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As a 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 ability 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 franchise
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 12
years experience as a professional business broker and franchise
consultant. You can view
top franchises for sale
across the
USA
here. You can go here to research top
master franchises for sale.© 2010
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