Best practices for developing master franchisees
August 25, 2016 10:34 am Leave your thoughtsPodcast: Play in new window | Download
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At the 2016 International Franchise Expo, Dr. John P. Hayes had the pleasure of interviewing Tony Foley, who for many years has sold master franchises for the United Franchise Group (UFG) globally. The focus of the interview was international development, but Foley, a veteran of franchise expos, shared a piece of advice that applied to all attendees, whether they were looking for a master license or a single unit franchise opportunity: “I hope they’re not here to buy a franchise,” he said. Rather, “I hope they’re here to gather info, collect data, and then do their own due diligence.”
UFG began franchising 30 years ago with a single concept, but currently offers eight franchise brands (could be nine by the time of this interview, or ten by the time you listen to it) and supports nearly 1,500 units in 74 countries, making it one of the world’s largest franchise companies. Its flagship company is Signarama, and the additional brands include EmbroidMe, SuperGreen Solutions, Experimac, TransWorld Business Advisors, Accurate Franchising, Jon Smith Subs, and VentureX.
What is a master franchisee?
International franchising differs significantly from franchising in the USA. While a domestic franchisor may sell a single unit in a distant state, an international franchisor tends not to sell a single unit in a foreign country. The reason? It’s too difficult to support a single franchisee whose unit is thousands of miles away from the corporate office. It’s not economically feasible for a franchisor in West Palm Beach, Fla, for example, where UFG is located, to train and support one franchisee in Tanzania, Taiwan or Tokyo.
Instead, international firms focus on selling the franchise development rights for a territory or country to a master franchisee, who then opens a unit and eventually sells, trains and supports single-unit and multi-unit franchisees.
UFG trains its master franchisees to understand how the brand functions and succeeds. That’s why they’re required to operate a unit of the business before they begin selling franchises. This also provides time for the master franchisee to blend the operating system with the demands of the local environment. Foley knows that a locally experienced master franchisee will be much more successful selling franchises than he would be in a particular country, but the master franchisees need time to accumulate knowledge and expertise.
Most do not qualify to be master franchises
Tony Foley
Just as single unit franchise operators need to be a good fit for franchising, and for a particular brand, Foley says it’s crucial for master franchisees to have the “right mentality and personality” to qualify for this opportunity. An entrepreneurial attitude, business management experience, and the ability to function well within a team environment are three mandatory qualifiers for UFG master franchises.
A huge 80 percent of master franchisee applicants are not a good fit for the opportunity, per Foley. He points out that the high rejection percentage is fairly common among international franchise developers.
Of course, it’s also not a small investment to buy the rights to a territory or a country, and economics weeds out many would-be buyers. It’s also common for master franchisees to consist of multiple investors, i.e. business partners or families that want to control a large territory.
Building the relationship
Buying a master franchise, or license, from UFG is mostly a matter of qualifying and then building the appropriate relationship. It’s not uncommon for a sale to require many months, if not more than a year, to materialize.
Applicants can start the relationship by completing an online questionnaire, or meeting UFG’s representatives at a franchise expo. If all goes well, UFG will invite the candidate(s) to West Palm Beach for a Discovery Day. Candidates use this opportunity to learn more about UFG, its brands, and to see how the franchisor trains and supports franchisees at corporate headquarters. In turn, UFG uses the Discovery Day to evaluate the candidates’ credentials, skills and interests.
Building this relationship is critical, Foley points out, and it doesn’t end with the Discovery Day. Throughout what he calls the “courting stage,” there are many opportunities for franchisor and candidates to exchange information. It’s also likely that Foley will visit the candidates’ home country to get a closer look at what a working relationship might look like.
#1 business model in the world!
Visiting countries keeps Foley on the road most of the year. He estimates that he visits 25 different countries annually, and he’s been doing that for several decades! Why does he do it? He says “franchising is fun,” but he also points out that it’s the #1 business model in the world.
It also helps that he works for UFG, one of the world’s most respected franchise conglomerates. When he’s selling a master franchise, it’s not difficult for him to demonstrate the value of owning a master franchise with UFG.
Listen now as Tony Foley shares his story with Dr. John Hayes.
Categorised in: Franchisor, International Franchising
This post was written by Dr. John Hayes
