With Thanksgiving just last week, I have pie on the brain. One slice is never enough!
Likewise, in franchising, sometimes owning only one franchise just doesn’t cut it. While
franchises provide sales and support services to individual franchisees, there is another option
out there for what are known as master franchisees and area developers.
This level of franchisee is a person (or entity) that a franchisor contracts with to provide support
services to franchisees in a specified territory – typically a major market or even one or more
states. Think of a master franchisee as the CEO of the company.
The master franchisee usually pays the franchise company an initial fee for the rights to develop
the territory and may initially operate their company-owned outlets and will sooner or later
recruit sub-franchisees to open, own and operate additional units.
The master franchisee will retain a portion of the initial franchise fee and residual royalty fees
paid by the individual franchisees in the territory. Sub-franchisees attend to the day-to-day
functions, including recruiting franchisees, increasing the focus on territories, and marketing
and compliance, which leaves the master or area developer free to focus on other areas of the
business.
Like anything, there also are disadvantages to becoming a master franchisee, such as increased
responsibility to maintain brand standards in the franchise network. That’s why it’s important
for the master franchisee to have a very close relationship with franchisor and the other
franchisees. They’ll also need a well drafted master franchise agreement and numerous checks
and balances in place.
I’m considering being an area developer here in Wisconsin. I’ve narrowed it to two beauty concepts and,
of course, a Green Building concept. Narrowing it to the time needed to devote to the cause, and
wearing yet another hat in the industry?!
Are you intrigued by the thought of becoming a master franchisor or area developer? Give us a
call. Also, save half a slice of pie for me!