Franchise USA

MASTER FRANCHISING

The ultimate business opportunity.

Imagine sharing in the royalty income generated by all of the Subway or UPS Store locations operating within your city or state.

That is what it means to be a Master franchisee or "Area Developer." The Master is a sub-Franchisor who shares in each dollar of revenue generated by all of the units operating within his/her territory.

A rare opportunity.

Master franchise opportunities are rarely advertised. And, because few Franchisors choose to offer Master franchises, the ones that become available usually sell quickly.

The best opportunities are often those with brand names that you may not recognize -- at first. Have you ever thought about what it would have been like to be a "ground floor" franchisee for McDonald's? Imagine having an idea that exploded into a business with people clamoring to buy your franchise. Imagine having successful entrepreneurs with proven expertise and a time-tested business system available to share advice and help make your dreams a reality.

The key is to get in early. After a franchise system begins to mature and becomes a recognizable brand, the opportunities become either VERY expensive or completely non-existent. Click here to familiarize yourself with the stages of the business life cycle.

How does it work?

The Master franchisee buys the right to market and sell franchises within a specific territory. This territory can be a major metropolitan area, a state or an entire region of the country.

In addition to selling franchises, the Master assumes the role of business consultant to the franchisees. This is usually in the form of providing training, sales support and business development strategies. Most Master franchisees find this to be the most satisfying part of their job.

Here is a real-life example.

Before most people ever heard of a franchise called "Massage Envy," the Franchisor had sold all 54 Master franchise territories covering the entire United States.

In 2006, the 65,000 member International Council of Shopping Centers selected Massage Envy as one of five "Hot Retailers." This put them in a very elite group. Previous winners have included Apple, American Eagle, Build-A-Bear, Chico’s, Coach, Hollister, Hot Topic, P.F. Chang’s, Steve Madden, Trader Joe’s, Victoria’s Secret, White House/Black Market and Williams-Sonoma.

Massage Envy's extraordinary success is documented by an impressive Earnings Claim that is published under Item 19 of their Offering Circular. Furthermore, substantial information has been revealed in numerous press releases and feature articles, such as one published in the San Diego Union-Tribune.

The company's San Diego territory includes about 3 million population and was reportedly sold to the Master franchisee for $156,000. In exchange for this investment, the Franchisor was said to have agreed to pay the Master half of each $39,000 franchise fee and half of the 5% royalty income from each franchise unit opened in the territory.

On February 4, 2007, the Master franchisee for San Diego reported that he had sold 18 (of 22 possible) franchise units. This was in addition to the "showcase" unit that he owns and operates.

Now, let's go one step further. In 2007, Massage Envy reported that units open one year had average gross revenue of $862,000 per unit, per year. If the Master achieves these "average" results, he would receive 2.5% of that sum or over $20,000 per unit, per year.

	1 Unit:	Master's Earnings:
	Franchise Fee (Half of $39,000)	$19,500 one-time PLUS
	Royalty (Half of 5% x $800,000)	$20,000 per year

	10 Units:	Master's Earnings:
	Franchise Fee (Half of $39,000 x 10)	$195,000 one-time PLUS
	Royalty (Half of 5% x $800,000 x 10)	$200,000 per year

	20 Units:	Master's Earnings:
	Franchise Fee (Half of $39,000 x 20)	$390,000 one-time PLUS
	Royalty (Half of 5% x $800,000 x 20)	$400,000 per year

The investment and income referenced above relates only to the Master franchise. It neither includes the cost of opening the Master's own "pilot" unit nor the earnings from it. Furthermore, it is easy to see that even the most modest results can yield a substantial residual income and return on investment.

Although Master franchises are seldom advertised for resale and many factors affect their market value, it has been suggested that a multiplier of 6 to 7 times annual EBITDA (i.e. earnings before interest, taxes, depreciation and amortization) be used to determine actual resale value. Using this formula, it appears that this Master franchisee may have added well over $2 million to his net worth. And, that does not include the value of the unit(s) that he owns.

Savvy investors also know that Master franchisees can create wealth by opening and, then, selling operating units as a turn-key investment. The benchmark value of a membership-based business, like Massage Envy, is asset value plus about 2.5 times annual EBITDA. That means that the profit earned from selling just one operating unit is likely to be enough to allow the Master franchisee to recoup his entire initial investment for the Master franchise and the "pilot" unit.

As you can see, the Master franchisee for Massage Envy in San Diego has discovered a gold mine. In fact, his total return on investment seems likely to approach 300% per year -- year after year.

