standard franchisee. This article outlines the duties of a master franchisee and explores the advantages and disadvantages of taking on this role.
What is a Master Franchisee?
A master franchisee operates differently from a standard franchisee. Their responsibilities extend across multiple franchises within a specific region or territory.
What is a Master Franchise Agreement?
A master franchise agreement outlines the specific responsibilities of the master franchisee. It also details the obligations to sub-franchisees and any franchises you may operate yourself.
The terminology in these agreements can sometimes be confusing, as different names often refer to the same roles. However, the two main parties in a master franchise agreement are:
1. Master Franchisor: Also referred to as the “master” or “head franchisor”, they act as the CEO of the franchise system. They grant the intellectual property rights to franchisees or master franchisees to operate the brand under the agreed terms; and
2. Master Franchisee: Sometimes called the “sub-franchisor”, this role involves managing and supporting sub-franchises within a designated territory. The master franchisee reports to the master franchisor in much the same way as standard franchisees report to their franchisor.
Continue reading this article below the formWhy Become a Master Franchisee?
If you have significant industry experience and a network of potential franchise operators, you may consider becoming a master franchisee. Rather than running a single franchise, you would manage and recruit multiple franchisees. This position allows you to apply your expertise within an established framework, increasing your revenue potential.
There are two common reasons why a master franchise agreement is created:
1. A Successful Franchise is Expanding
The role of a master franchisee can represent the potential growth of an already successful business. In this position, you can use your industry awareness to assist existing franchisees in maximising their business’ performance.
The master franchisee’s role will be primarily managerial and involve:
- recruiting sub-franchisees within their territory;
- promoting and marketing the brand within their territory; and
- overseeing daily operational aspects of the relevant franchises.
2. A New Franchise is Considering Expanding
As a master franchisee, you help the franchisor expand the brand geographically and grow its customer base. This often happens when an international franchisor wants to enter the Australian market and needs someone to manage local franchises. Similarly, you may be required when an Australian franchise plans to expand into another state or territory.
This publication offers guidance on managing your franchise network effectively to achieve success, ensure franchisee satisfaction, and maintain legal compliance.
Advantages of Being a Master Franchisee
Master franchisees often benefit from receiving percentage royalties from their franchisees. They typically understand their local territory or market more than interstate or international franchisors, a key asset they bring to negotiations. By leveraging this knowledge, they can drive growth and increase profitability. Additionally, you take on the day-to-day operational responsibilities, easing the time burden on the franchisor. This allows the franchisor to focus on expanding the business at a strategic, macro level.
Disadvantages of Being a Master Franchisee
Becoming a master franchisee often involves a substantial initial set-up fee. Additionally, the master franchisor usually establishes a development schedule and strict performance criteria to ensure you meet the high standards expected of the brand. Failure to achieve and maintain these minimum performance requirements can result in costly consequences.
As a master franchisee, you will oversee other franchisees in your region while managing your own franchise. This role may not suit you if you are not naturally inclined to operate or cannot handle a significant workload.
Key Takeaways
Becoming a master franchisee offers a unique opportunity for individuals with substantial industry experience and a solid network to take on a more significant role in the growth and management of a franchise. While the financial rewards and potential for expansion are considerable, the position comes with increased responsibilities and challenges. Moreover, they must balance overseeing sub-franchises with managing their own operations. This is all while meeting strict performance criteria set by the franchisor. Therefore, if you are prepared for the workload and investment required, this role can provide a lucrative and fulfilling career path. However, careful consideration is needed to ensure it aligns with your skills and long-term goals.
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Frequently Asked Questions
They manages multiple franchises within a specific region or territory. Unlike a standard franchisee who operates a single franchise, a master franchisee recruits and oversees sub-franchisees while managing their own franchises.
A master franchise agreement outlines the rights and responsibilities of the master franchisee. It also defines the master franchisee’s obligations toward sub-franchisees and the operational and managerial duties the master franchisee must fulfil. The two main parties in the agreement are the master franchisor and the master franchisee.
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