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

In early retirement, I do some 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 learned most of it the hard way. Suffice it to say, the franchise industry is pretty tough, over-regulated, and as a franchisor, you’re much more likely to go out of business than if you bought 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 for a master license agreement, they were particularly concerned about costs. They were also more legitimately concerned with the revenue split, that is; how much of each franchise fee they could keep for each unit sold and how we intended to divide the royalty income stream, in the same way in our case; percentage of soap sales and equipment sales (Mobile Car Wash Franchise Business).

Now let me tell you that as a franchisor it was hard to want to give up any of that, but sadly, as my franchise business grew, I realized how difficult it was to maintain space growth and continue to fulfill all of my obligations as franchisor.

Recently, there was an interesting article in Global Franchise News titled; “14 Questions a Prime Franchisee MUST 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 topic that was discussed was; How much will a master franchise agreement cost me? He explained, “This is the million dollar question. The typical upfront fee for a prime franchise agreement will be significant, but it should also be commensurate with brand awareness and size of the specified territory. . You can expect to pay multiple six-figure figures for the rights to become a Master Franchisee. “

In our main franchise contract we did a 1/3 to 2/3 split of the initial franchise fee for each new unit sold, we kept the 23rds portion, but we also did the training. Later, with larger, well-funded prime franchise buyers, we split in half, but they had to train the new franchisees themselves. On the rights side, we did the 50/50 split from the beginning.

Believe 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 everything from seed to weed all over again, I’m just saying.