Why become a franchisor when you can buy a master franchise agreement?

In early retirement, I do a bit of consulting in the franchise industry. You see, I built a perfect business model for my small business and after a decade I felt like I was ready to franchise. In doing so, I learned a lot, and I learned most of it the hard way. Suffice to say, the franchising industry is tough enough, overly regulated, and as a franchisor you are much more likely to go out of business than if you were to buy a franchise. Similarly, it would be better to buy a master franchise from a franchise system with a proven track record than to try to perfect a business model and then try to franchise it.

Often when master franchise buyers came to me to secure a master license deal, they were particularly concerned about cost. They were also more concerned with the revenue split, ie; how much of each franchise fee they could keep for each unit sold and how we intended to split the royalty revenue stream, just like we did; percentage of soap sales and equipment sales (Mobile Car Wash Franchise Business).

Now, let me tell you, as a franchisor, it was hard to want to give up any of that, but unfortunately, as my franchise company grew, I realized how hard it was to keep up the growth spurt and meet all my needs. duties. have a franchisor.

Recently, there was an interesting article in Global Franchise News titled; “14 Questions a Master Franchisee SHOULD Ask”, published in the December 2016 issue.

The article said; “Before you sign that master franchise agreement, make sure you can answer these essential questions, says Adam G. Wasch,” and the first item discussed was; How much will a master franchise agreement cost me? And the article explained: “This is the million-dollar question. The typical upfront fee for a master franchise agreement will be significant, but it must also be commensurate with brand awareness and the size of the specified territory.” You can expect to pay multiple six-figures for the rights to become a master franchisee.”

In our master franchise agreement we split 1/3 – 2/3 of the initial franchise fee for each new unit sold, we kept the 23 portion, but we also did the training. Later, with the larger, well-funded master franchise buyers, we did a half to half split, but they had to train the new franchisees themselves. On the royal side we did the 50/50 split from the start.

Trust me when I tell you that I would rather have bought some master franchise territories from someone else’s franchise system, than have to do it all over again, from seed to weed, just saying.