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The Benefits And Demands Of Master Franchises

Aug 17, 2007
Master franchises have an enormous profit potential, but you need to have the financial resources required to take advantage of one.

Franchise companies tend to be very discriminating about which locations they sell their master licences to, because failure of the franchise in some significant location can bring them bad publicity negatively affecting their ability to sell franchises elsewhere. There have been a number of high profile cases of failure of master franchises in countries or regions without adequate demand or infrastructure for the franchise to succeed.

Master franchises give people with significant funds to start a business a degree of power, as they will be in charge of the other franchises that are established in a specified country or region. Sometimes, they are established in groups of countries or regions.

This middle stage can be an excellent grounding into business management and can be very successful if the processes are done in the right way, but there is more to lose if things go wrong.

Master franchisees will not only be given the company's structure and access to its training and support system, they will have the authority to appoint, train and receive a proportion of fees from regular franchisees.

The responsibility for a large area offers a great earning potential, as a model is already in place for marketing the business and distributing the product and so if there is enough interest from franchisees, company outlets can quickly spread and provides the franchise with a better chance of making a strong impression in the market sector.

However, to purchase a master franchise requires a significant investment and so it is essential to ensure that everything is in place before commencing in the role.

Substantial market research needs to be carried out across the whole country or region, as the product or service on offer needs to appeal to consumers in a number of places.

It is important that the contract with the franchiser is agreed in a straightforward, uncomplicated way so that the master franchisee knows exactly what is covered and expected of them.

Issues in it include how much power is given, when the renewal process starts and how to go about it and the exact territory area controlled, particularly for regional master franchisees.

It is advisable to consult a lawyer with some experience in licensing agreements to check the contract.

In addition, master franchisees will in effect be running two separate businesses and so they must be prepared to handle the pressures of ensuring that franchised outlets are up-and-running successfully across a country or region.

This position is certainly very demanding, but with an excellent management structure in place and good support from the international franchiser, big returns can be made on investments which are usually above 100,000.

A certain amount of patience is required though and master franchisees must concentrate on the long-term, as there is a fair chance that a few local franchisees will fail to make an impact and have to close.
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