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.
Any master franchise contract is likely to contain a great deal of detail and may be very prescriptive in defining the exact role of the master franchisee. As a potential master franchisee, you need to be confident that you could make a success of the master franchise on offer, with your skills, experience and the amount of funding you have available.
If you have any doubts about the totality and accuracy of the information that is being presented to you by the franchise owner, then you should almost certainly abandon the negotiations and look for another master franchise that more closely meets your aspirations.
It is absolutely vital that the prospective master franchisee understands all aspects of the contract. Therefore, engaging a lawyer with experience of business franchising is essential for potential master franchisees, preferably at an early stage in the negotiation process.
Before making a decision about a master franchise, the business should be researched thoroughly:
Investigate the products and/or services that your franchisees will be selling;
try to understand as fully as possible the franchise’s management structure, business systems, marketing strategy and purchasing policies;
ask your accountant to review the franchise company’s financial statements and projections;
obtain legal advice regarding all contracts, licences and disclosure agreements;
ensure that the master franchise agreement is legal and enforceable in the country in which the franchise is to be operated.
If after your research you are uneasy about the master franchise – withdraw from contract negotiations and bide your time until you find a more suitable master franchise.
Comprehensive research is essential when considering the purchase of a master franchise;
communication skills are essential for a successful master franchisee;
full understanding of the contract is crucial when choosing a master franchise;
obtain professional advice, particularly about legal and financial issues.