There are pros and cons to each approach to franchising your business. In my over three decades of experience as a franchise consultant, I am often asked about the different methods for franchising your business. There are three main paths for franchising your business:
- Individual franchising
- Area development franchising
- Master franchising
In a previous blog, I addressed the individual approach to franchising your business, and in September, I discussed the positives and negatives of the area development method of franchising your business.
With a master franchise approach to franchising your business, the master franchisee is granted a territory in which to sell franchises, provide assistance to these franchisees and collect the majority of the money earned from the individual initial franchise fees and royalties. If the master franchisee fails to meet the terms of the Master Franchise Agreement, the remainder of the territory reverts back to the franchisor.
The pros of taking the master franchise path to franchising your business include:
- The master franchise method of franchising your business has the potential to create the fastest growth in your franchise program.
- If your franchise program affords you the opportunity to sell your products or services to individual franchise locations, the master franchise approach to franchising your business can help you grow more quickly, thereby allowing you to sell more products/services.
- The master franchise way of franchising your business demands less of your time and effort to sell franchises, train the franchisees and service the franchisees.
- A master franchise program can result in savings that help master franchisees operate more efficiently.
The cons of the master franchise avenue to franchising your business include the following:
- You can lose control of your franchise program.
- You have to share the majority of the revenues generated from each individual franchise location with the master franchisee.
- It can be difficult to find qualified master franchisees.
- The master franchise approach to franchising your business is typically more suited to certain industries.
- In many cases, master franchise programs are not as successful as franchise programs grown through the individual and area development approach to franchising your business.
You must carefully explore which type of Franchise Agreement(s) best meets your goals for franchising your business.