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One of the best ways to get into business in New Zealand is buying or starting a franchise. A franchise is a business model that allows an established business to expand without using its own money. Instead, they licence their branding and model to somebody who can replicate the business in another location. It is a popular business model as it requires little money for a business to expand. It also helps a business succeed if its branding is already recognised. Additionally, some franchisors will appoint a master franchisee to ensure the franchising process goes smoothly. This article will explain what a master franchisee is and why you should become a master franchisee.

What is a Master Franchisee?

A master franchisee is a franchisee who can appoint new franchisees in a given area. In essence, they become a franchisor for a specific locality. It is common for franchisors to utilise master franchisees as it allows a franchisee to grow and also helps to ease the workload for franchisors. There are multiple benefits to being a master franchisee. However, it may not benefit all franchisees to become one.

Reasons to Become the Master Franchisee

Develop Your Business

A great reason to become the master franchisee is to help grow your business. As a franchisee, the only way you can grow is to either increase your capacity or buy another franchise. By becoming a master franchisee, you do not need to open another franchise but can help facilitate the establishment of them. In addition, you benefit by charging franchise fees to the new franchises. 

Help Grow the Business Into a New Market

Another reason you should become a master franchisee is to help the franchisor enter a new market. For example, you could be the first franchise in a new country. By becoming the master franchisee for that country, you can help manage new franchises in your country. Additionally, you would be in charge of marketing and supply chains for franchises in your country. 

You Will Receive Royalties

You should become the master franchisee so that you receive royalties for those franchises below you. The franchises you help open will have to pay a percentage of their revenue to you for the: 

  • business model; 
  • marketing; and
  • supply chain management. 

The head franchisor then charges you franchise fees as a percentage of your revenue. By establishing more franchisees, you can help grow your business and increase your revenue without deploying any money. 

Grow the Business as a Whole

A further reason you should become a master franchisee is to help grow the business as a whole. Becoming the master franchisee helps to achieve this goal as it helps take work off the head franchisor’s plate. The head franchisor can then focus on implementing strategies that help all franchisees. These could be about marketing or changing the business model. If the head franchisor helps the business grow as a whole, then all the franchisees will benefit from increased sales or a more productive business model. 

Issues With Becoming the Master Franchisee

However, there may be situations where it is not best to become the master franchisee. For example, it may cause you to lose focus on running your franchise which could cause your business to struggle. It also may not be appropriate to become the master franchisee if you are inexperienced in your current franchise or do not have the requisite knowledge to help grow the business. You should also not become the master franchisee if you believe that the head franchisor will not give you sufficient independence to help grow the business in your specific locality.

Key Takeaways

Franchising is a popular business model to help franchisors businesses expand as it requires little to no cost. However, a separate individual takes on the risk, and the head franchisor charges a fee for using the model. This individual is known as the franchisee. Franchisees can also become master franchisees, and the master franchisee agreement governs this relationship. The master franchisee acts as the head franchisor in a specific area and facilitates the growth of other franchises. Additionally, they have some independence as to how they can structure the franchises. However, they must ultimately follow the directions of the head franchisor.

There are many benefits to becoming a master franchisee, such as helping to grow your franchise and revenue. For legal assistance with franchising, contact LegalVision’s New Zealand franchise lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I cancel a master franchisee agreement after a certain amount of time?

This depends on the terms agreed to in the contract. You may be able to opt out if another franchisee wishes to take on the role.

How much can I change the business model as the master franchisee?

The extent that you can change the business model will depend on how much control your head franchisor gives you. For example, the head franchisor should let you alter certain aspects of the business if it benefits the franchises in your specific locality. 

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