Master Franchise Licence

What is a Master Franchise Licence?

Have you ever wondered how franchisees interact with their franchisor? Most franchises choose one of two ways for providing sales and support services to franchisees: directly by the franchise company to the individual franchisees or via a master franchisee or master franchise licencee.

If the franchise is expanding via master franchisee licences, it means they've contracted with a person or entity to provide services to franchisees in a specified territory (typically a major market or even an entire country). The master franchisee typically pays the franchise company a significant initial fee for the rights to develop the master franchise territory and then retains most or all the initial franchise fees and franchise royalty fees paid over time by the individual franchisees in the territory covered by the master franchise licence.

That master franchise licencee is usually responsible for recruiting the individual franchisees and providing all training and support they need, both initially and on an ongoing basis. Franchise companies often select the master franchise approach in the belief it will result in more rapid system growth with less initial capital risk for the franchise company.

There is no reason for you, the franchise buyer, to place a higher value on either buying the direct franchising or buying a master franchise approach. Each strategy can be effective or terrible, depending on the skills and resources brought to the selected approach.

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