A Master Franchise is a franchise agreement in which one person (the Master Franchisee) purchases the rights to use the name and systems of the franchised company to develop and operate additional franchises in a defined territory. The master franchisee may recruit, train and supervise local franchisees in that territory.
This often involves setting up infrastructure, training local franchisees and providing ongoing operational support to ensure the success of the franchise model. The master franchisee may also be responsible for promoting the brand and selling franchises in his or her territory. Master Franchising can be a way for a franchising company to expand rapidly into new markets, without having to invest directly in on-site operations. The master franchisee also benefits from the advantage of developing his or her own franchise network, and from additional income from royalties and entry fees from local franchisees.
Master franchise development also entails certain challenges and risks. The Master Franchisee must ensure that local franchisees comply with the franchised company's standards and operational protocols, which may require constant monitoring and supervision. In addition, the Master Franchisee is responsible for the overall performance of the franchise in his or her territory, and for managing any problems that may arise with local franchisees, such as disputes or bankruptcies. Finally, the Master Franchisee must maintain a good reputation for the franchised company's brand and protect the exclusive rights of its territory.
