Master Franchising

There are two primary ways in which franchisors can guide and support their franchisees: direct franchising and master franchising. The first mode of franchising involves direct communication between the franchisor and franchisees. The second one involves indirect communication between the franchisor and franchisees through an intermediate figure, the master franchisee.

The master franchisee essentially takes on part of the role of the franchisor. He or she can only play this role in a specified territory. The role entails recruiting the franchisees and giving them the guidance, training and assistance they need. The master franchisee also receives the franchisees’ initial fees and royalty fees. He or she might have to pass some of these earnings to the franchisor if that is what their agreement indicates. In addition, the master franchisee has to pay a large fee to the franchisor at the beginning of their agreement.

 

The Characteristics of Master Franchising

 

Master franchising is advantageous for a number of reasons. These reasons could ultimately convince some to sign up for the position of the master franchisee. For one, the master franchisee does not need too much cash to begin with. Secondly, he or she can work as an independent business agent. This makes it is an attractive proposition for the up-and-coming entrepreneur. Master franchising sets the master franchisee right in the geographical vicinity of the franchisees. Hence, the master franchisee can communicate more efficiently with the franchisees and assist them more readily than the franchisor, who is located in another part of the country or in an entirely different country, can.

Unfortunately, master franchising is also characterized by disadvantages. These include the fact that the master franchisee cannot expand beyond the predetermined territory. Additionally, the contract that the master franchisee signs with the franchisor is typically a long-term one. Hence, if it turns out to have been negotiated to the disadvantage of the master franchisee, it can be a long time before he or she has the opportunity to renegotiate its terms or end it to pursue another endeavor. Master franchising is also beset by legal problems, likely due to the added layer of complications and inefficiencies that can only be expected with the introduction of an intermediate figure into the franchising process.

The franchisor that is keen on the rapid growth of the franchise but does not want to risk much of his or her own initial capital will typically opt to contract a master franchisee. If the franchisor contracts a master franchisee with the right skills and is able to match these with excellent resources, success is sure to follow.

Using the master franchising concept, you can take great franchise owners and turn them into master franchisers and expand their success and yours along the way.

It is hard to say if master franchising benefits the franchising company or the franchisee more. The concept is an elegant one to be sure.  Instead of developing a small army of franchise owners, each of which operates one franchise per owner, you take the real winners in from your franchisee elite and let them operate many franchises by offering sub-franchisees that they train and run based on their vast experience and expertise. In exchange, you fork over a little bigger piece of the pie from the profits of those sub-franchises and with that exchange, you pass to the master franchising candidate a boat load of headaches, costs and risks.

The changes to the franchise agreement can be handled by your legal eagles who know the in and outs of franchise law.  It is all very legitimate and it is a beautiful way to kick your franchising program into the next level. You can continue to grow your empire through franchising but the results in terms of reduced effort, overhead and risk to the franchising company plummet even as your profits sour.

The control of risks alone should make master franchising a very sweet deal to the big bosses in your company. As much as we put a sweet spin on the business maneuver of franchising, there is always a risk.  When you sell a franchise to a new partner, you do all you can to snoop around and make sure that he or she has the right stuff to make it big running one of your operations. By try as you might, some people can’t cut it. When a franchise fails, that is terrible for the franchisee and you lose a bundle too.

Master franchising turns over the risk of opening new franchise to the master franchising guru.  You know that the partner you are signing a master franchising agreement knows his stuff because there is a track record of stunning growth and profits that you already get from that franchisee. So why not mine that huge experience and let him or her make you even big piles of money through master franchising.

Master franchising means everybody shares in a bigger pot of money.

When you bring in that candidate for master franchising to negotiate a deal with, it isn’t hard to dangle some sweet profits out there to wet his appetite.  Along with taking over the recruitment, the training, the management and the risks of handling sub-franchise, you will be able to put a nice increase in profits into that master franchising agreement.  You get to still keep raking in the big profits from the anchor franchise your master franchising candidate runs because that isn’t going away.

The change is that all of that seasoned knowledge about how to turn a franchise into a cash cow is now gets spread to man sub-franchises. Not only can that master franchising guru train his or her charges to run serious profitable outlets of your business, he or she can jump in there and fix things when they break and fine tune each sub-franchise until it is a money generating machine too.

The result is the master franchising guru gets to use his or her hard fought experience to get very rich indeed. The sub-franchise managers begin to get a taste for serious money that they can enjoy working in a tightly run franchise and you see the cash flow from the chain of operations run under the master franchising agreement explode making you huge amounts of money.  That is a win-win-win situation.

If franchising is a good idea, master franchising is even better but understand the pros and cons well before taking it on.

It might sound like the idea of master franchising is franchising on steroids. But in reality, there could be a volcano of opportunities for even more riches if you decide to go the master franchising route. But, like any golden business opportunity, knowing all you can up front is not just a good idea, it is a must. So get all the franchise information you can about this twist on the franchising concept and you will be better off for the effort.

The idea of master franchising does not take a rocket scientist to grasp. In a nutshell, a person who is dabbling in master franchising is able to own a franchise and own and operate sub-franchises in the same vicinity where he or she operates and so run a small empire.  It is a nifty idea because, after all, one would think if you are great at franchising, you could be a huge success in master franchising.

There are a few dragons in the land for those who think master franchising is for them. For one thing, you will need a few more big bags of money to invest in master franchising because you are running several businesses under the same umbrella.

Another risk that often jumps out and broadsides those who get into master franchising is that running several outlets of your franchise is going to become a management hurdle for anyone. You must be ready to deal with employee issues at all of the sub-franchises. You may be called upon to cope with facility problems and handle the book keeping for your vast empire as well. So you should be sure that in addition to your zeal for master franchising, you have some serious stripes in master management and master multitasking as well.

The gold mine of profits that master franchising might return may make the risks entirely worth it.

There is simply no question that there is a lot of opportunity in master franchising for the manager who can deal with franchise operations on a larger scale. Master franchising is not a new concept so there are plenty of people who have cleared the brush for you that can help you figure out how to make master franchising work for you.

For the franchisee who wants to jump start a much larger business very quickly, master franchising a great way to go.  Because you can launch a number of sub-franchises at once, you can get a network of businesses going strong much faster than going the traditional franchise route.  For the small business person who is ready to go whole hog into rapid expansion, master franchising is a great route.

In addition, it is a way to share the bonanza of business skills with those who manage your sub-franchises while they help make your bank account get fatter by the day in exchange for your vast wisdom.  That is not a bad exchange.