Franchise Buying Guide

Get in the Game

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If you're looking for a more aggressive role in the franchise system, you could check into becoming a master franchisee. The details of the master franchisee concept differ from one system to the next, but the basics are the same: A master franchisee is appointed to serve as a local or regional representative of the franchisor, providing training and field support, and is compensated for those services, often by receiving a percentage of the royalty revenue generated in the assigned territory. The master franchisee may also have recruiting responsibilities, generating commissions on franchise sales made from his or her efforts.

The appointment as a master franchisee is usually extended to existing franchise owners who prove successful in their operations and are interested in expanding their involvement in the system. If you enjoy teaching and want to super-size the return on your franchise investment, inquire about master franchise programs.

It's the involvement in franchise sales that draws many investors to master franchise programs, and it is there that the law imposes the most restrictions. As a third party participating in a franchise sale, the master franchisee will be considered a "franchise broker" and, as such, must be included in the company's Uniform Franchise Offering Circular, disclosing business experience and litigation history. The franchisor must submit a "salesman disclosure" form to most registration states. In a few states, a broker must independently register with state authorities.

A master franchise is often confused with a subfranchising program, but there's one important distinction: A subfranchisor offers and sells franchises directly, for its own account; and, of course, a master franchisee does not sell franchises directly. A master franchisee typically generates leads, meets with and qualifies prospective franchisees, and sends them on to the franchisor for closing.

A master franchisee is the utility infielder of franchising. Success is measured by the ability to manage, teach and recruit, while continuing to operate your own franchise business successfully.

MASTER PLAN

Giannini enjoys the freedom that being a master franchisee grants him. Because he is free to set his own schedule, he can juggle working at Action's head office-helping other master franchisees-with running additional businesses on the side, including a real estate and investment business. "There's a fairly quick educational process," says Giannini. "What's important is that you've got that entrepreneurial attitude-that you'll go out there and get it done, whatever it takes." He points out that his royalty from the sale of each franchise is fixed. In contrast, a regular franchisee chooses the monthly rate to charge clients and is, therefore, more in control of his or her income.

Giannini advises potential master franchisees to look ahead 10 years, examine their vision, then speak with different franchisees. Giannini says of becoming a master franchisee, "I [believed] I could help people more by being able to sell multiple franchises and have a lot of people helping business owners rather than just me. My vision better suited the master franchisee side than the individual franchisee side."

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This article was originally published in the January 2005 print edition of Entrepreneur with the headline: Get in the Game.

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