Master Franchise Agreement Development

Master franchising is a popular business model in South Africa. A master franchise agreement (MFA), sometimes called a regional franchise agreement, is a legal agreement between a franchisor and a master franchisee that allows a franchise owner to become a mini-franchisor and own and operate several businesses within a specified territory. Franchise Administration can assist you with master franchise agreement development to reap the benefits of this franchise model, fit for multi-area development.

When a franchisee becomes a master franchisee owner they become a sub-franchisor of the brand and now take on a very different role than a traditional franchise owner. As master franchisees, they would usually purchase the rights to a market where their job is to sell and open franchises of the brand.

Under a master franchise agreement, the master franchisor grants to the master franchisee a specified area where the master franchisee has the right not only to open franchise units itself, but also to “sub-franchise” to third parties.

Franchisors may decide to use master franchisees for a variety of reasons. In systems experiencing rapid growth, master franchisees can allow the franchisor to support more franchisees without hiring additional staff, therefore lowering the franchisor’s costs, whilst increasing bandwidth. 

The master franchise agreement sets out the terms and conditions under which the master franchisee will work with the franchisor. This includes details about the franchise fee and ongoing royalties to be paid by the master franchisee to the franchisor, as applicable law, as well as the obligations of both parties on training and support.

Key aspects to consider when entering into a master franchise agreement include:

• Exclusive territory – the master franchise agreement should outline the specific geographic area or region in which you’ll have the exclusive rights to develop and grant sub-franchises.
• Franchise support – the franchisor should provide you with ongoing support, training, and resources to ensure your success as a master franchisee. This may include assistance with marketing, site selection, and operations.
• Fees and royalties – you must be made aware of the initial franchise fees and ongoing royalties that are required to be paid to the franchisor in return for using their trademark, systems, and processes.
• Term – master franchise agreements are typically long-term contracts, often spanning several years. Be sure to review the term of your agreement and any renewal options before committing.

At Franchise Administration, we understand that becoming a master franchisee can be a lucrative and rewarding venture, so it is critical to fully understand the nuances and responsibilities outlined in the master franchise agreement. We can assist to ensure that you thoroughly understand the terms, conditions, and expectations set forth in the contract, equipping you to build a successful business within your designated territory.

For assistance with master franchise agreement development – Contact the team