What is master franchising?
What is the definition of master franchising?
On this page we will explain the concept of master franchising and give you some tips on what to take into account if you want to become a master franchisee.
Definition master franchise: When a franchising concept wants to expand its franchise abroad, the franchisor will find or appoint a master franchisee for a specific country or countries. It is the responsibility of the master franchisee to expand the franchise in his/her country and attract local franchisees. This master franchisee will buy the rights to exclusively operate within the specific country. Most of the time this master franchisee will receive support from the main corporate headquarters during this expansion.
If you want to become a master franchisee, you will need to have:
- Sufficient investing capital. The needed funds for buying master franchisee rights are often higher than regular franchising investments. Amounts above $100.000,- are very common.
- Relevant experience in the related field. Not only do you need entrepreneurial experience, but also experience in the field in which the franchise is active, is a requirement.
- Good communication skills. A direct line of contact with the franchisor is a must. A proper sufficiency in the english language is an absolute must.
- A versatile personality. During the startup phase of your expansion in a certain country you will need several qualities to succeed; Willpower, conviction, enthousiasm and the willingness to do alot of work. It is usually best to exploit the first location for yourself. If you get through this pioneering phase successfully, and are able to attract several local franchisees, you will have to have certain managing qualities. Leading and advising a team of franchisees and employers requires a lot of tact, experience and knowledge of people. A whole different skillset.
The master franchisee will have to sign a contract at the start of the cooperation, this contract is not comparable with a regular franchising contract which franchisees sign when they will join a franchising company. The difference is mainly in the duration of the contract, mostly this is longer than the average franchising contract (about 10 years total) and because master franchisees often concern foreign companies, the contracts are subjected to different legal systems. The contract will also often contain a section concerning the minimum amount of stores/locations you are expected to open in a certain amount of time. If the master will not be able to reach this goal, the rights to the franchiseeship of that country will return to the franchisor. The international franchisor will only benefit from the arrangement if a master franchisee attracts alot of local franchisees for that country. A good past example of this is Burger King. The former master franchisee thought that only a few big restaurants in primarily railway stations was sufficient and stopped expanding. Leaving room for competitors like McDonalds and KFC to conquer the dutch market. Only after Burger King had passed along the rights to another, was it able to expand further. We always advise franchisees to consult a local franchise lawyer before signing a contract.
What are the benefits of being a master franchisee?
- A franchising concept often has proven its worth abroad. Thanks to the experience it has, you can be assured that all kinks have been straightened out.
- The master franchisee will no longer have to work on the concept because it has been thought through. The focus lies solely on conquering the market of his specific country.
- The franchisor will support you on several aspects like the finding of franchisees using custom profiles, and locating the right market area’s.
- As a master franchisee you will be operating nationally. Thus it will be easier to operate locally and to approach consumers.
What are the cons of being a master franchisee?
- The master franchisee will have to make a relative big investment in comparison to a regular franchisee.
- The master franchisee contract usually is for a longer period of time. Mostly between 10 and 25 years. But this could also be seen as an advantage.
- The master franchisee bears a big responsibility over the expansion of the concept within a certain country.