1. MASTER FRANCHISE Differences from a Franchise
AGREEMENT Agreement
2. WHAT IS A FRANCHISE
AGREEMENT?
• A franchise agreement is a written document between two parties in which
one party, the franchiser, licenses out his business or a service to another
party, the franchisee, who uses the intellectual property, trade mark or logo
of the franchiser and pays to him a specific amount as fee.
3. WHAT IS A MASTER
FRANCHISE AGREEMENT?
• Master Franchising agreement, franchiser grants the franchise rights to an
entire country or territory and the franchisee is permitted to open franchise
outlets and grant sub-franchises to others. Two agreements are generally
involved — one that is entered into between the franchiser and master
franchisee and the other between the master franchisee and sub-
franchisees.
• For example, your master franchise agreement with the franchisor may state
that you will receive 50% of the franchise fee and 50% of the royalty fees for
each unit sold within your territory. You will be responsible for recruiting and
training other franchisees. You will also need to be available for ongoing
support.
4. DIFFERENCES….
• After signing of a MFA, a master franchisee can be kept on his toes it is
usual to provide minimum performance targets which is not so in case of
Franchise agreement.
• Also another difference from a franchise agreement is that, there should be
both annual and cumulative targets. There will be provisions for termination
or loss of exclusivity if the minimum performance is not reached.
5. DIFFERENCES….
• In a master franchise agreement, one has to show huge capital, as it
requires huge investments.
• Additional income is generated from distributing products through the
franchisees and by real-estate interests. International franchises often use
this form of franchise agreement to expand in a new country, as it makes
their job easier and faster.
• Both the situations are almost non existent in other type of franchisees
agreements.
6. DIFFERENCES IN
FRANCHISES…
The master franchisee is like a mini franchisor; its main aim is to sell the
areas under it to prospective single, multi and area developer franchisees. A
single location is often developed as a training facility and income source.
Master franchisees get a percentage of the franchise fee and royalty fee that
people who buy a franchise pay to the franchisor.
Single unit franchises are very common among new franchise owners who
have just started in the business or are yet to start and do not have enough
experience in this line of business. A single unit franchise enables the owner
to concentrate on managing only one unit at a time. Also, such franchise
units are good low cost start-up opportunities.
7. A SMALL THING TO
REMEMBER
• One detriment to a master franchise agreement is however, if you fall into
the trap of not entering into proven franchise system.
