TotalFranchise.co.uk provide an insight into the world of Master Franchising, providing an overview of what it is, how it works, and why it may (or may not) be a form of investment for you to consider.
Master Franchising is where an opportunity is created by an organisation to grant a franchise to a large territory such as a country or region, whereby the Master Franchisee acts at a level above regular franchisees, but within a controlled manner as governed by an agreement with the Franchisor.
So, a Master Franchise holder is a Master Franchisee, as they act under license to the Franchisor. However, the manner of their operation is similar to that of a franchisor, in a regular franchisee to franchisor relationship.
The Master Franchisee will recruit, train and support franchisees at a local level.
Regular franchisees have their franchise relationship directly with the Master Franchisee. They usually have no direct dealing with the Franchisor.
There may be International events, knowledge, expertise, and operations successes collated and shared between Master Franchisees and the Franchisor that is disseminated down to franchisees.
Of course, costs vary according to a wide array of factors - location, market potential, brand size and reputation, and ultimately the perceived value set by the Franchisor and agreed by the Master Franchisee. However, in the UK, its likely that for an established international franchise, the cost could be several hundreds of thousands of pounds.
Like with most franchises though, this is an investment that should yield a saleable asset, assuming the business develops in line with expectations, so usually offers an opportunity to sell the business later (within the boundaries of the Franchise Agreement) whilst also achieving a high level of income if the Master Franchisee's business is meeting performance expectations.
Other factors to take into consideration include the working capital required, which to ensure a successful franchise launch usually needs to be vast to achieve the kind of market penetration required to establish a franchise growth.
Getting this wrong is a major factor in potential failure, as if the business does not meet recruitment targets in the first year, it becomes increasingly difficult to apply recruitment acceleration if potential franchisees are aware of a brand but are not able to see demonstrable growth and success within a reasonable timeframe.
For the right person, a Master Franchise presents an exciting opportunity of potential, one of being in the right place at the right time to take a great business model to a new market. With high potential, comes high risk however.
Applying International branding to new markets can meet with different responses culturally, as many American and Australian Franchisors have found when taking their successful businesses on a domestic level to the UK market and finding brand perception very different to home markets.
So, a Master Franchise is a massive commitment, as is to be expected, and one which presents a significant investment of time and money, but if you had the opportunity to take brands largely unknown in the UK ten years ago, but that are household names today, like Subway, you may regret passing by such a lucrative investment in years to come.
The Master Franchisee is building a business through franchise growth, so is recruiting and training franchisees is a primary focus. Depending on the business model though, the Master Franchisee will be, in partnership with their franchisor, setting up all the commercial relationships necessary for the business to operate on a level comparable to the Franchisors proven business model.
These commercial relationships are vital to ensure the franchisees operation can run smoothly as can be reasonably expected and to aid effective business development.
In addition, the Master Franchisee will also be ensuring that all the obligations to the franchisee are met, providing resources in support services and training on an ongoing basis, developing a Group Head Office base usually in the process that grows in tandem with the franchise network.
There is alot to weigh up. Massive investment and working capital requirement, astute business skills and a good decision maker, a strong leader, a salesman, a relationship manager and so much more.
The full array of business skills are usually needed to succeed, and an awful lot of graft, coupled with the right opportunity, in the right market, at the right time.
So, if this has you thinking fearfully, probably a Master Franchise is not for you. But to find yourself in an enviable position as the regional head and owner of an international brand worth millions, what would else would you expect?