When faced with the prospect of expanding a franchise into a new territory, many franchisors employ the model of master franchising. As opposed to direct franchising (where one franchisee is granted the right to open one business) or area development (where a franchisee is granted the right to open several businesses across a particular region), master franchising contemplates something larger.
A master franchisee is a bit of a hybrid entity, because it acts as a franchisee in its operation of one or several businesses, but is also granted the right to be a franchisor and sub-franchise to franchisees across a specified region, such as a province, state or country.
However, the road to successful master franchising is fraught with potential pitfalls of which both franchisors and prospective master franchisees should be aware. Read more.