What is a "master franchise"?

Posted on 8th May 2016 at 4:10pm by Carl Reader in Business

A master franchise is generally offered for an entire country, and these differ from an area developer agreement in that the master franchisee can sub-franchise the business. Because of this, the capital requirements are lower than an area developer licence as the master franchisee is not expected to fund the growth of the units themselves, and instead would recruit for franchisees in the same way that a domestic franchisor would. Before sub-franchising, it would be expected that the master franchisee operates a pilot franchise, to test the concept within the country. This is due to the subtle, and not so subtle, differences in business between nations – for example, although the UK and US share a common language, the business customs, the culture, and the demographics of the two nations are very different.

In the same way that there are differences between domestic franchisors in so far as the control exerted over the franchisees, I’ve noticed that there are substantial differences in the approach to business from international franchisors that offer master licences. Some are very hands off, and simply allow the master franchisee to operate as the best practice dictates in their home nation; whereas other brands exert significant control over the marketing material, launch, and even legal agreements between them and their franchisees (I know of more than one model where the agreements between the master franchisee and the franchisee are drafted by overseas advisors who have no experience of UK law). There are also several examples of badly translated websites from the home nation, and other areas where due consideration of the UK market hasn’t taken place.

It is vital to consider the different requirements in experience and skillset between an area developer and a master. Effectively, when a master franchise is granted, the master becomes a franchisor and is therefore required to focus on the recruitment and retention of franchisees; whereas an area developer will typically be required to focus on the management of the company owned locations. At either of these levels of investment, the franchisor would be expecting you to have the ability and experience to hit the ground running and scale the business effectively.

The above is an extract from The Franchising Handbook, which is due for release later this year. Follow this link to pre-order and be one of the first to read it!

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