Partnering with the right master franchisee is perhaps the most important thing to get right when you expand overseas. Here’s what to look for
As a franchisor, it’s tempting to become enthusiastic about the quantity of franchise leads coming in before truly analyzing the quality of those leads. But as any experienced franchise organization will tell you, it’s far better to have a single, quality franchisee that’s the right fit for your system than thirty potential franchisees that may not represent your brand according to its highest standards.
When a master franchise agreement is on the line, the quality of the leads to consider is especially crucial, as the master franchisee is the primary determining factor in whether or not franchise development will succeed in a new territory. Before awarding a master license, first, ask yourself the following four questions.
Necessary resources?
While there are a number of characteristics beyond financial stability that are important to consider when looking at a prospective master franchisee, the fact remains that the candidate must have the capital necessary to get the business off the ground in each new location where he/she spearheads development. So when the master franchisee vetting process begins, expect complete financial transparency from the prospect. If the interested investor is not straightforward regarding what capital is available to take on master development, this could be a red flag worth addressing from the start.
Appropriate business experience?
Look closely at the background of the prospect. Does it give you confidence that they’ll know how to operate your business successfully? Does the candidate have an extensive portfolio of past investments? Has he/she been involved with other franchise businesses before? Depending on your business model, it’s best to partner with a potential master franchisee who has “been there, done that” when it comes to fulfilling your company’s goals.
If you’re looking for rapid growth, align with a master franchisee with a proven record of leading accelerated business expansion. If you’re looking to break into a new market, find a master franchisee with connections and expertise that will complement the franchise systems you already have in place. Whatever outcome you hope for, it is critical that your prospect has the past experience to help you get there.
Expert on the development territory?
Beyond the business perspective, experience has a significant local meaning when it comes to foreign expansion. From one country to the next, there are cultural differences, language barriers, and more that must be addressed to determine how the franchise needs to adapt for international success. A franchisor must feel confident when awarding a master license in a foreign country that the franchisee will know the culture and pathway to success in this region better than the franchisor would from the brand’s corporate headquarters. When the master franchisee takes on development in their country, the relationship between the franchisor and the franchisee will be a collaborative one. An especially valuable asset a master franchisee will bring is real estate connections throughout their country, which will help with the development of the brand in all of the country’s key cities and areas.
Will they remain dedicated to your mission and systems?
If all of the standards that make a prospective franchisee eligible to take on a master license are there on paper, you should feel confident that the prospect can be trusted to effectively manage the buildout and operations of the business. But before awarding the master franchise agreement, you must ascertain whether or not the prospect values the brand image and vision that he/she intends to spread.
With your brand’s standards and expectations laid out clearly from the start, how does the candidate respond? Is there a clear passion for the products and services they will promote under your brand name? Do they express a willingness to maintain an appropriate balance between collaboration and compliance? In a perfect world, your master franchisee will know how to attract customers to your brand in the most effective way for the development region, while still remaining steadfast to the brand’s principles. You must feel confident that this balance will be achieved before finalizing the deal.
While the benefits of global expansion through master franchising are numerous, these benefits will only be achieved with the right investor behind the development. Only through a thorough analysis of the prospect can you be confident of moving forward with a quality franchisee that will lead your brand to sustainable growth, which is always the ultimate goal.
ABOUT THE AUTHOR
Ken Phipps is Director of Global Franchise Development for Gold’s Gym Franchising LLC. He can be reached at ken.phipps@goldsgym.com or 214-296-5026
