GlobalBX

Franchising – A Great Business Model

Many of the businesses you come across in your day-to-day life, especially those with well-known brand names, are actually franchise operations.  The fast-food restaurant on the corner, the oil-and-lube shop down the street, the maid service that comes to your house in the blue-and-pink van, or the daycare center where your daughter-in-law parks her preschool child while she’s at work – each one of these establishments is most likely owned and operated by a franchisee.  People who have decided to run their own business often choose to buy a franchise.  The reasons are many, including instant credibility and brand recognition, a proven path to financial success, and plenty of support from a major corporation.

Expanding Your Business Reach

The average small-business owner has just a single establishment to his or her name.  As an individual franchisee – let’s say, the purveyor of an ice cream shop – you have one storefront location, a finite number of employees, and only a single business that requires your day-to-day attention.  Over time you may elect to take some of the profit you’ve made and open a second store across town, and maybe a third and fourth further down the road.  Your ability to do so is only limited by your financial circumstances, the economic health of your city or town in its ability to support additional ice cream shops, and whatever restrictions your original franchise agreement may hold.  Some corporations grant their franchisees fairly wide latitude when it comes to additional locations, while others can be fussy about how many places they allow to open in a particular geographic area.

The Solo Franchisee

When a person decides to buy a franchise, they are generally granted the right to open one place of business and offer their product or service to a pre-defined clientele.  This restriction is much easier to enforce for franchises that operate out of a single retail location – the aforementioned ice cream store, for example.  Your parent company will help you choose a spot and usually reserves the right to veto a location based upon such factors as client traffic, visibility, and how close it might be to a competitor or even another franchisee.

What is a Master Franchise?

Master franchises are essentially miniature representations of the parent company.  Instead of encompassing a single location, a master franchise grants its owner the right to operate within a broad geographic area.  Depending upon the company and the demand for what it offers, this could be defined as a metropolitan area, an entire state, a group of contiguous states, or even an entire foreign country.  Naturally, the larger the area, the more franchise locations there can be.  Some fast-food master franchises include hundreds of restaurants in dozens of cities, and a few are even large enough to be traded publicly on the NASDAQ!

What is a Master Franchisee?

Sometimes a person becomes a master franchisee by having significant wealth or accumulating investors to form an operating company.  Under these circumstances, the master franchisee owns and operates all the franchise locations within a protected territory.  More commonly, one of the main goals of a master franchisee is to identify and recruit sub-franchisees that would operate under his or her direction.  In this situation, the parent corporation signs over the right of control – at the local level, anyway – in return for having the master franchisee look after site location, training, and ongoing operational elements.  Ultimately all of the sub-franchisees must answer to the parent company, especially when it comes to business methods, employee rules and regulations, and branding efforts, but some of the royalty fees levied against individual locations flow to the master franchisee to pay for these extra responsibilities.

Master Franchising – A Win-Win Situation

Becoming a master franchisee is not for everyone.  It requires incredible organizational skills, solid management experience, and deep pockets financially – unless you have a really rich group of friends.  But the rewards can be amazing, especially if you represent a solid brand in an area with significant demand for your product or service.  Imagine being the only McDonald’s franchise in an entire country, or controlling every single Midas muffler shop in the state.  There are benefits to the parent corporation as well.  Oftentimes a company will grant master franchise licenses in order to speed up development in a particular region, or if they want to expand into a country but have no clear understanding of the customs or language.  It also eases their financial burden, transferring onto their master franchisee the responsibility of finding sub-franchisees with enough money and skill to run their own business.

Looking to buy a franchise? We have 100s of Franchises For Sale and Business Opportunities. Check out our Master Franchises and other Franchise Opportunities – get FREE franchise information today!