Sounds incredible, but it's true.

Some of the most recognizable names in franchising have used this method to grow their business. Listed below are a few franchises that have used Master franchising to help develop their brand.

Subway	Curves	UPS Store
Century 21 Realty	Domino's Pizza	Mrs. Field's Cookies
AAMCO	Molly Maid	Fantastic Sams
Jani-King Cleaning	Quizno's Subs	Realty Executives

More than likely you recognize many of these brand names today.

The big question is: In 1983, would you have invested in becoming a Master franchisee within a new and unproven franchise system called Quizno's Subs or Mail Boxes Etc. (now The UPS Store)? .Or, in 1995, would you have invested in a system called Curves? .Today, Curves is one of the fastest growing franchise systems on the planet, opening 900 units a year and $1 Billion in annual revenue.

By using this system, Franchisors are able to have Representatives located throughout the USA working together to open units. Without Master franchising, many companies would find it impossible to have a national development team on staff.

A pathway to wealth creation.

According to many experts, a Master franchise usually has two to three times the earning power of a normal franchise. While a normal franchise makes money operating units, a Master franchise generates income several ways. These include:

Operating Units. The Master will usually set up and operate at least one unit that is also used as a training center. Although this person is not likely to be a “hands on” owner, the operating units can be more profitable due to the greatly reduced franchise fee and royalty.
Franchise Fees. When you sell a franchise, you receive a franchise fee. Most franchise fees run between $20,000 to $30,000 and, in a typical Master franchise program, you keep up to half of the fee.
Royalties. You receive royalty income or annuity type income for the life of the franchises that operate in your exclusive territory. Imagine making 2% to 4% on every sale in your territory.
Products or Additional Services. There may be additional income available from distribution of products through the franchisees in your area.
Turnkey Unit Development. There may be opportunities to sell single or multiple franchise units and make a nice profit on the sale.
Real Estate. There may be additional income available from real estate interests.

Master franchising can be extremely lucrative.

A very prestigious business.

The prestige of owning a Master franchise and controlling an entire regional area can give you great satisfaction. Your main job will be to act as a business consultant to your franchisees and help them succeed in their own businesses. As the main developer of an area, you will be associated with the growth and ever increasing brand awareness of the franchise -- even though your franchisees are the ones who are investing their time and money.

An improved quality of life.

Unlike any other business system, Master franchise owners are empowered with the ability to turn their dreams into reality. As a result, they most often achieve greater financial freedom, personal prestige, a privileged lifestyle and the ability to help others. This, together with having time to relax and enjoy family and friends, leads to a greatly improved quality of life.

Listed below are key characteristics of a typical Master franchise:

Very Few Customers. Your customers are your franchisees. You will help support a small number of franchisees who typically own several franchise units each.
Very Few Employees. Typically, you will operate a Master franchise by yourself and then expand to add more staff. It is not unusual for Masters, after having worked for 3 to 7 years, to semi-retire and live off an extremely good income while spending only 1-2 days a month in the office.
Very Little Office Space. Many Masters start with a home office before expanding to an outside office.
Build Equity Faster. Once you sell a few franchises or open your own stores, you increase the value of your business significantly. Not only do you have an existing business with cash flow, you have additional franchise opportunities to sell.
Low Overhead. Start with a home office and expand as you go.
Exclusive Territory. Your exclusive territory is most likely to be a large metropolitan area, an entire state or even several states or country.
More Freedom. Unlike a normal franchise, a Master franchise allows you much more flexibility.
No Experience Needed. You will receive industry specific training and ongoing support.
Best Of All... It's A Franchise! Franchises as a whole enjoy a 92% success rate and Master franchises experience even greater success.

A Master will seldom work “hands on” in a unit franchise. They primarily function as business consultant or coach to their franchisees.

Do you have what it takes?

The franchisor will usually grant the territory to someone or some group with the following qualifications:

Management and/or sales experience. Real life experience running a business or managing a business for someone else is very helpful but not essential.
Good people skills. You will be dealing with your franchisees and will need to treat them like customers.
The ability and desire to follow a proven system. The franchise system offered is a system for success when followed. It is not wise to buy a franchise unless you believe you can follow their system.
Financially qualified. The fee to purchase the rights to a Master franchise territory typically ranges from $100,000 to $250,000. You should also have the capital required to open open and operate at least one unit (pilot location) and support your operation until you can begin to make money.

Because of the high income potential, the initial investment is really quite low compared to the value that is likely to be built.