Franchising is primarily a lawful commercial arrangement between two associates, which are the franchisor and the franchisee. The franchisor who has recognized a market commercial package of goods and services arrives into a predetermined association with another person who is the franchise for this case to market his products and services using the trade name of another business. The operations of this business should be carried out according to the franchisor’s specified terms and conditions.
Master franchising is done internationally, the franchise contracts with an entity to provide services to the person who is granted a franchise in a specified state or area with an intention of expanding the system globally as well as the brand. Therefore, the master franchisee sells the franchising products and services to other countries on behalf of the franchisor. Many franchisors go for master franchising because they can expand quickly if it is selected keen fully and rightly. They are attractive to many franchisors. Its advantage is that the franchisor does not really need to sponsor the capital used to facilitate the expansion of the master franchisee. The master franchisee contributes this capital. Sometimes the master franchisee gets a lot of pressure since it is responsible for training, selling and supporting the franchise in that particular area of the country. Sometimes they fail to offer this kind of support hence it can be a hazard in the foreign expansion (Steinberg & Campbell, 2013). Another issue about this model is profitability since the profits have to be shared between the franchisor and the master franchise, which could be franchisor’s profits only instead.
Before getting involved in master franchising, it is important to seek consultation with franchise counsel in order to be knowledgeable about this method of expansion. The beauty of choosing this kind of model is that the franchisor depends on the country’s culture, and linguistic the master franchise is dealing with.
Steinberg A.W.& Campbell, C. 2013. International Expansion: Is Master Franchising the Best Approach? American Bar Association, 16 (2). Retrieved from http://www.americanbar.org/publications/franchise_lawyer/2013/spring_2013/international_expansion_is_master_franchising_the_best_approach.html