Should I use Master Franchising to expand my business interstate or overseas?
Firstly, let’s consider the role of a Master Franchisee. The master franchisee’s role is to actively recruit and then manage franchisees in their region. Typically, a region is a state or country geographically separate from the home turf of the franchisor.
Master franchisees provide a local presence where a franchisor would find it difficult to effectively recruit and support local-area franchisees.
For their role as “intermediaries” between the franchisor and local-area franchisees, the master franchisee is remunerated with a share of the franchisor’s revenue streams. That is, the initial franchise fees and the ongoing royalties.
So, the first question to ask is: Can my franchise fee structures support paying a master franchisee in exchange for their providing local area services? If the answer is Yes, then the next steps are to define exactly what a master franchisee is required to do (ie. set some goals and targets), what resources you will need to provide to the master franchisee so that they can operate effectively and how you intend to share franchisee support activities. For example, what role will a master franchisee play in local-area marketing for franchisees and how is this to be delivered to franchisees by the master franchisee?
In effect, a master franchisee becomes the franchisor in their region and takes on all the roles and responsibilities of the franchisor. So, selecting the right master franchisee is critically important. The master franchisee must share the franchisor’s vision and commitment to the business and the brand and demonstrate a capability to grow the franchisor’s business in their regional territory in complete harmony with the objectives of the franchisor.
There’s much to consider before simply assuming that the best way to develop and support a region remote from head office is to delegate to a master franchisee.
Master franchising can and does work where the careful preliminary considerations are well thought out and where the 3-way association of franchisor, master franchisee and franchise is made a “win-win” for all parties.
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