There are generally three options for setting up for international expansion.
- Master: Master Franchising is the most common option for your international expansion. In this model, a franchisor sells a territory to a Master franchisee who is granted the right to offer and sell franchises within the defined territory. The Master essentially steps into the shoes of the franchisor and performs all of the services that a franchisor would and signs each sub-franchise agreement with the sub-franchisee. The franchisor is not a signatory to each of these agreements. They franchisor and master franchisee will share in the fees that are paid by each sub-franchisee. This is frequently a 50-50 split, but it can be as much as 60-40 with the master receiving the 60. The franchisor will almost always require the master to open its own unit before it begins marketing the franchise within the territory. This will establish a footprint for each sub-franchisee to follow. The arrangement will allow the master to expand the brand in the territory without any interference from the franchisor, except for the customary monthly or quarterly visits. The negative for the franchisor is that they will lose control over the territory and will rely exclusively on the master to meet their development schedule and work with the sub-franchisees.
- Area Representative: Area Representative model is a hybrid of the Master model. In this model, the franchisor grants the same rights to the Area Rep but maintains control because the franchisor will sign each franchise agreement, so that there is a direct relationship with each franchisee. In this model, the split of fees is almost always 50-50. This model does provide the franchisor with the ability to terminate each franchisee as opposed to relying on the Master to that.
- Multi-Unit: Multi-Unit model is not any different than it is in the US. The franchisor targets a local operator who is granted the right to develop its own units in the territory. This model does not give the developer the right to offer or sell franchises in the territory. The operator must own each unit.
We rarely see single units in the international arena, and our recommendation is to go with the master setup, provided you do not give away too big a territory. The size of the territory and the selection of the right master is the key to having international success.