Posted in Marketing and Strategy Terms, Total Reads: 413
Definition: Master Franchise
A company franchise may expand in two ways either by directly providing sales and support services to the franchisees or through a master franchisee. In the latter case, master franchisee recruits, trains and supports other sub-franchisees in the territory.
It is a kind of partnership in which both the franchise company and master franchisee are benefited. The franchise company outsources the task of establishing a franchise network to the master franchisee and saves the cost (and headaches) of recruiting, training and supporting the individual franchisees and the cost of infrastructure. It is mainly useful when a company is expanding internationally where a master franchisee will be able to solve the problem of cultural and linguistically differences and provide greater brand penetration.
The master franchisee on the other hand retains a major percentage of the initial fees and other royalties paid by the individual franchisees and earns greater profit. But, a master franchisee should be experienced in the industry and should have sufficient financial resources and great managerial skills to set up a franchisee network.