What is a master franchisee?
Large franchisors may have hundreds or even thousands of franchisees to manage. This can become a logistical nightmare in terms of communications, training, support services, quality control, dispute resolution, and other matters.
This is where the master franchisee comes in. A master franchisee (also called a subfranchisor) agrees, under a written contract, to fulfill the franchisor's obligations of providing support and services to all the franchisees within a defined territory.
Benefits of appointing a master franchisee / subfranchisor
There are distinct advantages for a franchisor to use the master franchise approach, especially when expanding internationally. Contracting with master franchisees who speak the language and understand the cultural differences, and who already have experience doing business locally, gives you a faster, easier and less expensive penetration into foreign markets. Locally based subfranchisors have better access to suppliers, lenders, employees and customers.
The master franchise method opens up new territories more quickly, resulting in:
- wider diversification of revenue streams,
- increased cash flow, and
- closer ties to individual local markets.
How does the master franchise system work?
The master franchisee / subfranchisor pays a fee to the franchisor for the rights to the territory. In turn, the master franchisee is allowed to keep a portion of the franchise fees and ongoing royalties received from the franchisees within that territory.
In return for this, the master franchisee essentially takes on the responsibilities of the franchisor with respect to those franchisees. Their responsibilities include:
- recruiting new franchisees to operate within the territory,
- providing training for franchisees and their personnel,
- providing ongoing support for the term of the franchise,
- providing sales, marketing and financial management advice.
What to look for in a master franchisee / subfranchisor
To be effective and successful in the role, a master franchisee should possess extensive business management skills and sales expertise. They should become thoroughly knowledgeable about the franchisor's type of business and business model prior to taking on the role. They should be adept at dealing with people and have excellent communication and time management skills. Above all, they need abundant energy, ambition and the drive to succeed and to help others succeed.
Image by Gerd Altmann from Pixabay
