Most master franchises on offer in the UK are for products and services originally developed overseas. Formerly, the vast majority of franchises being marketed, for example, the big name fast food restaurant chains, originated in the USA. But, in recent years, an increasing number of master franchises have come from elsewhere, particularly Australia and the countries of the European Union.
By their very nature, master franchise agreements are complex, so it is important that they are clearly drafted to avoid possible ambiguities. The most fundamental issue that needs to be addressed within the contract is the relationship between franchise owner, master franchisee and the individual franchisees. Defining the responsibilities associated with these three levels of participation in the franchise is the main key to devising a successful master franchise agreement.
When buying any business, a potential owner should research the business thoroughly before making a decision. This is particularly true in the case of the purchase of a master franchise. If you became a master franchisee you would be the ‘lynch pin’ between the franchise brand owner and the individual franchisees. Inevitably, this role is likely to be stressful because of the pressures from above and below to maintain and develop the brand within the franchise territory, so good communication skills are vital for a master franchisee.
Although the basic principles of franchising are well known, the term ‘master franchise’ is far less widely understood.
A master franchise licence is a licence that gives an individual or company (the master franchisee) the right to act as a franchisor in a particular territory. The territory would normally be a country but could possibly be a region of a country or a group of countries.
When deciding whether to become a franchisee, most of the issues to be considered are similar to those that must be addressed by any self-employed person considering a new business venture. However, a crucial difference exists between an independent business and a franchise, namely the relationship between franchisor and franchisee.
Franchising, as we know it today, started as far back as 1850 when the Singer Sewing Machine Company contracted independent traders to sell and maintain their machines. Today, franchising is commonly associated with the fast food restaurant sector, which includes many household names that originally started in the USA, including McDonalds, Burger King, KFC, Pizza Hut, Subway and Starbucks.
Franchising is a method of starting and developing a business using a ‘tried and tested’ methodology. Much of the hard work associated with starting a new business from scratch can be avoided. In addition, you will be investing in a type of business that has worked for other people and should work for you, too, assuming that you have conducted your research thoroughly.
For many franchises, much of the marketing and administration is carried out centrally, allowing the franchisee to concentrate on boosting sales and market share locally, rather than getting bogged down with less productive administrative tasks.
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