The Role of a Master Franchisee- A Guide

There are numerous benefits of becoming a master franchisee. The franchise business model has stood the test of time and refined for increased efficiency. All industries are represented in franchising, and prospective investors should only identify the industry they are passionate about and excel in, to succeed. If you want to be a master franchisee, you do not have to go at it alone. Your business partner, franchisor, understands this business model- after all, that is why they are expanding to other locations.

The franchisor is required to provide all forms of support. However, the relationship between a franchisor and a master franchisee turns sour after disputes arise. This is when you’ll need a person experienced in franchising to hold your hand; you need a franchise attorney.

Who is a Master Franchisee?

Master franchising involves a business relationship between a franchisor and franchisee. In this case, the franchisee assumes the role of a franchisor in the designated territory. The master franchisee will be tasked with various duties, such as recruiting, training, and providing support to recruits. In exchange, the master franchisor will be entitled to a franchise fee and royalties.

A master franchise is managed by the master franchisee, who pays an initial fee to get legal rights of establishing a business, similar to the franchisor’s business, using the franchisor’s name in a specified area. In essence, the master franchisee becomes a mini-franchisor.

Advantages of Being a Master Franchisee

The master franchisee should benefit everyone, both the franchisor, and the master franchisee. Some of the benefits enjoyed by both parties include:

1. The franchisor gets a significant injection of capital, thanks to the proceeds of the master franchise sale.
2. Helps expand the brand into other territories.
3. Acts as a form of marketing.
4. The master franchisee doesn’t start from scratch, as the business is already well established.
5. The franchisee gets a share of monthly royalties.

Disadvantages of a Master Franchisee

Like with all businesses, there are drawbacks associated with a master franchisee, including:

1. The franchisor has less control over the franchise.
2. Transfer of responsibility can dilute brand standards.
3. It may be hard for the master franchisee to adapt.
4. No guaranteed success.

Accepted Principles for Master Franchisee

Although franchises are contractual in nature, there are usually critical elements that should be evaluated before investing, including brand value, franchisor support, and working relations. In addition, franchises facilitate business expansion in other jurisdictions, which may not be what the master franchisee expected. This means that prospective investors should consider legal help when investing in a franchise. A franchise attorney can give the necessary legal counsel, regarding, but not limited to the following:

• Trademark license.
• Technical assistance.
• Royalties.
• Standards and permissions.

Contents of a Franchise Agreement

Franchises are not regulated in some countries. If a franchise agreement is executed in a non-regulated jurisdiction, it should then be guided by the international standards for franchising. Countries with thriving franchise systems have developed international standards. In some jurisdictions, franchisors are required, by law, to furnish prospective investors with pre-sale disclosures contained in a franchise disclosure document.  The franchise disclosure document should contain technical, economic, and financial information related to the business.

If you’re interested in becoming a master franchisee, you should contact a franchising attorney to help you understand all about a master franchisee.