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What is a Master Franchisee?

Frequently Asked Questions about buying and selling a franchise

Author:
Franchise Finder

Heard the terms ‘master franchisee’ and ‘master franchise’, but not really sure what they mean? Read on to find out more…

What is a master franchisee?

A master franchisee is a franchisee who has purchased the rights, from a franchisor, to sub-franchise within a certain geographical region. The master franchisee shares the revenue from these franchises, usually a specified percentage of the franchise fee and franchise royalty fees.

What are the roles of a master franchisee?

A master franchisee is responsible for:

  • Recruiting franchisees within the area for which s/he is the master franchisee
  • Training and managing recruited franchisees
  • Providing ongoing support for franchises in his/her area
  • Acting as the link between the franchisor and franchisees.

What qualities do franchisors look for in master franchisees?

Being a master franchisee is not for the faint-hearted – essentially, you will be running two businesses:

  1. Managing your own franchise
  2. Recruiting and managing other franchisees in your area.

Each of these requires different skills sets. Briefly, here are in-demand qualities required of master franchisees:

  • Sales and marketing skills
  • Brand management skills
  • People management skills
  • Time and project management skills
  • Admin and financial management skills.

What are the advantages (pros) of a master franchise system?

The major advantage to operating as a master franchise system is that franchises are able to expand more rapidly. Rapid expansion gives the franchise system access to more capital, which in turn leads to more expansion, in a self-perpetuating process.

What are the disadvantages (cons) of a master franchise system?

Franchises operating under this model generally have greater agency costs. Legal contracts (master franchise agreements) are necessarily more complex in nature.

What are the pros and cons of being a master franchisee?

Although up-front costs are more than those of a regular (direct) franchisee, a master franchisee’s potential for growth is greater. In addition to earning money from royalty fees, master franchisees also make money off the up-front fees franchisees pay to invest in a franchise.

Author: Franchise Finder, Online Directory of Franchises and Business Opportunities in South Africa


 
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