Master Franchisor or Area Developer: Which is the Right Choice for Your Franchise Business?
Making the Right Decision to Grow Your Franchise Business
If you're considering expanding your franchise business, you might be wondering which is the better choice: becoming a Master Franchisor or an Area Developer. Both options can help you grow your business by recruiting and supporting new franchisees, but they have different structures and responsibilities.
In this blog post, we'll explain the differences between Master Franchisors and Area Developers, and help you determine which is the right choice for your franchise business.
We recently had a client who was considering expanding his successful restaurant franchise into new markets. As he researched his options, he came across the terms "Master Franchisor" and "Area Developer." Unsure of which route to take, he turned to our Franchise Lawyers, in Philadelphia, for guidance. After discussing his goals and resources with the firm's franchise experts, our client ultimately decided to become a Master Franchisor, allowing him to focus exclusively on recruiting, training, and supporting new franchisees while generating passive income from franchise fees and royalties.
Read more about the differences below.
What is a Master Franchisor?
A Master Franchisor is a type of franchisee who is granted the exclusive right to develop and operate a franchise system within a particular geographic area. As a Master Franchisor, you are responsible for recruiting and training new franchisees, and providing ongoing support and guidance to ensure their success. In exchange, you receive a share of the franchise fees and royalties collected by your franchisees. Let's dive into this option a bit further.
Essentially, Master Franchisors act as a sub-franchisor within the larger franchise system, and are responsible for expanding the franchise brand's presence within the Master Franchisor's designated territory. This can include opening new franchise locations themselves, as well as recruiting and training new franchisees to open additional locations.
One of the primary responsibilities of a Master Franchisor is to recruit and train new franchisees. This involves identifying potential franchisees within the designated territory, providing them with information about the franchise system, and guiding them through the process of opening and operating their own franchise location. This can include assistance with site selection, training programs, marketing and advertising support, and ongoing operational and financial guidance. This can significantly reduce the burden on the Franchisor, since the Master Franchisor will become the point of contact within their territory. By reducing the administrative burden on your franchise system, you can typically scale your franchise faster (into new territories) with a Master Franchisor on your team.
In addition to recruiting and training new franchisees, Master Franchisors are also responsible for providing ongoing support and guidance to their franchisees. This can include regular check-ins, assistance with marketing and advertising, operational support, and financial guidance. Essentially, Master Franchisors act as a mentor and partner to their franchisees, helping to ensure their success and the overall success of the franchise system.
Of course, there are benefits to becoming a Master Franchisor as well. One of the primary benefits is the ability to generate passive income from franchise fees and royalties. As franchisees within the designated territory open and operate their own locations, the Master Franchisor earns a share of the fees and royalties collected. This can provide a stable source of income without the need to personally operate a franchise location.
Another benefit of becoming a Master Franchisor is the potential for significant growth and expansion. By recruiting and training new franchisees within the designated territory, the franchise system can rapidly expand into new markets and increase its overall presence. This can lead to increased brand recognition, economies of scale, and overall profitability.
If you have additional questions or concerns about recruiting a Master Franchisor reach out to one of our franchise attorneys.