A franchise system employs the strategy of selling a sub-franchise, commonly referred to as a “Master franchise,” to facilitate the expansion of the business into new locations. Master franchising is particularly effective when aiming for international brand growth. This involves the sale of a master franchise to an individual or entity, empowering them to subsequently sell franchises within their own country on behalf of the franchisor. The primary role of a master franchisee is to oversee the recruitment, training, and support of franchisees within their designated region. Therefore, this franchise system is the ideal choice for businesses seeking international expansion.
Comprehending Master Franchises
In the United States, many businesses have adopted the master franchising system to foster domestic business growth by segmenting the country into distinct regions. These regional divisions are not strictly defined but tailored to each business’s unique requirements. For instance, a business may sell American master franchises, which are then responsible for selling, training, and supporting franchisees within their specific locations. In accordance with the franchise agreement, master franchisees typically receive a portion of the franchise fees and royalty amounts.
Advantages and Disadvantages of This Approach
The advantages of expanding a business using this method include:
1. Leveraging local knowledge
2. Accelerating growth
3. Offering potentially improved logistical support for franchisees