What’s a master franchise?

A master franchise or licence is usually given for a larger area, whole region or country. A master franchisee will have the right to open its own outlets and to sub-franchise to individual franchisees. The emphasis will be on subfranchising and the master franchisee will be expected to establish its own outlets to pilot test.The master franchisee stands in the shoes of the franchisor in the territory and is, to all intents and purposes, the franchisor of the system in the territory. The franchisor has only one entity with which to deal in the target country or region. All its dealings will be with the master franchisee and it will not be involved in the day to day dealings with sub-franchisees. The master franchisee will be responsible for the selection and training of sub-franchisees, site selection and all the other services a franchisor normally provides to franchisees.The master franchisee will be required to provide the financial resources to establish and exploit the system in the target country or region, while sub-franchisees will provide the financial resources for the outlets they operate. The master franchisee is responsible for the recruitment of staff for the pilot operations, as well as the establishment of the infrastructure for its own business organisation. The fee income generated by sub-franchisees is divided between franchisor and master franchisee. The master franchisee will charge franchise fees to its sub-franchisees and from these will not only have to finance its own operations, but also to make a payment to the franchisor.