As you will be assuming the role of the franchisor, you will incur three sets of costs when you buy a master franchise:
- License fees charged by the foreign franchisor
- Set-up costs arising from the establishment of the pilot unit
- Set-up costs linked to the setting up of a local franchise infrastructure
Take into account the actual cost to the master franchisor of dealing with you on an initial and ongoing basis, helping you to set up the business and proving the concept and finally, providing ongoing support.
Other cost factors you need to take into account include:
- Costs arising from the translation/adaptation of manuals and marketing materials.
- Costs associated with the conduct of initial and ongoing local market research.
- Professional fees arising from the negotiation of the master franchisee agreement (fees for local lawyers and their correspondent lawyers in the country of origin plus other professional fees).
- Costs of transportation of material.
Seek maximum flexibility over the payment of initial fees, for example in the form of staggered payments linked to the rollout of the franchise.
Negotiate an equitable split of ongoing fees and/or mark-ups on the products or services the business sells.