What is a Master Franchise?
What is a Master Franchise?
The master franchise holds a very challenging role in the Franchise Industry. The responsibility of the master franchise lies in being a franchisor to a specific territory’s sub-franchisee.
The roles and responsibilities of the master franchise are wide and large; includes selling of franchisee to buyers who are capable to grow the business, understanding the sales process, advertising, marketing, hiring an efficient HR team, core understanding of the stock market, and continuous support to the franchisees of the location.
When the franchise decides to expand its business through the master franchisees, it means that they agree with an individual or an entity for support in services in that territory. Here the master franchisee pays a good amount to the franchise company initially for the right to develop the territory.
Features of Master Franchise as below
1. Highly Profitable: Master franchise earns more profit than a normal franchise. Every sale of the franchise yields a very good amount of profit.
2. Limited Employees: In Master Franchise, the number of employees is not that huge. Typically, the master franchise himself runs the operation, with the help of a salesperson, accountant, and marketing person. With growth, he adds hires a capable manager to run the business with few administrators.
3. Fewer Customers: As compared to a normal franchise, a master franchise has very less customers to handle. His customers are only the franchisee of that territory.
4. Abides the law to set up units: As per the Franchise Agreement. The master franchise is mandated to set up an agreed number of units in a stipulated period.
5. High benefit: The master franchisee benefits from the goodwill and reputation of the brand. It also gains the maximum support of the franchisor providing to the franchisee. An average of 45% to 70% of the royalty amount and franchisee fee is earned by the master franchisee of a particular territory.
Unlike the normal franchise business, master franchise’s terms and conditions in the agreement are deeper and more varied. The former concept involves the agreement between two parties-Franchisor and Franchise, whereas, in the latter concept, three parties are involved in the franchise agreement-Master Franchisor, master franchise, and sub-franchisees.
However, the master franchising model has its own set of drawbacks. In this approach, with the involvement of the master franchisee, the franchisor does not have that power above the franchise as compared to the traditional method of the franchise business.
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