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Master franchisees typically purchase the rights to develop and own an exclusive territory (typically a major market or region), and
then sell portions of this territory to new franchisees. Master franchisees then function as a sub-franchisor and split the roles and
responsibilities as well as the franchise fees and ongoing royalties with the franchisor.
Master franchisees are drawn to the potential for significant financial gains in a business with low overhead and few employees
needed. However, that is not the only reason to investigate this opportunity master franchisees enjoy the benefits of an improved
quality of life by owning their own business with exclusive territory rights, and the opportunity to grow as quickly as they want
leveraging the capital and full time management of their sub-franchisees.
Low Overhead: Especially in the beginning, master franchise operations can be run with little office space or from a
home office. Typically, you will operate the master franchise yourself, and potentially add just a few support positions to
aid in your growth such as an administrative assistant, a franchise sales manager, or a field training and marketing
manager. Once you reach a certain level of growth and success, you may opt to hire a district general manager to
manage much of the operation.
Few Customers: Your franchisees will be your end customers. You will support a limited number of franchisees in your
master territory. Your franchisees will support a large volume of customers in their daily operation.
Wealth Building: Master franchising offers an unparalleled opportunity for financial growth in the franchising industry,
versus individual franchise operation or even multi-unit development businesses.
What type of support does the corporate franchise office give Master Franchisees?
Typically, the franchisor provides the master franchisee with ongoing innovations, business expertise, training and operating
guidance, rights to use proprietary brand names and trademarks, technology and purchasing advice, and other business building
support effectively making them a mini-franchisor.
Learn how Boardwalk Fresh Burgers & Fries is expanding via master franchising with experienced franchisees at the Fransmart
Blog.
Master franchisee must demonstrate success as a multi-unit owner/operator with the highest of standards
1)
__ units x $___ volume/each = $____ total sales x __% profit = $______ Profit
2)
Master Franchisee sells and supports sub-franchisees earning half the franchise fees and royalties:
Franchise Fees:
___ number of franchises x ___ franchise fee = $_____ x 50% goes to Master =
$________ (take this number, and plug into formula below)
$______ - expenses = $___ profit from franchise fees
Royalties:
____ number of units x $___ volume/each franchisee = $____ system wide sales x ___%
royalties = $____ royalty revenue x 50% split with franchisor = $_____ master
franchisees cut x __% expenses = $___ master franchisee profit
This worksheet is for information purposes only. A franchise offering can only be made by prospectus.
Multi-Unit franchisees purchase the rights to develop and own multiple units in an exclusive territory. In a multi-unit operation, a
franchisee will typically work less in the daily operations of a single unit, and instead focusing on managing multiple locations at a
higher level. Frequently, multi-unit franchisees rely on experienced general managers and staff to oversee daily, store-level
operations.
Multi-Unit franchisees are drawn to the potential for significant financial gains produced by owning multiple units, and the ability to
achieve greater operating efficiencies.
According to the International Franchise Association Education Foundation, while just under 20% of all franchisees are multi-unit
owners, they account for more than half (52.6%) of all units, and they average between 4.3 units (in single-brand systems) and 5.83
units (in multi-brand systems).
This means that more than half of all output produced by franchise businesses is generated by multi-unit franchisees. According to
the International Franchise Associations Report The Economic Impact of Franchised Businesses: Volume III, Results for 2007:
Franchised businesses were the cause of $2.1 trillion of annual output, or 9.0 percent of all private nonfarm output in the
United States in 2007.
Franchise Glossary
Franchise: A type of license agreement that describes the relationship between a franchisor and franchisee including use
of brand name and trademarks, fees, training, assistance and guidelines.
Federal Trade Commission (FTC): The US government agency that regulates the sale of franchises in the United
States.
Franchisor: A company that grants to an individual or entity the right to use its name, trademark, and operating systems
for distribution of a product or service, in return for a fee and other considerations.
Franchisee: An individual or entity who holds a contract to conduct one or more businesses using the name, trademark
and operating system of a franchise company.
Single Unit Franchise: A franchisee owner who operates one unit of a franchise brand.
Multi-Unit Franchise: A franchisee owner or entity who operates multiple units of a franchise brand within a protected
territory.
Master Franchise or Area Developer: A franchisee owner or entity who acquires the franchise rights to a large territory
with the intent to both open locations and resell sub-franchise locations. Master franchisees share a portion of the
franchisee fee and the royalty from their sub-franchisees with the franchisor. Learn more about master franchising here.
Conversion Franchise: The opportunity to convert an existing business to a franchise brand. Conversion opportunities
may allow for lower start up costs.
Franchise Disclosure Document (or FDD): The Franchise Disclosure Document provides information about the
franchisor and franchise system, and full details on start-up and ongoing fees. The FDD allows prospective franchisees to
make an informed investment decision.
Acknowledgement of Receipt: The last page of an FDD (Franchise Disclosure Document), which once signed, indicates
your receipt of documents on a specific date.
Franchise Fee: The initial fee paid to a franchisor, usually due at the signing of the contract, for the right to use the
franchisor's name, trademark and business system.
Royalty: The ongoing regular payment made by the franchisee to the franchisor, usually based on a percentage of the
franchisees gross sale.
Earnings Claims or Item 19 or Financial Performance Representations: The FTCs Franchise Rule permits a
franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisorowned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure
document.
Advertising/Marketing Fee: An ongoing fee paid by franchisees, usually a percentage of gross revenues, enabling
franchisors to create and execute national marketing and advertising programs.
Agreement: A Franchise Agreement is the legal, written document that governs the relationship between franchisor and
franchisee, and specifies the terms of the franchise purchase including use of the franchise system and trademarks,
territory, rights and obligations of the parties, payments and term (duration) of agreement.
Capital Requirement: The total amount of liquid assets a franchise candidate must possess for the start up and initial
operation costs of a franchise business.
Initial Investment: An estimate of the initial cash investment required to buy and open a franchise business. This
estimate includes the franchise fee and other initial start-up costs, but not necessarily the total cost of operating the
business.
Liquid Capital: Cash assets or other assets that can be readily converted to cash.
Franchise FAQs
Q: Would I make a successful franchisee?
A: Fransmart recommends that all potential franchisees first ask themselves: Am I passionate about owning my own business? Am I
willing and able to follow a proven system? Do I have a strong work ethic and a drive to succeed? Franchising is not for everyone. It
takes a unique mix of business acumen, motivation, capital, and a committment to succeed.
Step 2: Qualification
Initial conversations to review qualifications based on business experience and financial strength
Headquarter Discovery Day: tour restaurants, meet Franchisor team, learn more about opportunity
Step 4: Legal
Real Estate
Since its inception, Fransmart has focused on the fast casual niche in the restaurant industry. In the mid-nineties,
Fransmart founder Dan Rowe identified an early fast casual superstar, Qdoba Mexican Grill, when it was just a single unit.
Rowe grew the company via franchising to a successful 100-unit chain before it was sold to Jack in the Box for $45
million. Today, Qdoba has over 500 locations. In 2002, Fransmart launched the explosive fast casual Better Burger
niche, growing Five Guys Burgers and Fries from a local, family run business to the powerhouse chain they are today.
Fransmart is the industry leader in identifying fast casual brands that are primed for growth.