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What is a Master Franchisee?

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Becoming a Master Franchisee can be quite lucrative. But what exactly is Master Franchising?

Master Franchisee Defined

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 timeframe. Not every franchisor offers master franchising opportunities. Franchisors that do use this system of usually grow very rapidly.

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.

For example, your master franchise agreement with the franchisor may state that you will receive 50% of the franchise fee and 50% of the royalty fees for each unit sold within your territory. You will be responsible for recruiting and training other franchisees. You will also need to be available for ongoing support.

Advantages

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.

What to Look for

Although master franchises may sometimes be 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.

In conclusion, master franchising can be a wonderful way to franchise and make a great return on your investment; returns are typically higher than investing in stocks/bonds, starting a brand new business, or even purchasing an existing business. Just be sure to buy into a proven franchise system.

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