Master franchisee
Date : March 6, 2024
MASTER FRANCHISEE - WHAT IT IS. HOW IT WORKS.
What is master franchisee
One way to expand a franchise network faster is the Master Franchise contract. What is it? In practice, the franchisor entrusts to a company or individual (called Master) the rights to expand its brand in a territory, which can correspond to a city, a region, up to an entire country.
As you can imagine, the investment that the Master will make to take advantage of these rights will be much more expensive from the economic point of view, than the opening of a single store. However, when managed well, even the benefits that the Master will get from this particular affiliation will be greater and more lasting.
Usually this type of contract is chosen when the franchisor wants to expand its network to foreign markets, which have their own cultural and economic peculiarities. For this reason, relying on a local person is the best way to enter markets other than your own. And master franchising is the right tool to do that.
How it works
From a legal point of view, the Master corresponds to an amount that is predetermined in the contract. The amount allows him to actually acquire certain rights. The Master Franchisee obtains powers that are usually reserved to the franchisor, such as developing affiliate agreements, with other local affiliates that always fall within the geographical area in which it can operate legally.
The franchisor, who in the contract becomes “Master Franchisor”, has the ownership of the affiliation contracts that the Master Franchisee signs and retains a good part of the royalties that are paid periodically by the franchisees operating in the territory.
More specifically, there are no specific standards. The costs, as well as the goals, change according to a number of factors, such as the extent of the territory on which the Master Franchisee can operate legally
Advantages and disadvantages
The advantages of a Master Franchise agreement are many, especially for those who want to quickly extend their Network into other markets. By relying on a Master Franchise agreement, the franchisor will have an easier time penetrating other markets, because the Master Franchisee has direct knowledge of those markets, is closer to the tastes of the local customer (and can therefore make ad hoc offers, for example, in food), and then accesses local credit more easily.
However, there are also disadvantages to consider, especially if one does not do a careful analysis of the territory, the legal costs, the economic reliability of a country, and also the contractual clauses that are not always valid in other countries.
Who handles communication in a Master Franchise contract?
The master franchisor has the duty to manage and finance advertising internationally, coordinating with the master franchisee.
What is the duration of a Master Franchise contract?
A Master Franchise contract typically has an initial term of 10 years, which are then renewable.
Want to know the secrets of a Master Franchise contract and whether you have the right requirements to enter into one? Ask our consultants for help.
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