Every franchisor has rules and regulations to be followed. These are stipulated in the master franchise contract.

Master Franchisee Contract

So, as a master franchisee, you have to know what is expected of you to ensure you stay in line with your franchisor’s specifications and avoid pitfalls in the franchise business.

Master Franchisee Rights And Responsibilities

To get control of the franchising rights, you have to sign a master franchise contract. This gives you the rights to work on any designated territory and sub franchise other open units to subfranchisees within a designated area.

Typically the document to sign, which is the master franchise agreement, will involve

  1. The master franchisee
  2. The franchisor
  3. The products contained on the franchise handbook

If you get an excellent franchisor with a perfect brand, master franchising can be a lucrative activity.

The master franchise agreement contains:

  • Master franchise rights:

    A right to exclusively carry out the franchisor business within the allocated territory. Here, there is use of the symbols designs and all the proprietary marks authorized by a franchisor. Again, you also gain the right to benefit from the franchisors experience concerning the services being provided.

    The master franchisee is not allowed in any way to carry themselves as a part of the parent franchisor when dealing with third parties; instead, this should be treated as an independent undertaking.

  • The franchisor’s current and ongoing obligation:

    Here, the master franchisee has to learn of the obligations of the territories. The franchisors should then provide training to support the operations. The period of such training has to be stipulated. It’s the franchisor’s obligations to ensure they effectively offer to assist in the launching of the territory.

    For any ongoing obligations, the franchisor must ensure that the master franchisee has continuing guidance on the management or any improvement needed for the business. There can be an arrangement of franchisor staff to ensure the master franchisee is following proper standards, and the same is being adhered to by the sub-franchisees. Again, the franchisor has to ensure they have adequate finances to ensure all operations run smoothly.

As the master franchisee, you will be obligated to:

  • Comply with all regulations or requirements put in place for the smooth running of the business. This is about ensuring that you comply with all statutes and statutory requirements. The parent franchisor may from time to come up with procedures needed to enhance the standards of the services being provided
  • Protection of intellectual property rights. This is done by opening up subfranchisees outlets as per what has been granted in the master franchise agreement. Yet again, a master franchisee is obligated to allow an authorized person to inspect such books and the supporting documents.
  • The master franchisee has no power to acquire any financial interest in any undertaking that would give them such power to the financial conduct of such task.
  • Ensure to use the tools specified by the franchisor for performing of services. This should be adhered to except where a master franchisee has an alternative that seems appropriate and cheaper. The master franchise should not engage in any manufacture or sale of materials that may compete with the franchisor.
  • To provide promotion and advertising of the parent franchisor services within the given territory. The advertising levy should then be imposed on all the franchises accordingly.
  • Pay the franchisor an agreed amount to franchise and management fees such as franchisees fees collected on each accounting period. Here the master franchisees have to provide a detailed invoice showing all the services provided by the franchisees at a given period of time. This means that they should ensure accurate check of all the financial performance with sub-franchisees.
  • Maintain proper books of accounts. Usually, such books have to be preserved for a definite period such as 3-5 years. The master franchisor should ensure that there have supporting documents for inspections, such as during audits.
  • Provide training to franchisees at a reasonable location.
  • Protection of franchisors goodwill.
  • No publishing any information based on the profits or issues with present or future franchisors plans.
  • Provide information related to master franchise business details on costs, prices used in any distinct work.
  • Not engage in any business that would seem to compete with the franchisor’s services on the allocated territory of another area revolving around the franchised network.
  • Termination is to be granted at the end of the period stipulated in the master franchise contract. If a master franchise terminates such an agreement before the designated time, this may amount to a material breach, subject to legal action.

Get Legal Help

There is no perfect business, and becoming a master franchisee has its risks.

If you contemplate on getting into a master franchise, you can have a free consultation with an experienced franchise attorney.

You should look for a lawyer who has both domestic and international franchising knowledge.

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