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The Basics of Master Franchising

The Basics of Master Franchising
master franchising

Master franchising allows the franchisor to take on responsibility beyond the typical multi-unit franchisee. The master franchisee becomes more of a partner to the franchisor, combining both the roles of franchisee and franchisor. Thanks to franchising.com, we offer you the basics of a master franchisee.

What is a Master Franchisee?

The master franchisee acts as a mini-franchisor for a specified territory. The franchisee receives a large percentage of the franchise fee and royalties. In exchange, the master franchisee will recruit other local franchisees and take on the responsibility of training and supporting the recruits. To sum up, he or she will receive more financial benefits, but take on extra financial burdens and responsibilities within the territory.

Purpose

US franchisors most commonly use master franchisees when they want to expand internationally. This is because there are usually major cultural differences and insufficient infrastructure. It take a lot of time and effort to launch overseas, so finding a master franchisee relieves much of this burden. If expanding in the US with a master franchisee, it typically serves the purpose of expanding rapidly in a populous territory. The more franchisees the master franchisee recruits, the more money he or she makes, so there is a major incentive to obtain plenty of recruits. That being said, they also have an incentive to only recruit those qualified, because they are responsible for training and support.

Benefits

Master Franchisee:

  • Proven system.
  • Known brand.
  • International marketing.
  • Access to franchisor’s systems and technology.
  • A partner very interested in the franchisee’s success with plenty of informational resources to offer.

Master Franchisor:

  • Benefits from the franchisee’s existing business and contracts.
  • Franchisee offers local expertise.
  • Quickly penetrate market.
  • Gain brand dominance within region.

Mutual Benefit: Both are using someone else’s money. Recruited franchisee pays the franchise fees for their location, and the master franchisee typically receives 50% of the fee.

Master Franchisee Qualifications

Not just anyone can be a master franchisee. It requires significant money and experience.

  • Management and organizational skills.
  • Own an existing business or infrastructure.
  • Sales and marketing experience.
  • Experience in the industry or franchising in general.
  • Significant capital.
  • Contracts with local financial institutions.

It’s not easy to be a master franchisee, but the benefits can be great. Master franchising offers a unique opportunity for both the master franchisee and franchisor. It positions the company for great success in a region, while the master franchisee reaps rewards beyond that of an ordinary franchisee.

Other resources:
Franchise Science CEO, and Franchise Growth Institute Executive Director Harry Miller has made a career of successful franchising, including both client and consulting-side perspectives. He also serves as VP Franchise Development for Persona Pizzeria, a fast-growing, fast-casual concept. Prior to founding Franchise Science and Franchise Growth Institute, Harry was Senior VP of Francorp, one of the first international franchise consulting firms, and lead consultant to some of the largest and most successful franchise concepts. Prior to these extraordinary experiences, Harry owned and managed a Radio Shack franchise, and ran multiple offices in Los Angeles for a 400 unit tax resolution company. For several years, he assisted scores of entrepreneurs across the continent in obtaining angel funding and capital investment through due diligence roles relevant to franchising. Harry credits his training in the U.S. Navy, and working on a farm in South Dakota for his discipline and unrelenting work ethic brought to each franchise engagement.

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