A master franchise is a chain of agreements between three parties – the brand owner (franchisor), the master franchisee and the unit franchisee. What is the difference between a master franchise and a regional franchise? In this type of business organization, the franchisee receives broader rights, usually becoming.
Often, the main purpose of master franchising is to expand an international network in a country or region that has not yet been developed, where the franchisor cannot operate independently for some reason. The parent company most often has no experience of working in the territory and is not familiar with the specifics of demand and doing business in a particular country. The franchisor runs the risk of encountering market realities and a peculiar mentality as well as peculiarities of the legislation of the chosen country that he was not aware of. Therefore, he is looking for the “connecting link” – the local entrepreneur who will help to build the network based on the peculiarities of the chosen territory.
For the parent company, the sale of a master franchise is a good opportunity to achieve great and positive results while minimizing risks for the business. In this case, the master franchisee also aims to expand the network, attract new partners and open new outlets.
Since the success of the company, its prospective development in the new market largely depends on the master franchisee’s skills, experience and willingness to develop, the rights holder should be very careful in selecting a partner.
The master franchisee receives exclusive rights for a given territory (usually the country), and starts to act as the franchisor himself. Now he can sell the unit franchise to local entrepreneurs, collecting from them a lump sum fee and monthly payments (royalties, marketing fees). It should not be forgotten that the master franchisee is obliged to pay a stipulated percentage to the franchisor. The amount of remuneration is determined by the degree of involvement of the master franchisee in the development of the territorial network.
For all this, the exclusive right to make changes to the brand concept remains with the brand owner (rights holder). That is, the master franchisee will search for potential franchisees, conclude agreements, select and approve premises, assist in the opening of businesses and monitor activities. However, the franchisor (brand owner) will decide on changes in the global brand development strategy.