WHY BUY A MASTER FRANCHISE
Imagine having an opportunity to join in on the idea of a new franchise concept that explodes in your area with dozens of new units opening up. Then consider having control of this concept and receiving royalties and franchise fees on a consistent basis. Imagine developing this concept and having people line up at your door to buy into your opportunity. You in turn have access to the best business experts to help guide you in building your new organization. These types of opportunities called Master Franchising are rare, yet they exist and a good franchise consultant knows where to find them.
Franchises come in a wide range of investment levels but the highest up-front investment is a Master Franchise or Area Developer because they can result in tremendous upside. Typically seasoned entrepreneurs, experienced sales executives, or independently wealthy individuals looking to diversify their assets are attracted to Master opportunities.
With Master franchising you get all the benefits without the expense of having to develop the concept from scratch. You get control of the successful franchise system in a specific geographic area, a proven track record that works, the brand name, other master franchises to give you valuable support, and a partner in the form of a corporate office to offer you the latest innovations and business expertise when you need it.
As a master or regional franchise, your ways of generating income are expanded over that of a normal franchise. With a normal franchise, you are generally offering the product or service directly to the end use customer such as a retail store. With a master franchise you can generate income through your own stores if you wish with a significantly reduced royalty and franchise fee. In addition you can generate sales through:
- Franchise Fees: When you sell a franchise, you receive a portion of the franchise fee. Most franchise fees are between $30,000 to $60,000 and in a typical master franchise program you may get to keep 50%of the fee!
- Ongoing royalties: This is the ultimate income source. Once you help set up a franchise, you receive royalty income for the rest of the life of that franchise. Imagine receiving 2% to 5% of your franchisee’s volume every month for many years.
- Products or additional services: Often products or additional services needed by the franchisees are sold in the franchisee’s outlet and can bring excellent income.
- Real Estate: If real estate is involved with the franchisee’s location, often the master can become involved in development of sites and receive other types of real estate related income.
The prestige of owning a master franchise and controlling an entire area can offer you an opportunity to feel great satisfaction. Your main job will be to act as a business consultant to your franchisees and help them succeed in their own business. You will be associated with the elite brand name of the franchise as the main developer of an area even though it will be your own franchisees investing their money. You will receive initial training and then ongoing training from the corporate office.
As franchise owners themselves, the master franchisees understand the concerns of local owners and look out for the fellow franchisees in their region, following up with them to push initiatives on behalf of the corporate office. The master franchisee hosts meetings and training sessions as new products or technologies come about. The master franchisee may go out on sales calls, pass along leads or even put local franchisees together to better work for a client. Because master franchisees have an intimate knowledge of the franchisees in their market, their areas of expertise and of the clients, they can make recommendations for collaboration when necessary.
Here are some key characteristics about the typical Master Franchisee:
- Very few customers: Your customers are your franchisees. You help support a smaller number of franchisees who typically own several franchise units each.
- Very few employees: Typically you will operate a master franchise by yourself and then expand to have an administrative assistant, a trainer or other support person and a franchise sales person. As you grow bigger, you add more of these positions into your staff and perhaps a general manager to run the whole operation and can back away almost completely if desired. We have found that many master franchisees after working for three to seven years can retire and live off a extremely good income and spend limited time in the office.
- High Visibility: Multiple offices and signage promote the business and brand awareness throughout the community and market place.
- You build equity in the business at a much faster rate than a normal business: Once you sell a few franchises or open your own stores, you increase the value of your business significantly. Not only do you have an existing business with cash flow, but you have additional franchise opportunities to sell which gives the master franchise a higher value typically between four to nine times earnings instead of the typical 1.8 to 2.8 times earnings of normal businesses.
- You have the option of setting up your own franchises at reduced rates: As you open your own outlets you create another asset of value. You now have your master franchise with a specific value and also your own franchise with its value. As the value of your franchise increases, it increases the value of your master franchise. They are separate assets you can sell when you wish.
- You own an exclusive territory: Only you and your designated franchisees will be allowed to develop franchises in your territory.
- More freedoms exist in a master franchise than a normal franchise: You help set the standards of franchise in your area.
- You stay up to date on the latest technology: Being part of a larger franchise system allows the best ideas to flow into the corporate office and then into the field. You will have your own research and development built right in.
- Experience in the specific industry: You will receive industry specific training and support from the corporate office.
- And best of all— it’s a franchise! Franchises as a whole enjoy a higher success rate than independent businesses. Master franchises typically have a better success rate than the normal franchise. All you need to do is find the right master franchise for you. Master franchising, or regional development franchises as they are sometimes called, are the best kept secret in business today… for the right person.