Master Franchise Agreement
Master franchise Agreement is popular with service franchises. Service franchises are those which involve the franchisee selling services rather than goods. Service franchises are common in the home services, cleaning and courier industries. Often there will be no retail premises involved, with the franchisee operating from home. The use of a vehicle will be a critical element of the franchise.
A feature of service franchises is the high number of individual franchisees. To avoid creating a large head office bureaucracy master franchising can be used to delegate the responsibility of growing, developing and monitoring the network in a territory to a master franchisee.
The grant of a master franchise is very similar to the grant of a franchise. However, the terms of
the master franchise and the responsibilities of the master franchisee are different from those of a
franchisee. A franchisor must provide a master franchisee with a disclosure document, a cooling
off period and other arrangements applicable to franchisees under the Code.
Master Franchise Agreement
What is Franchising – Written by Franchise Business
WHY WOULD YOU BUY A FRANCHSE?
There are many reasons why someone would buy a franchise. For example:
- There are incentives to the franchisee in owning and operating its own business. Monetary rewards are directly related to the efforts of the franchisee.
- In some respects, it is easier for the franchisee than starting up their own business. A franchise should have a brand that is well established.
- In Australia, franchises are regulated by the Franchising Code of Conduct, which is administered by the ACCC. This provides legal protections to franchisees, in particular it requires the franchisor to make disclosures to prospective franchisees (e.g. financial information) and allows a franchisee to change its mind and walk away within seven days of signing the initial franchise agreement.
- The franchisor generally provides assistance in identifying suitable business locations, which should minimise the risk of the franchise not operating successfully, and setting up so that it is ready to open for business.
- The term can be flexible, it could be as short as one year or have no fixed term and last forever.
- The franchisor generally provides ongoing support, training and knowledge (including of their past mistakes). This may be specific to their business model or general business training in areas like marketing, merchandising and accounting.
- Buying one is generally cheaper than starting your own business.
- If the franchise sells goods, the purchase price of the franchisee is generally cheaper than if it were a stand-alone business as the franchisor should have access to bulk discounts.
- The franchisee indirectly benefits from advertising by other franchisees.
- Franchisees may be protected from competition (certainly within the group), depending on the terms of their agreement.