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As a
Business Broker and franchise sales consultant I am often
asked what are the advantages of the master franchising
business model and buying a master franchise. Master
franchising, some times referred to as sub-franchising, is a
form of franchising that allows an individual to buy the
rights from a franchise company (The Franchiser) to
sub-franchise their business concept in a specific territory
or large geographical area. In general the individual or
master franchisee’s goal is to sell and open a
pre-determined amount of franchise units in his or her
specific territory. The master franchisee benefits from
populating his territory with new franchise locations by
receiving a share of the franchise fees and royalty fees
generated by each unit opening and operating in their
designated territory.
The reason
master franchising works is that it creates a “win win”
scenario for both franchiser and the master franchisee. By
allowing its concept to be sub-franchised and developed by
qualified individuals broken down by territories, the
franchiser can often grow its system much faster and more
efficiently than trying to sell single units itself. The
master franchisee in return can also benefit in numerous and
significant ways from this arrangement including the
following below.
Residual
Income:
The opportunity to develop a residual income stream is in my
opinion the most attractive benefit and number 1 reason to
buy a master franchise. Although all franchise agreements
are slightly different, typically the master franchisee and
franchise will split the royalty fees (typically 5 to 7%)
generated by the units opened in the master franchisees
territory. Imagine getting a nice fat royalty check every
month based on the gross sales from all the franchise units
in your territory you sold. This is a personal income stream
that can potentially last a lifetime!
Franchise
Fees:
With most
master franchising agreements when you sell a franchise unit
in your territory you typically receive a franchise fee or
commission from the franchiser for your efforts. These fees
tend to range anywhere between $15,000 to $30,000 and
generally most franchise agreements allow you to keep all or
most of it!
Low
Overhead:
Because being a master franchisee at the end of the day is a
“sales job”, there is no real need to rent or lease a retail
office space. You can in most cases easily start out in a
home based office and accrue all the benefits and
flexibility that option offers including low overhead, no
commute, generous tax deductions, more personal freedom, and
a better lifestyle.
Few
Employees:
Most master
franchisees typically start out as a 1 person owner operated
business. Once the business reaches a certain critical mass
regarding number of units sold or operating, you may in some
cases find it advantageous to hire some support staff such
as an administrative assistant or sales assistant to keep
the business growing and running smoothly. In general
however, most master franchisees don’t have a lot of
employees and all the headaches and costs associated with
having a large staff.
High
Success Rate:
As with all
franchise businesses, master franchises generally enjoy a
very high success rate. Keep in mind however that not all
master franchising opportunities are alike. It’s important
to make sure that you adequately investigate and research
any franchise opportunity before moving forward. As part of
your due diligence I would ask the franchiser if you could
speak with an existing master franchisee in their system to
get some feedback on their experiences.
About Author:
Ray Haiber
has 10 years experience as a professional small Arizona
Business Broker and franchise consultant. Go here to view
and research
franchise opportunities for sale throughout the
USA
including
master and multi-unit opportunities. |
