Master Franchises Explained
hile looking at different franchise business for sale offers, you must have come across the term “master franchise”. If you are wondering what it is, here are the details:
What or who is a master franchise?
A master franchise can be a person or a business entity who buys the right to promote and sell units of a franchise in a specific area.
Sounds like an Area developer. What is the difference?
The biggest difference is that unlike an Area Developer, a master franchise is not bound to open and maintain units. He or she can open one unit for training or as a model unit; but his or her prime focus is to spread the name of the franchisor in the chosen market. A master franchisor also gets to keep a part of the franchise fee and royalty fee that people who buy a franchise pay to the franchisor. Also, a master franchise is supposed to train the people like a main franchisor in many cases.
Sounds good, can I get one?
Since the function of a master franchise is like a franchisor, only experienced people are considered as master franchisees. Then again, not all franchise opportunities offer this program. Many times, international franchises use it to spread faster in a new country. Also, your net worth has to be really good to qualify as a master franchise.
How big will be the area?
It can be anything between a state and a country! Among different franchise business for sale offers circulated by a franchise concept, a master franchise has the largest area. If the master franchisee opens the required number of units within a given time-frame, the area is more or less exclusive.
How is the return of investment?
A master franchise has more than one channel of earning. Besides getting a part of the franchise fee and the royalty fee, the master franchise can earn from the unit it decides to open (it also gets reduced opening fees when it opens a unit of its own) and also by distributing products to the franchisees. Additionally, it can also have real estate interests.