Master franchise

Master Franchise is a franchising contract in which the franchise owning company (the franchisor) provides the franchisee with the rights to sub-franchise in a specific geographical area. The franchisee becomes a sort of mini-franchisor for that territory.

Overview

In a master franchise agreement, the master franchisee pays the franchisor for the rights to develop a specific territory and then retains most or all the initial franchise fee paid by the individual franchisees within the territory. They also receive a portion of the ongoing royalties. Essentially, the master franchisee takes on many of the roles of the franchisor in their specific territory.

Benefits

Master franchising is a way for franchisors to expand their brand more quickly and at a lower cost than traditional expansion methods. For the master franchisee, it offers the opportunity to build a business within a business. This can provide a greater return on investment than owning a single franchise or multiple franchises.

Risks

While master franchising can be lucrative, it also comes with risks. The master franchisee is responsible for recruiting, training, and supporting their sub-franchisees. If the sub-franchisees fail, it can impact the master franchisee's profitability and reputation.

See Also

• Franchise
• Franchise agreement
• Sub-franchise
• Royalties

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