Master franchise

A master franchise is a person or entity who provides services to franchisees in a specified territory, typically a major market, geographical region or even one or more countries.^[1]

Master franchising is a method that has been employed by most franchise systems. The operational efficiency of these systems, with their distinctly complex organizational form, benefits from increased growth rates.

In general, a franchise solves geographic concerns raised by companies and enables their product to be dispersed in more outlets, in more regions. In doing so, it allows the company to retain the economies of a large chain, while allowing for the meticulous management of geographically dispersed individual stores. Generally, a master franchisor will grant the master franchisee, or subfranchisor, the right to third-party operations within a defined territory. And then, with respect to regional issues, the subfranchisor will assume the role of the franchisor, but they typically will not own or operate the franchise. They are removed from a direct management position. This duplication of the franchisor's role forms an additional layer of control in the general franchise system, which results in some small scale inefficiencies on the small, local scale but greatly reduces the large scale inefficiencies. Additionally, a master franchise allows the company holding the franchising permit to benefit from management talent and more and more accessible capital. Combined, these two factors translate into almost instant penetration into the market and a competitive advantage, both of which increase system growth rates. Managerial levels and hierarchical framework exemplify one competitive advantage. By allowing the franchisor to specialize in recruiting, screening and training of subfranchisors, who then develop their area in a similar way, it increases the overall growth rate of chains.^[2] Other benefits include faster development, a more comprehensive financial base, specific expansion plans, capital and a regular cash flow, proximity to the customer, some independence, and the ability to address the demands of the customers as well as address the local competition.

Although master franchising can beneficial and advantageous, there are also setbacks. Setbacks can include legal problems and overly long contracts. One specific setback of master franchises is that they raise agency costs. Franchise agreements are needed to codify the enforcement of behavior. But, because all aspects of the franchise cannot be predicted, this requirement raises the opportunity for franchise shirking while reducing the overall ability to monitor all aspects of the franchise. Thus, some scholar hypothesize that "new franchise systems which employ master franchising are more likely to fail than are other new franchise systems." ^[3]

Generally, master franchises are the organizational structure for domestic cleaners, fast food restaurants, computer equipment, real estate agencies, and convenience food stores.^[4]

References

1. ^ Elgin, Jeff (2004-09-07). "What is a Master Franchisee?". Entrepreneur Magazine. http://www.entrepreneur.com/franchises/buyingafranchise/franchisecolumnistjeffelgin/article72380.html. Retrieved 2009-06-08. 
2. ^ "Master Franchising and System Growth Rates". http://books.google.com/books?hl=en&lr=&id=gmacXnrjCwQC&oi=fnd&pg=PA49&ots=M0aW528X9f&sig=r4xVY5DOrMfA5FxyJOyLRgQNpaM#v=onepage&q&f=false. 
3. ^ "Making New Franchise Systems Work". http://www.jstor.org/openurl?volume=19&date=1998&spage=697&issn=01432095&issue=7. 
4. ^ "Master Franchising: A New Look". http://www.questia.com/googleScholar.qst;jsessionid=7CEB483F0EC6B6CAA6C6A31E8140507D.inst2_3a?docId=5001686454. 

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This article about retailing is a stub. You can help Wikipedia by expanding it.v · Categories: Franchises Business stubs Retailing stubs Wikimedia Foundation. 2010. Игры ⚽ Поможем написать реферат Master of Bioscience Enterprise Hox gene Look at other dictionaries: master franchise — ➔ franchise1 * * * master franchise UK US noun [C] (also area franchise) ► COMMERCE an arrangement where a company allows one person or business the right to sell its products or services in a particular area or country: »A master franchise… …   Financial and business terms master franchise agreement — An agreement entered into by a franchisor who grants a master franchisor the right to grant sub franchises within a territory. Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010 …   Law dictionary master franchise — / mɑ:stə ˌfræntʃaɪz/ noun a franchise given to a single entrepreneur who then sells subsidiary franchises to others …   Marketing dictionary in english master franchisee — Instead of granting franchises directly to franchisees, a franchisor may enter into a master franchise agreement with a master franchisee, under which the master franchisee is granted the exclusive right to appoint franchisees within a particular …   Law dictionary franchise — a business arrangement in which knowledge, expertise and often a trade mark or trade name are licensed to an operator, generally for an initial fee and a yearly payment. Glossary of Business Terms * * * ▪ I. franchise fran‧chise 1 [ˈfræntʆaɪz]… …   Financial and business terms Franchise (réseau commercial) — Pour les articles homonymes, voir Franchise. La franchise est un accord commercial et juridique par lequel une entreprise appelée le franchiseur s engage à fournir à une seconde entreprise, dite franchisée, un savoir faire, une formation et une… …   Wikipédia en Français Master Tara Singh — Malhotra (24 June, 1885, Rawalpindi, Punjab 22 November, 1967, Chandigarh) was a prominent Sikh political and religious leader in the first half of the 20th century. He was instrumental in organizing the Shiromani Gurdwara Prabhandak Committee,… …   Wikipedia master development agreement — An agreement entered into by a franchisor and an operator where the operator is obliged to operate franchise outlets itself within a specified area and cannot sub franchise to third parties. Practical Law Dictionary. Glossary of UK, US and… …   Law dictionary Master Chief (Halo) — Master Chief Petty Officer John 117 …   Wikipedia Master Chief Petty Officer — Contents 1 Master Chief Petty Officer 2 Command Master Chief Petty Officer 3 Fleet/Force Master Chief Petty Officer 3.1 Force Master Chief Petty Officer …   Wikipedia 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”