Should a master franchise be in your growth plan?

Extract: We break down the master franchise landscape in New Zealand, as well as look into the benefits of this business model compared to standard franchisee ownership. If becoming a master franchisor isn’t in your growth plan, here’s why it maybe should be. 

We know that buying a franchise in New Zealand can be a great way to get into business. You have the security of joining a brand with proven success, so you can start shop confidently, knowing an audience of potential customers is available to you.

So, at What Stage Should You Consider Becoming a Master Franchisee?

Though similar in name, entering a master franchise deal offers different opportunities and challenges compared to a standard franchise agreement. While the latter may be a natural first step into business, the former requires a certain level of understanding of the franchise network, a familiarity with local law and customs, and a higher amount of capital, as well as strong negotiation skills and knowledge of real estate. 

What is a Master Franchise in a Nutshell?

Master franchises work on the premise that you are appointed control over a given area by the franchisor and are responsible for recruiting new franchises within this locality. 

It’s common for franchisors to appoint a master franchisee when they want to expand the business. It is, in fact, one of the main ways that franchised businesses multiply so quickly throughout the world. 

In turn, master franchises create opportunities for a franchisee to take on bigger stakes in the business or for an experienced businessperson with extensive local knowledge to take on a new challenge. Like all business agreements, it will suit some situations more than others. 

In New Zealand, the majority of franchise brands are homegrown, however, it is also a common way for international brands to enter the market. 

Below, we take a look at when taking on a master franchise could be beneficial to you. 

When a Master Franchise Makes Sense for Your Growth Goals

You want to expand a franchise business in a given region or territory

Franchising provides a business model that offers expansion opportunities to grow the distribution of products or services at an economy of scale that is similar to large chains. This in large part is due to a hierarchical framework that gives a master franchisee the ability to scale up either by opening franchise units in an assigned area granted by the franchisor or by sub-franchising to third parties.

The latter option requires the master franchisee to take on more of a franchisor role in management and operations.  

The exact pathway will be determined by the organisational structure of the franchise, the requirements of the territory or geographical area, the talent on hand, and the preferences of the franchisor and master franchisee. 

You have a lot of experience in franchising (or the business sector the franchise is in)

Once a master franchisee has established that the system works, their job is to act similarly to a franchisor. That means recruiting, training, monitoring, and motivating franchisees. If you’ve run other franchises before, you may have just the skills needed to dial up the speed on how quickly the brand grows. 

If you’re a passionate entrepreneur or seasoned franchisee veteran, taking on the responsibility of a franchise expansion in New Zealand may be your ticket to success. 

You want another revenue stream and have the capital to put toward it

Franchise financing is a huge part of any franchise method, and the master franchise fee is often much higher than you may find in individual unit franchise sales.

That being said, if you have the capital to make the deal viable, you will have the financial incentive of receiving royalties for each site you open. The franchises you help open will have to pay a percentage of their revenue to you for the business model, marketing, and supply chain management.

As Legal Vision explains, ‘The head franchisor then charges you franchise fees as a percentage of your revenue. By establishing more franchisees, you can help grow your business and increase your revenue without deploying any money.

Opportunities Available Now

We have several master franchise opportunities available in the hospitality sector, both established and greenfields, including Duck Donuts, Chatime, and Muzz Buzz, and a new opportunity with Ziebart in automotive aftersales.

If you would like to see if one of these franchises could be the right fit, get in touch with us for more information.