What is the role of 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… the list goes on.
This is where the master franchisee comes in. A master franchisee (also called a subfranchisor) contracts with the franchisor to fulfill the franchisor's obligations of providing support and services to all the franchisees within a defined territory. 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 the franchisor a faster, easier and less expensive penetration into foreign markets. 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.
Locally based subfranchisors have better access to suppliers, lenders, employees and customers. The master franchisee pays the franchisor for the rights to the territory. In turn, the master franchisee is allowed to keep a good chunk of the franchise fees and ongoing royalties paid by the franchisees within that territory. 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.
To be effective and successful in the role, a master franchisee should possess extensive business management skills and sales expertise. S/He should thoroughly research the type of business and the franchisor's business model prior to taking on the role. S/He should be adept at dealing with people and have excellent communication and time management skills. Above all, s/he needs abundant energy, ambition and the drive to succeed and to help others succeed.