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Jun, 15 2013

ARE YOU THE RIGHT MASTER FRANCHISEE?

If you are looking for a business opportunity and have big bucks to realise your dream, you may consider master franchising. Read on to know if you have it in you to be a master franchisee.

MASTER franchising is a form of franchisor-franchisee relationship in which the franchisee essentially becomes a mini-franchisor, for a specified territory. Also known as area developer, the master franchisee owns the rights to develop a franchise system within the territory, which could be a metropolitan area, an entire state, several states or even a country.

How does it work?

For obtaining these rights, the area developer/ master franchisee needs to pay the franchisor a fee and must promise to provide certain services to existing franchisees.

“Our master franchisees need to commit a certain number of stores based on the extent of region they are taking the license for. Investment commitment is based on the store opening plan (average investment per store would be Rs 20 to 70 lakh)”, explains Joseph Cherian, CEO, GFA Global.

The master franchisee recruits, trains and provides ongoing support to each franchisee he signs in his specific territory. In return he gets royalty revenues and franchise fees generated from operations within that area. The master franchisee may or may not enter into an agreement with the franchisees in the decided territory. He may just facilitate the coming together of franchisor and franchisees.

The area developer/ master franchisee usually helps franchisees in site selection, equipment acquisition, training, operations and ensuring quality control.

“It's my responsibility to develop the brand in my territories in India. This includes- but is not limited to- franchise sales, assisting franchisees with opening restaurants, ongoing support, etc.,” says Manpreet Gulri, Country Head, Subway Systems India Pvt Ltd.

Do you fit the bill?

Significant capital

Master franchising is not for beginners. It requires significant capital, be it for obtaining the license or opening up outlets/stores as per the agreement with the franchisor.

Introducing a brand in a new country/region is not easy. There are many responsibilities that the master franchisee must be ready to shoulder.

“We needed to prove our financial strength, among other things, in order to get international master franchise of Smooy (frozen yogurt brand from Spain) in India. Our long term relationship with the brand in Spain and experience in running this business profitably there further helped our case”, says Luis Gamon, Managing Director, Smooy India.

Strong management skills: Master franchisees should possess strong management, organisational and inter-personnel skills. They are required to handle the brand in the entire specified territory. They should be able to help their franchisees set up their stores and train them to manage the business by themselves.

Experience: Experience in the specific industry is desirable but not essential (depends from franchisor to franchisor). However, experience in franchising is a must.

Strong Marketing skills: The individual or organisation that becomes the master franchisee must possess strong sales, marketing and operational skills. They should be able to teach their franchisees the art of running the business with maximum cash flow for all parties.

Cherian tells us what GFA looks for in a master franchisee. “We need partners who have capital, commitment and capability to operate our brands. They should be passionate about being in the food business and willing to commit their time and effort in handling their business.”

The Checklist

Once you have assessed yourself as a potential master franchisee, analyse yourself vis-à-vis the four R's of franchising.

Resolve: Can you resolve to be a part of the franchising system?

Be ready to work within the framework and guidelines prescribed by the franchisor. Staying within the system and learning fully the nuances of the business requires firm resolve which ultimately leads to prosperity.

Agrees Cherian: “Our master franchisees should be able to identify right locations, recruit appropriate people and most importantly, operate the store by the GFA standards.”

Realism: What are your business strengths and weaknesses?

Make certain that the particular opportunity is a good match for your interests and goals. One key area that realistically needs to be addressed is your ability and willingness to promote products and services of the franchisor. You must possess a 'franchising' frame of mind for successful handling of the franchisor and the franchisees.

Research: How well do you know your franchisor and franchisee?

Learn as much as you can about the franchisor, franchisee and the market that you are catering to. Collect comprehensive information on the franchisor, the products or services on offer and competing products and services before committing your financial resources on a long-term basis.

Make sure that franchisor's business model has a solid foundation. Try to tap the nerve of the market, understand the psychology and purchase pattern of the customers. This way you'll be able to help the franchisees further in running the business profitably.

Interview successful master franchisees so you can be aware of the types of challenges you may face. If face-to-face interaction is not possible, do read about them on the Internet.

Sharing his experience, Gamon of Smooy India says: “Our main challenge is to understand the Indian market and we've worked a great deal to know the Indian customer behaviour. It's a challenge to study your potential franchise investors, their expectations from your brand as well as what you can really offer them. I'll suggest anyone who wants to be a master franchisee must study his market well and provide the franchisees a business that is easy to manage.”

Resources: Are you  well equipped?

In most cases, the agreement between the franchisor and master franchisee clearly indicates systems, procedures and methods of managing the resources. But you would do well to prepare yourself mentally to accept the resource management terms of the franchisor.

Why master franchise?

With owning a master franchise, one can enjoy all the benefits of being a franchisor without the burden of developing a concept from scratch.

You get a proven operating system and a brand name to follow. Along with business experience of the franchisor, the master franchisee also gets to benefit from international marketing and ongoing access to the franchisor's latest systems and technologies. A master franchisee actually becomes franchisor's partner in a territory. And so, the franchisor offers to help the master franchisee in manage-ment, leadership, and other high-level skills to run the organisation.

“Our franchise support system provides a great handholding for anyone who is new to the business. We provide training (professionally designed courses, including pre-opening assistance and launch), operating standards, vendor development, finance training, continuous R&D, etc. to master franchisees,” says Cherian about GFA Global.

About training, Manpreet Gulri of Subway, says: “I underwent four weeks of rigorous training. This included two weeks of franchise training and two weeks of development agent training.” Also, the prestige of owning a master franchise and controlling an entire area can provide tremendous satisfaction and financial leverage.Unlike an individual unit franchise, a master franchise allows the investor much more freedom.  Master franchising adds a third tier to the simple franchisor-franchisee relationship and from win-win, makes it a win-win-win relationship.

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