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Master Franchise Defined

Becoming a Master Franchisee can be quite lucrative. Master franchising allows people or corporations to purchase the rights to sub-franchise within a certain territory. This allows the master franchisee the opportunity to grow a decent business in a fairly short time-frame. Franchisors that do use this system of usually grow very rapidly, however not every franchisor offers master franchising opportunities.

Here's how it works: A master franchisee helps the overall franchise company by recruiting franchisees to open units within a specific territory. The master franchisee purchases this specific territory from the franchisor and then shares in the revenue from franchises in that territory.

Unlike domestic Area Representative structures, a master franchisee agreement is designed to allow sub-franchisees to sign an agreement and compensate the Master Franchise entity directly. Because of this feature, master franchise structures are ideal for International development where unique franchise compliance elements can be written into the documentation to comply with franchise law of the country being developed.

In exchange for shared revenue, master franchisers are typically responsible for recruiting, training and fully supporting franchisees within their territory. Revenue sharing is negotiable but master franchisers can expect to receive 50% of the franchise fee and 50% of the royalty fees for each unit sold within their territory.

Advantages of a Master Franchise

This type of investment offers the investor the opportunity to partake in a business concept that has already been fully developed. In addition, by partnering with the larger entity, the master franchisee receives support and expertise as needed from the franchisor as well as access to new systems and technologies. Although the up-front costs are a bit steeper, obtaining a master franchise license is the precursor for more extensive growth potential than a traditional franchise. Also, the master franchisee earns income by keeping a share of the up-front fees as well as through ongoing royalties that individual franchisees pay. Sometimes the master franchisee can also earn an override on a product that is distributed. In addition, as a master franchisee, you may be able to hire others to help you build the business as an additional source of income, while still working at your job or running another business.

Complete Your Research

Although master franchises are sometimes difficult to find, there are many different types of master franchise opportunities that are available. When a prospective franchisee finds a possible opportunity, it is necessary to be aware of all that is involved before signing on the dotted line. Be sure to research the system thoroughly in order to make certain that the business model has a solid foundation. Make certain that the particular opportunity is a good match for your interests and goals. As you do your research, it is wise to visit as many franchise locations as possible.

Lastly, interview successful master franchisees so you can be aware of the types of challenges you may face. If you can’t find someone to interview, try investigating via the Internet or the local library.


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