There are many misconceptions about franchises and the benefits of getting involved with these companies.
It is our goal to make it clear exactly what a master franchise does along with the many benefits of franchising.
Before we dive into the benefits of franchising- there are a few key definitions that we’d like to share with you.
Master Franchise/Franchisor: A corporation that owns a chain of stores (ex. McDonald’s, Starbucks, Publix)
Franchisee: An individual who licenses the rights to operate a franchise’s store (ex. Individual Starbucks stores)
With these definitions understood, you can better realize the benefits of the franchisor and franchisee relationship.
Master Franchises
Firstly, master franchises are large corporations that license the rights to their logos, branding identities, and products to expand their customer base.
Master franchises are looking to expand their chain of stores, to increase revenues and reputation.
A benefit of a master franchise is that the primary goal is to provide resources, management, and structure for their franchisee partners.
Therefore, with structure and support, the franchisees have a higher chance of success.
This is beneficial for franchisees who are looking to jump into business with experienced franchisors.
The experience franchisors possess will make most likely improve the launch, operations, and success of the franchise store.
In short, master franchises provide resources and information that jumpstart their franchisee’s business.
Because master franchises are experienced in curating successful operations for their chains – the primary goal is to empower their franchisee.
By doing so, the franchise can continue to grow and expand.
Royalty Fees
Licensing the rights to franchise is not as expensive as one may think.
Aside from the cost of the storefront, which varies for any business, the revenues earned after launching franchises are much higher than independent stores.
We are not stating that independent stores will not earn high revenues, but with a franchise, they have the power of an established customer base.
We’ve all heard the stories, when the franchise In-N-Out Burger opened in Colorado, there was a line wrapping around the building for hours.
This is due to the power of a franchise.
With that being said, once the initial franchising fees are paid, and your storefront has been built or opened, the only money owed to the master franchisor will be in the form of royalty fees.
Royalty fees are a percentage of monthly revenues.
In most cases, royalty fees are somewhere between 5-8% of monthly revenues.
This small fee makes the biggest difference for the master franchisor, as it incentives them to provide the best possible experiences for their franchisee.
The goal of the master franchisor is to empower their franchisee to make as much money as possible while providing an amazing product/experience for their customers.
This results in a higher royalty fee per month, which is paid directly to the master franchise.
This delicate balance is beneficial to both the franchisee and franchisor, as it incentivizes both parties to perform better.
Final Thoughts
If you are wondering, what are the benefits of a franchisor, you may find more examples in our last article.
For today, we hope you have a better understanding of the benefits of a master franchise.
These companies have three primary goals, which are revenues, expansion, and customer experience.
With that being said, Franchises provide powerful opportunities for growth.
If you are looking for more information about master franchises, you may book a free demo with one of our consultants here.
