Master Franchising: A New Look

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MASTER FRANCHISING: A NEW LOOK

Franchising is often viewed as an industry by itself. However, franchising is not an industry, but a process-- an ongoing contractual relationship between a franchisor (owner) and a franchisee (leasee). Franchising is a distribution method which is being used by an increasing number of businesses for expansion and growth.

Grasping the nature of the franchising relationship is the key to understanding franchising strengths and weaknesses. Most common business-format franchises include fast-food restaurants, domestic cleaners, business services, household cleaning, computer equipment, real estate, convenience food stores, and a variety of other products and services1.

1 Andrea Kostecka, Franchising in the Economy 1984-1986 (Washington, D.C.: U.S. Department of Commerce, U.S. Government Printing Office, 1986), pp. 5-23.

The art of franchising includes the professional and legal obligations of the franchisor to help a franchisee to be profitable and successful. Today some franchises use a new organizational structure that involves a third level of responsibility in the franchising process. The "master franchisor' acts as a middleman between the franchisor and the franchisee.

The term "master franchisor' is slowly developing in franchising practice. The word "master' is used because of the authority relationship over the franchisee. The master franchisor is strongly affiliated with the headquarters of the franchisor organization and is in a superior position to franchisees.2

2 Bonney Levine, "Area Regional Master Franchisor Agreements, Guidelines, Controls and Cautions,' presentation given at International Franchise Association Annual Meeting, January 23, 1985, Miami, Florida.

A master franchisor is an independent business person who has contracted with the franchisor to sell franchises to franchisees in a specific geographic area or territory. The master franchisor may or may not be a franchisee. The master franchisor is responsible for the recruitment and qualifying of franchisees within the given territory (see table 1). The master franchisor is a sub-franchisor, and most organizations have required that they relinquish any operating franchises which they may have …