Wednesday, May 30, 2012

How to Buy a Master Franchise & what you must do before you sign ...


Almost all companies that want to expand into newer geographies or into global markets, generally have a Franchise Model or Business Plan configured to work within that market with large local players, (High Net worth Groups, Large Business Houses, Senior Professionals within an Industry or for that matter investors who are seeking large investments in tested franchise business models) of that country and get access to the markets and immediate penetration. ?Master Franchise Wanted?, is a common message that you will come across while you are on your How to Buy phase and researching several Franchise Lists.

There are several franchises for sale, from across the globe. The more developed American, European and Australian franchise markets have on offer several master franchise opportunities for almost all countries of the world. Franchise Dubai, Franchise in India, Franchise in China is gaining tremendous predominance, as a way of business growth in these countries. In fact, you have franchise specialists in most countries who will guide you with the options that are available for your country as there Franchise broker networks, where these franchise consultants, socialize and exchange franchise information. It is very important to make the right first impression, when you are contacting these master franchise companies, and what these franchise consultants would do is, help you make the right first moves.

In a given area, a Franchise has the obligation and right to open a certain number of sub-franchises within a given period, generally through a pre-agreed master franchise development schedule. The Franchise also has the right to sell unit franchise ownership rights to people or organizations who are looking to become sub-franchisees. As a franchisee, you could be given rights to recruit/appoint other franchisees, which can then open and operate at more locations. These other franchisees are called the sub franchisees or Unit franchisees. Often a Franchise license system works with the appointment of a unit master franchise license with the required Franchise profile approval. Most interested prospects generally go through a Franchise Questionnaire which has several questions linked to their backgrounds and which then goes deep into a verification stage. The Franchise Questions are generally linked to ascertain the ability of the franchisee to execute the Franchise Respons ibilities, Role and Functions and to ensure that the Brand gets the right momentum within a prescribed period.

You have to sign a Franchise agreement and complete all other formalities, laid out by the company, to become a franchisee. The Franchise contract will clearly have you pay a Franchise fee to the parent company (franchisor) for this. A franchise fee and ongoing Franchise royalties have to be paid by the sub franchisees and the master licence to the franchisor, which is usually shared between the franchisor and the master franchise. Depending on the nature of master relationship you have entered into, the percentage of profit is shared. The total Franchise cost is generally a calculation of the initial investment and the ongoing investments as per the Franchise development plan. The franchisor clearly outlines their investments in the country and the support system that they will have including the Franchise training, unit master franchise training, Franchise manuals, and other Franchise support systems that they would have in place. Thereafter, they would expect the franch isee to invest in the Franchise system and make headway into the local markets.

If you want to take Franchise of any kind of business model then you should know both the operational and management aspect of that particular kind of business model. Even though you are not from the same industry or you are not proficient in doing the business, the franchisor will train you and have the right support, checks, and balances to ensure that you are functioning in line with what the business warrants you to. It then becomes extremely important, in order to make profit out of your master franchise, that you appoint efficient sub-franchisees under your assigned area/region. Apart from controlling the sub-franchisees, it is your responsibility to educate them and support them in all aspects of running the business successfully.

Normally, the master franchisee receives continuous support and training from the parent company rather than being alone in a business venture. It is the duty of the Franchise to pass on the knowledge to further down the line. You are the bridge between the company and the unit franchises. You need continuous support of your sub-franchisees if you want your Franchise to be a successful venture.

The initial costs are usually a bit higher than investing in a regular franchise, which is one of the drawbacks of entering into master franchising. You need to devote a great deal of extra time and resources in setting the Franchise organization up and running. You need some time to bring this kind of business model on to an auto-run mode. Several Business houses or high net worth individuals take up the Franchise and hire skilled employees to manage the Franchise business while they continue to work at another position or operate another business. Once the network is set, as in most cases, the parent company shares a part of the business profit with its master franchises, so you have the advantage of earning continuous unit master franchise royalty payments from the sub-franchisees. This is one of the many advantages of owning a master franchise.

Before opting for a master franchise, research the possibility thoroughly before investing. Working with a Franchise specialist in your country is a very vital necessity as they will know exactly the entire process and help you properly with the entire negotiations. They will also connect you with the right financial and legal professionals, who will work parallel with you for all documentation, research and feasibility. Ensure to pay visits to several of the master franchise locations to see how they operate. It is better to speak with other franchisee owners to understand how the entire concept works in their countries. It is also important to study the fine print and understand the entire Franchise terms. Generally, understanding the exit parameters and knowing the Franchise termination consequences, are also critical to making the right choice. You have to be very clear, how much you would lose, if the Franchise failed and how will you bring in the exact resources to m anage the same. Certain limiting clauses, post termination have to also be studied very carefully, just to ensure that your future is not impacted by the failure or success of the franchise.

As a whole, a good Franchise could make you popular instantly in your country. We have seen that several business groups have driven on Franchise international brands and have gained very good recognition in their country. Additionally, it creates quite a decent income, as master franchising can be a very solid business opportunity expansion strategy. However, in order to get the highest chance for success, it is tegy. However, in order to get the highest chance for success, it isimportant to find the best match for your skills and interests and choose brands and businesses that have a higher chance to succeed. It is not necessary that it some Franchise has been successful in some country, it will be in yours too. So, do your entire Franchise pros and cons with the right amount of research, have adequate resources ready, hire a competent Franchise specialist and get started with your search for a reputed, profitable Franchise business.

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