by Contributor
(Jun. 23, 2023) — Being a master franchisee is a very different experience to being a regular franchisee. It is a role that comes with additional challenges and responsibilities, but also opportunities. Anyone who has considered investing in a franchise should consider whether master franchising is a better path for them to take.
Master franchisees take a franchisor’s business and expand it into a new market or territory. For franchisors looking to expand into markets that they have no previous experience with, master franchisees provide a valuable service. The role they play is closer to that of a business partner than a franchisee. Master franchisees retain a strong connection to the initial business and play a core role in helping it to grow.
Before you can make an informed decision about whether master franchising is for you or not, you need to understand the pros and cons of the opportunity on offer.
Generate additional revenue
Master franchisees are in an excellent position to generate significantly more revenue from their franchise than regular franchisees. Master franchisees serve as middlemen between their franchisor and other franchisees in their chosen market.
In addition to running their own franchise, master franchisees also recruit their own sub-franchisees and oversee their operations. These sub-franchisees will pay fees and royalties to the master franchisee.
Some of these will be passed on to the original franchisor, but master franchisees can directly pocket some of them. The exact percentages will vary according to the franchising agreement, but master franchisees will be in a much stronger position to negotiate a settlement than regular franchisees. Master franchisees are often chosen for their experience in a new and untested market the franchisor wants to expand in to but has no previous experience working in.
Delegate tasks
With a network of sub-franchisees in place, master franchisees can delegate many of their responsibilities to the individuals running those sub-franchises. In doing so, master franchisees free up their time to focus on their unique responsibilities such as marketing and growing the franchise in their new market.
In fact, once a master franchisee has a thriving network of sub-franchisees generating a steady revenue stream for them, they might even choose to focus on other business ventures in the market. Master franchising gives master franchisees the freedom to explore other business opportunities, provided they meet all their agreements under their franchising agreement.
Gain prestige and experience
Working as a franchisee is an excellent way of gaining first-hand experience operating as a business manager. Being a master franchisee provides a similar opportunity to gain experience, but with the added prestige that comes with working as a partner of the franchisor, rather than working in a subordinate position to them. Master franchisees have a greater degree of control over their franchise and are often a key player in the franchisor’s original business.
As always, you need to stick to the terms of your franchising agreement or face the penalties set out in the agreement. But as long as you manage to live up to these terms, you can gain valuable experience overseeing your sub-franchisees and providing them with operational assistance when they request it.
Master franchisees are also in a much better position to sell their master franchise after some time if they want to cash in on their hard work and pass on their territory to someone else. With the experience gained working as a master franchisee, entrepreneurs will be in an excellent position to apply for management and leadership roles in other organisations. Having successfully taken a franchisor’s business and made a success of it in an entirely new market, there will be plenty of businesses eager to hire successful master franchisees, whether it’s an automotive franchise or one of the many food franchises that are available.
What are the disadvantages?
The main drawback of being a master franchisee rather than a regular franchisee is that you will be expected to invest more heavily in the business. Any franchisee will be expected to take on certain costs, such as recruiting staff and covering payroll. But master franchisees have an entire territory to oversee, not just a single franchise.
Because of this, the financial commitment required to operate as a master franchisor is considerably greater than that of a regular franchisee.
Another point to consider is whether the franchising opportunity on offer will translate into a new market successfully. The history of business is full of examples of businesses that found roaring success in their initial market but failed to replicate that success anywhere else. Master franchisees are chosen for their experience with new markets, but that doesn’t guarantee success by any means.
Provided you understand the risks and challenges of master franchising, it is a business opportunity worth considering for any entrepreneur with experience managing businesses and overseeing other people. Master franchisees have many responsibilities, but they also have a unique opportunity to take an already successful business and expand into new fruitful markets. Master franchising is a great way to regain control of your career and with many of the best franchises available as a master franchise, you’ll be sure to find your ideal franchise.