THINKING OF BUYING A MASTER FRANCHISE?
THERE IS A LOT MORE TO IT THAN JUST THE FRANCHISE AGREEMENT. CEO CONSULTING WILL HELP YOU REVIEW, NEGOTIATE AND LAUNCH YOUR MASTER FRANCHISE IN AUSTRALIA.
CONSIDERATIONS WHEN BUYING A MASTER FRANCHISE
- The role and relationships of a Master Franchisee can be complex as they are the party in the middle. To the head Franchisor you are a Franchisee and to your Sub-Franchisees you are their Franchisor. Then you may have other State based Master Franchisees as your peer group. This takes a certain type of person to be able to manage these stakeholder groups.
- The key economic consideration is “will the business be profitable enough over the long term to sustain all the parties involved?” With an extra layer in the model, you need a large enough and profitable enough network to feed everyone. This is where many Master Franchise models break down over time.
- Are the key financial terms such as purchase price, royalty sharing, other fees and performance hurdles within feasible benchmarks not only for a Master arrangement but also based on your specific industry?
- What are the supply arrangements for products? Do sub-franchisees buy product from you, from the Franchisor or direct from manufacturers?
- What is your exit strategy? Who are the likely buyers and how do you develop your business to be attractive to those buyers whilst adhering to the rules of your Master agreement?
- You usually do not control the brand or the system. You have influence but you usually do not have decision rights. Can you deal with this?
- Who is responsible for brand building and marketing? You and your peers or the head franchisor?
- How do you deal with customers such as large national Australian companies that span your territory and others? How do you relationship manage and serve those customers?
Buying a Master Franchise is a more complex purchase arrangement so it is important you conduct a professional due diligence process to fully understand:
- The industry and markets
- How the franchise works
- Your roles and responsibilities
- How you make money on the way through and at exit
- Potential size and value of your sub-franchise network
- How you will set up and operate your local franchise network
- Areas of exposure such as:
- Supply arrangements
- Use of intellectual property & systems
- Exchange rate or product pricing fluctuation risks
- Brand sharing with other Master franchisees locally or overseas
- Termination triggers and consequences
CEO Consulting are Master franchise experts. We provide due diligence programs and work with Lawyers that specialise in this area. Call Robert Graham on 0407 105613 to discuss how we can help you get a better deal and a better business.