Are you looking for a franchise model to invest into? You’ve had some research, contacted to franchisor’s staff, there are either options revealed:
1. Buy a franchise directly from Franchisor; OR
2. Buy a franchise from Master Franchisee.
Question: Is there any difference between buying a franchise from franchisor or from a master franchisee which effects on franchisee’s success?
The answer is YES
Basically, Direct franchising is the purest model of franchising a business. With this model, the franchisor grants to the franchisee the right to open franchise unit at a location, within a specified geographic.
Meanwhile, Master franchising (MF) is mostly found in oversea-developed franchise system in which the master franchisee is granted the right to re-grant the right to other franchisees in designated territory. The MF then will be in charge of developing the territory by selling franchises and providing the same support, assistance: unit franchise operating, marketing and ongoing obligations of support and service.
Either Franchisor or MF directly running franchise system in your territory, there is certain effort putting in its system to help franchise unit achieve success. Here are still some weaknesses of Master Franchisee you should know before deciding to join its franchise system:
1. There are less Franchisor’s control and involvement that might be desirable.
2. Franchisor’s system must be communicated to unit franchisee through the MF: not only in term of manual, material, policy… translated but also the insight of product/service/system operation delivered via MF. There is sometimes a risk of missed-delivery.
3. MF might loose control or over control the system.
4. Wearing the hat of Franchisor maybe not easy for MF. After the training for MF, MF will be supposed to act as Franchisor in its territory. You might hear Franchisor and MF saying this: “We guarantee all franchise system is proven, successful, unified system. So there is no difference between working with Franchisor or MF”. The truth is, some certain areas of the business could be concrete and applied the same everywhere. However, some others could not be 100% the same in concerning about management, assistance, mentor activities… for example, in which can be unique from person to person – who is directly and daily providing it.
5. Sale result vs. System support.
Assume there is no doubt about strong brand, good service/product of its franchise system. MF though has long-term partnership with franchisor rather than franchisee with master Franchisee/Franchisor in order to assure franchise system maintained in effective and concrete system. Somehow, Master Franchisees target more in getting sale results to maximize their return on investment. Therefore, since you are looking for buying a franchise unit directly from Franchisor or via Master franchisee you should be awake that the factors needed to generate effective franchise sales results are quite different with the factors needed to support franchisees commence a successful business (marketing, sale, operation support…).
Before entering any Franchise Agreement from MF, it’s necessary to:
1. Read all document provided by MF (or from Franchisor): Franchise Disclosure Document (FDD), Agreement, all other informations… and ask for needed clarification. The more you clarify all info from beginning, the better based uniformity both sides are going to work on back then.
2. Visit franchise units and talk to franchisees in the territory: This is the best way to see how a franchise business works from the inside. You should talk to not only existing franchisee but also to whom considered being fail in doing its franchise unit in order to have whole picture (advantages and disadvantages) of the business.
3. Take a look at staff who will be delivering support or managing the system. Keep in mind this: Maybe, one of the reasons you decide to buy a franchise units is the trust upon ML/Franchisor/Franchise Developer… However, after you are officially entering the franchise system, your daily activity will be guided, supported by MF’s staff. Therefore, staff’s sufficiency & working manner is necessarily taken into account.
4. Consider hiring professional help. Franchise relationship normally lasts long from 5 to10 years. Along that road, there will be happiness and conflicts, ask for professional help from beginning to minimize conflicts and risks.
5. Do a cost/benefit analysis on your own. Normally, cost/benefit analysis is revealed by Franchisor/ML. However, it’s nessesary when you test and measure on your experience to have your own evaluation about the system. Because ultimately, operating franchise business is on your own responsibility.
To achieve success in franchise business not only lying in buying a franchise unit from a successful franchise system, but also how much you understand and get along well with that.
By Lien Ngo