Ashtons Franchise Consulting (AFC) has experience in assisting investors to acquire master franchises from international brands.
Over the years we have worked with investors to evaluate the potential of a Master Franchise Acquisition opportunity and to negotiate the terms and agreement.
Master Franchising offers an opportunity to acquire a brand proposition that has been successful in its own market or other markets and brings with it established reputation, and all the associated collateral of an established business meaning that the Master Franchise partner (the investor) has, potentially, the tools to build a scalable business in their own country either by corporate outlet growth or by sub-franchising or by a combination of the two.
Done well, Master Franchising can be very successful – think for example of brands such as Domino Pizza, Home Instead, Hertz car rental – to name but three.
Yet at the same time history can show any number of failures where a brand has not successfully established into the UK despite the best intentions of the Master Franchise investor – usually because there were some fundamental problems that were not identified at the outset.
It is important, also, for the franchise brand to have a belief in the capability of the investor.
There is a lot to think about both from the point of view of responding to active marketing from a brand wanting to enter into the UK, or from you approaching a company that you have identified as having attractive features that you would like to bring onto the market. Either way, the following will be relevant.
Establishing Your Requirements
The first step would be to gain a clear understanding of your existing activities and business experience, the opportunities that you perceive in the market and your future aspirations. We aim to:
- Evaluate and understand the type of franchise that you could develop
- Produce a business profile and an overview of your target location. This will assist in indicating your potential to the franchisors
- Identify the different business categories that would be of interest and suitable for you to operate
- Determine the type of Franchise Agreement that would be suitable for you to operate, such as Master Franchise, Area Development Franchise, Joint Venture, etc.
- Decide on the nature of franchisor to be sought, such as a new concept brand early in its international expansion or a well-established brand in a mature market
- Establish the initial level of investment, both the Master Franchise license fee and start-up costs, together with your expected return on that investment.
There are two aspects to this – it may be that you’re responding to a brand actively marketing its concept and thus you would wish to undertake research to ensure that the brand has the potential, and the other would be where you are actively looking at the international franchise market for concepts that:
- Fulfil your requirement as to business segment and investment opportunity, while being mindful of the character of the franchisor
- Have not already allocated a Master Franchise, Area Development Franchise or Joint Venture operations for your target location
- Meet the agreed criteria for the initial level of investment, both for the Master Franchise license and the start-up costs, along with the return on your investment.
This has to be a proactive search based on a number of criteria with which we are familiar.
The Screening Process
To evaluate the suitability of franchisors we would work to:
- Gain an overview of the business, its structure and track record
- Ensure that its intellectual property rights, and distinctive or unique selling features, are well developed
- Look into the operational support services and training materials that will be made available at the commencement of the relationship and ongoing
- Understand fully the long-term goals and ambitions of the franchisor for the brand in their own market and internationally and how this would fit with the UK market
- Assist to negotiate heads of terms
- Work closely with the appointed franchise lawyer to ensure the Master Franchise Agreement is fair, reasonable and operable
- Work with the investor and their financial advisors on the overall Franchise Business Plan.
The Ongoing Development
From the moment the investor, or investor organisation, acquire the Master Franchise rights with the potential to sub-franchise we remain on hand to assist in the rollout and in the franchise knowledge of the new investor.