Seeking International Opportunities
A strong brand, great systems and a track record of incredible success. These are the hallmarks of a high potential master franchise. Foreign master franchises, also known as master licenses or inbound franchises, are those franchise opportunities that have no presence in South Africa.
- Burger King,
- Pizza Hut,
- Domino’s Pizza and
- Krispy Kreme… are just a few of the franchise concepts that have found a local home in recent times. Then, of course, there are the many South Africa franchisors who have taken their brands international with master franchises in other countries.
The rights to the name and business system may come with a hefty price tag (paid in Dollars) but also the chance to realise a significant financial reward. The master franchisee typically pays the franchise company a significant initial fee for the rights to develop a new country and in return retains most of the initial fees and ongoing fees paid by individual franchisees in the territory. Typically, a third of the ongoing fees will be paid to the original franchisor.
But the costs don’t stop there as the master franchise will need to cover the set-up costs of the pilot unit, the local franchise infrastructure and have some money set aside to market the new opportunity.
The role of a master franchisee is vastly different to that of a typical franchisee; it’s much less operational and involves acting as the franchisor’s representative in a market. This means that master franchisees are responsible for selling individual franchises, coordinating training and providing support services to franchises in a specific geographic territory.
As every market is different, the master franchisee will work with the franchisor and local experts to adapt the foreign offering to meet local demand.
Master franchise success factors
Thinking about investigating a master franchise also known as a master license? Not all master franchises succeed; the wrong partner or a brand that is out of sync with the local market will mean certain failure. While there are many advantages of purchasing a master franchise, this decision is not without risk. Here are some of the things that you’ll need to consider before taking the plunge:
Deep pockets: You will need significant funds to purchase a master franchise. Not just for the initial investment, but also for ongoing costs including cash flow while setting up new operations and a substantial marketing budget to launch the brand to a new market.
Business experience: You need to have broad business experience across sales, marketing and operations. If you haven’t managed an expanding business before, then a master franchise is not for you.
A good team: Launching and developing a master franchise requires the expertise and support of a dedicated team. They must buy into the big vision and be prepared to put in the extra work to make it a reality. Aggressive growth, while rewarding, can also be exhausting for the team behind the initiative.
Franchisor support: It is not enough to buy a name alone. You also need the support from a committed franchisor who wants to see you succeed in a new territory.
Local competition: South Africa boasts a franchising industry with popular local brands and established international brands. You can expect that existing players will defend their turf.
Where to next?
Our master franchise section will provide invaluable advice and present you with international franchisors looking for a master franchisee in South Africa. Have a question? Ask our franchise experts for their specialist advice about investing in a master franchise.