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It is no secret that many franchisors have successfully expanded their presence and operational reach by using the Master Franchisee model. In this scenario, franchise growth is accelerated far beyond the individual level, by transferring significantly greater territorial control to a person with significantly greater responsibility than the average owner in a franchisee network.
Some business models can profit greatly from this approach, especially when expanding into latest and diverse markets with different cultural characteristics.
Although most would initially wonder why everyone franchisor does not use the Master Franchisee approach, you’ll see why using these preferred intermediaries is not for everyone. It takes the right franchisor, with the right operating systems and the right situation to make the most of its advantages. Not to mention that the Master Franchisee approach is also entirely dependent on finding exactly the right person to manage the effort.
Two successful case studies
Well-known fast-food franchisors like McDonald’s and Domino’s Pizza are two examples of brands that have successfully used the Master Franchisee approach. This strategy helped McDonald’s expand into many latest international markets where their local operations required them to adhere to certain global standards.
Domino’s Pizza not only used Master Franchisees to quickly expand into other countries, but the approach also benefited them by helping them tailor their menu offerings to local tastes on a cultural level. These two examples show where the Master Franchise approach paid off.
Both firms are franchisors with highly proven systems (and well-known brands) and their product offerings may be easily replicated across geographies, markets, and cultures. Of course, this does not mean that the Master Franchisee approach is reserved exclusively for international expansion. In many cases, franchisors (including the brand I represent – Stratus Building Solutions) have successfully benefited from this scalable strategy here in the U.S.
Ideal Situations for Master Franchisees
Any franchisor looking to thrive in difficult market conditions—cultural or geographic—without the need for direct oversight from corporate headquarters can use this strategy. That’s why those in industries like food and beverage, retail, and some service provider sectors typically find success with this strategy.
It comes down to the scalability of the business model and the franchisor’s willingness to relinquish and delegate a significant amount of operational control to the middleman, the Master Franchisee. Franchisors preferring tighter control over their brand’s standards and operations, and can also worry about maintaining consistency across multiple locations, are not ideal decisions.
One very last thing to consider – it takes a reliable person with a great business acumen to take on the responsibility of being a Master Franchisee. And people of that caliber don’t grow on trees.
The Ideal Profile of a Master Franchisee
Finding the right person to install as a Master Franchisee is extremely vital, especially given the high risk, high reward nature of the franchise. They have to be fully committed to building a brand in a given territory while adhering to the franchisor’s strict standards. They must also have the ability to invest and maintain a certain level of monetary stability to sustain rapid growth. In addition to having extensive experience managing and scaling businesses, they have to also possess the ideal leadership skills required to recruit, train, support and nurture franchisees – which requires charisma.
Finally, Master Franchisees must have a thorough understanding of local customs, regulations and the complex market dynamics required to aggressively expand inside their defined territories. The considerations that have to be made when targeting a big selection of cultures, ethnicities, local customs and regulations are not unique to international expansion.
In many cases, the United States is an equally diverse market, requiring a calculated geographic approach. In terms of scale, the granting of Master Franchisees internationally is often divided on a country-by-country basis. However, domestically, here in the United States, Master Franchisees could also be granted territorial rights for an entire state, province, or a variant of each, as defined by established regional boundaries. How these territorial rights are established and granted, on a global or national scale, is up to each franchisor.
Master Franchisee Responsibilities
Many in the industry refer to Master Franchisees as “sub-franchisors,” and for good reason. As Master Franchisees, they are tasked with acting as a third-party intermediary for a defined territory that far exceeds the reach of the franchisees at the unit level. In managing this designated territory, Master Franchisees oversee growth, ensure full compliance with the franchisor’s brand standards, and leverage their local market knowledge and operational experience to be certain that the desired level of expansion is achieved as planned. They have to be adept at meeting the challenges of:
- Local Marketing – Specific marketing strategies that address local preferences and cultures
- Training Programs – We be certain that all latest franchisees are well trained and motivated
- Streamlining operations – implementing scalable solutions that increase profitability
- Expansion – recruitment of latest franchisees in the Master Franchisee’s territory
- Community Engagement – Building Mutually Beneficial Relationships with the Local Community
With proficiency in these interconnected areas, Master Franchisees must have the ability to operate with little direct supervision and turn into the ultimate “middleman” between the brand and its latest franchisees inside a given territory.
A final word of warning
It was previously identified that the Master Franchisee approach is not a one size matches all solution, as there are potential drawbacks to using this aggressive strategy. First and foremost, it takes a highly talented and experienced individual to take on this role and the responsibilities that come with it. It requires the competence and commitment to manage multiple franchisees in the difficult environment of expanding into latest territories and cultures. If the brand is not well managed and governance fails, subtle differences in quality and consistency are normally the first casualties. And one very last thing that every franchisor needs to consider when considering the Master Franchisee approach. It requires robust systems to monitor and support the Master Franchisee, which many find quite resource intensive.
Like any business enterprise, the Master Franchisee approach can easily be described as a high-risk, high-reward strategy – when it really works best.