Any company must invest, but excellent investments have brought enormous future rewards. Your profit balance will be stronger if your company’s financial structure is well-structured. When it comes to franchise investing, everything should be well-organized. Although the costs of starting a franchise vary for every company, most of the criteria are the same. Master franchising is a sort of franchisor-franchisee relationship in which the master franchisee serves as a mini-franchisee for a certain geographic area. Each franchisee that the master franchisee signs in that territory are recruited, trained, and provided with ongoing support.
In exchange, the master franchisee earns a major portion of the initial franchise price as well as recurring royalties, which are normally 50% but can vary. Typically, the master franchisee commits to a development timetable, which may involve owning and operating their own units. Master franchising is most typically utilized by Indian franchise corporations to expand internationally, but it is also used domestically, most notably by commercial real estate service and maintenance companies to grow territory in key Indian cities.
Finding a capable master franchisee for international expansion saves a franchisor the expense (and difficulty) of setting up a sales, training, and support infrastructure in a new area. Working with a qualified foreign master franchisee also removes linguistic and cultural hurdles, as well as the difficulties of finding local employees, suppliers, real estate, and other essentials. Giving up half of the franchise fee and ongoing royalties in return for the master franchisee performing all of the heavy liftings is well worth it for Indian franchisors trying to expand worldwide. Master franchise partners frequently have a pre-existing business and infrastructure, as well as sales and marketing experience and connections with local financial institutions.
The master franchisee purchases an established system with a well-known brand, while the franchisor benefits from the master franchisee’s existing firm, contacts, and knowledge. Unlike other forms of franchising, this is more of a collaboration. Both are prospering by using the funds of others. Because the master franchisee is encouraged to sell as many units as possible to qualified candidates, the franchisor gains rapid market penetration and brand dominance. Because master franchisees are responsible for educating and guiding the franchisees they sign, they are incentivized to choose the finest franchisees they can find. They also want to do the greatest business they can since they get a large cut of the royalties.
It’s not for the faint of heart to enter the world of master franchising. It costs a lot of money not just to obtain a master franchise license, but also to launch a brand in a new country or region. Multi-unit franchisees, area developers, and area reps, on the other hand, do not benefit as much as master franchisees. However, there are also challenges and responsibilities. Whether done worldwide or locally, successful master franchising strives to quickly grow a region, similar to an area development or area representative agreement. The primary difference is that under a master franchise agreement, the franchisor is not required to invest in new infrastructure. Everything is effectively under the control of the master franchisee. The franchisor does not require extra staff for franchise sales, training, site selection, hiring, or ongoing support. Everything is under the control of the master franchisee.
Master franchisors must have strong management skills and/or the organization to provide them. Experience in the appropriate industry, as well as franchising experience, is beneficial but not needed. In addition, the person or company should have strong sales, marketing, and operational skills, as well as the capacity to teach franchisees how to manage their own unit economics to maximize cash flow for all parties.
The franchisor, on the other hand, gives a lot to the master franchisee. The master franchisee benefits from international marketing continued access to the franchisor’s newest systems and technology, and, in certain circumstances, enhanced revenues on products and supplies, in addition to the established operating system and brand name (as in a hair salon, for example). In addition, the master franchisee pairs up with a partner who is vested in their success and may provide assistance in management, leadership, and other high-level talents to help operate the business.
Master franchising adds an additional tier to the traditional two-tier franchisor-franchisee partnership, making it a win scenario. When all parties participate as expected and the industry collaborates, cash flows faster for franchisees, master franchisees, and franchisors.