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As you research franchising, you may come across master franchise opportunities. Because it can be easy to confuse the term with others in franchising, here’s a primer.
A master franchisee is essentially a mini-franchisor for a particular territory. In most franchise systems, they own and operate only a small number (or none) of the units directly. Rather, they find individual franchisees to purchase and run the outlets in their territory. In return for recruiting, training, and supporting these franchisees, the master franchisee receives compensation. This usually includes a portion (often 50%) of the franchise fees and ongoing royalties paid by franchisees.
A productive partnership
Franchisors use the master franchise method to expand more rapidly in a specific territory, often a major market. Because master franchise candidates frequently have sales and marketing experience and an understanding of the industry, the partnership is mutually beneficial. The master franchisee buys a proven system and known brand, and the franchisor benefits from the master franchisee’s existing business, contacts, and expertise.
Do you have what it takes?
Strong candidates have established management, sales, and marketing experience. While industry and franchise experience are desirable, neither is essential.
Master franchising requires significant capital, not only for the master franchise license, but also to introduce a brand into a new region. While it involves more responsibility and potentially more headaches than a traditional franchise arrangement, the rewards can be much greater. When all parties are contributing as agreed and the marketplace cooperates, income flows more quickly for everyone involved.Read More
When you’re evaluating franchise opportunities, it’s helpful to have a good understanding of what to expect from a franchisor. Then you can more easily tell the difference between high-quality franchisors and those to avoid. Franchisor support, training, and assistance will vary across industries. But here are a few common areas of support to anticipate:
Help with Site Selection
Mosts lists of what to expect from a franchisor include real estate assistance. For any business that requires a brick and mortar location, the franchisor should provide help with site selection. Some franchisors will actually offer an on-site review of proposed locations and help negotiate the lease. More typically, a franchisor will provide guidelines on finding and evaluating a site and negotiating lease terms.
What should you expect from a franchisor after the site is selected and approved? Next comes the build-out phase. Typically, the franchisor will provide you with detailed instructions about the equipment and decor components that you’ll need to order, along with a list of sources for each. More involved franchisors will provide direct ordering assistance.
Typically a franchisor will supply a complete marketing and advertising plan for the new business that covers at least the first three months of operation. It will specify the timing, sequence, and content of promotional material, and costs for every action outlined in the plan. More intensive support would involve the franchisor actually booking the advertising for the new franchisee, to make sure all areas are covered.
Wondering what to expect from the franchisor in terms of initial training? It should cover all aspects of operating the business, with enough detail and repetition so that a new franchisee can competently run the business from day one. A more advanced level of support could include the franchisor sending an experienced staff person to assist in on-site operations of the new unit.
The initial training should also cover all other issues associated with operating the business. This includes recruiting and retaining employees, back-office bookkeeping, and other administrative tasks. The franchisor should provide written reference materials such as instructional manuals and/or other written documents.
Before entering any franchise system, make sure you understand the types and degree of support the franchisor will be providing to you. When speaking to current franchisees during your due diligence, remember to ask how effective the franchisor is in providing the support. Equally important, remember to make sure the support you expect is specified in your franchise agreement.Read More