What Is a Master Franchise?

A master franchise is a type of business entity that operates between the franchisor and the franchisee. Not every franchisor offers master franchises for sale. The master franchise will work in close conjunction with the franchisees in its territory. Here are the basics of the master franchise.

Master Franchise

An individual that wants to purchase a master franchise will generally have to pay a large fee to the franchisor in order to secure this business. The master franchise will then be granted a particular territory to take care of. The master franchise will not actually set up any physical locations for that particular franchise. Instead, they will work to facilitate new franchises in the area. Then when franchises are set up, the master franchise will collect the franchise fees from these franchise locations. The master franchise will get to keep a large portion of the franchise fees and will pass only a small amount of money on to the franchisor. 

Recruiting Franchisees

One of the big responsibilities of a master franchise is to recruit new franchisees. In order to be successful, the master franchise has to have franchises set up underneath it. Without franchises, the master franchise will not be able to bring in any money. Because of this, they will go out into their region and look for individuals to start franchise locations. They will generally be in charge of distributing and accepting applications. They will determine if the individuals are worthy of selection for the franchise. Once an applicant is selected, they will help her facilitate the process of starting the business. They will show her how to get financing, help her select a location and help her get started with the franchise. 

Potential

If you choose the right business to get into with this particular business model, it could be very profitable. However, getting involved with a master franchise does not necessarily give you better odds of success than simply choosing a franchise. You still have to be able to choose a company that is on the way up and has good profit potential. With the thousands of franchises that are available to invest in, it is still very difficult to find one that will be a winner. If you find the right market with the right franchise, it could be extremely lucrative. You will have an exclusive contract to a large region, and you will be earning franchise fees from all of the stores in your area. If the stores do well, you will also do well running a master franchise.

Beware of Master Franchise Offers

If you are interested in a particular franchise and a company tries to sell you on the idea of purchasing a master franchise regardless of your expertise in the area, you should be a little skeptical. In many cases, the company is simply trying to get you to invest and does not care about the success of the individual franchisees. If you are experienced in marketing and licensing, then you may want to pursue the offer. Otherwise, you should try to figure out their motives.