What is a Master FranchiseIs buying a master franchise the answer to growing a huge successful business as a world-renowned brand? February 13, 2019
With a yearly turnover in sales of AU$144 billion (yes, with a “b”) in Australia alone, investing your money in a business there is a more than a smart move.
You have the option to start a new business or buy an existing one. And for many reasons buying a business is the safer choice – it has a higher success rate and you can quickly see a turnover.
And if you have the desire to operate a business on a big scale (understand bigger profit), it’s best to look into master franchising.
Table of Contents
- What is a Master Franchise Business
- Master Franchise VS Working Franchise
- How Much Does a Master Franchise Cost
- How to Become Master Franchisor
What is a Master Franchise Business
A master franchise is a form of contract which grants an investor the powers to operate as а franchisor for a specified territory.
Master franchisees, unlike regular franchisees, don’t work on the field. They act as managers for the given territory, having the right to sub-franchise other independent businesses, do marketing, train and recruit new contractors, as well as develop the infrastructure needed for the business.
Adopting the master franchise structure allows for the franchise company to cover new areas, work in new cities, or even establish the brand in another country.
Providing the powers of a franchisor to a master franchisee allows the company to retain the quality of their services or products, something normal businesses fail to do when they grow with a single managerial entity.
Master franchisees can sub-franchise the business, hire employees, and even run marketing campaigns in the designated geographical territory.
Advantages of a Master Franchise
Investing your money in a master franchise gives you a competitive edge from other businesses. One of the main advantages is that you have the support and experience of the franchisor, which can be very helpful in all stages of the development of your business.
Other advantages include a proven business plan, already tried out methods of working with clients and professional training both for employees and franchisees, which can be time and budget consuming for regular businesses to develop.
Regional Developers vs Master Franchisees
There is a big difference between regional developers and master franchisees. While both are responsible to develop a market, regional developers often operate in much smaller regions.
While a regional developer is still responsible for the recruitment, training and supervision of new franchisees, the franchisor has the right to take over the management if quality or targets aren’t met, as well as collect royalties directly from the franchisees.
The difference is that regional developers aren’t required to invest in building and developing new infrastructure, while this is often a commitment master franchisees have. Master franchisees also collect the royalties of the franchisees they’ve recruited.
Master Franchise VS Working Franchise
A master franchisee has to recruit local service providers, do franchise marketing, customer service and even performance management, while a working franchisee provides the given service without the need to develop the business (this is the franchising company’s responsibility).
For the franchising company, some of the problems that a master franchisee solves is overcoming geographical concerns, a deeper understanding of the local market and even better provision of services.
For local franchisees and contractors, a master franchisee can help with logistical problems and improve support for the service providers.
So, is investing your hard earned cash in a master franchise more profitable? Taking into consideration that you’re directly collecting royalties (a percentage from each unit) a master franchise is more profitable than a regular one, which has royalties deducted.
But it all depends if that’s what you want to do. Buying a master franchise isn’t a small investment. It’s about building and running a sustainable business and that takes time, experience and quite a bit of entrepreneurial flair.
How Much Does a Master Franchise Cost
Depending on the size of the brand and location the prices can vary drastically for a master franchise.
The price usually starts from several thousand dollars but for some of the biggest brands in the world, the initial investment can easily surpass two million dollars.
The cost of a master franchise is unique for each company and to have the exact price for your region, you would have to get in touch with your franchise of choice.
How to Become Master Franchisor
Depending on where you’re located, becoming a master franchisee requires meetings with the franchisor, as well as market research and liquid capital, which varies for each franchise.
About the Authors
Created by Gratsiela Borisova, project manager of the Fantastic Services franchise sites in Australia and the UK, and Evgeni Asenov, blog strategist for Fantastic Services Australia. Both of them produce business-related content and share the ins and outs of starting and running a business in Australia.