Section 4 of 6
4. Will your franchisee have the right
to sub-franchise rights to others?
If NO – click here for Question
5.
If YES – you should consider adopting a Master Franchise
Structure.
A Master Franchise Structure allows you to grant a third party
(i.e. a Master Franchisee) the right to sub-franchise a substantial
territory (usually a whole country or a particular region) (i.e. a
Master Franchise). The Master Franchisee is granted the right by
you to grant third parties (i.e. a Unit Franchisee) the right to
operate one or more Outlets of your franchised business and/or
provide your services in one or more regions (i.e. a Unit
Franchise). The Master Franchisee is in many ways similar to a
Franchisor. The term "sub-franchisor" is therefore sometimes used
instead of Master Franchisee and Unit Franchisees may be referred
to as sub-franchisees. This is one structure adopted by many
Franchisors looking to enter a new country. The Master Franchisee
needs to have sufficient drive and resource to fully exploit the
territory and control the Unit Franchisees territory. We can advise
you further regarding this structure if necessary.
In practice, Master Franchisees may also be permitted to operate
their own Outlets and/or provide your services in the territory. In
such a scenario, the Master Franchisee may operate an Outlet of
your franchised business and/or provide your services as a Corporate Franchisee.
To document the above structure, you will need to enter into a
Master Franchise Agreement with the Master Franchisee and the
Master Franchisee will need to enter into a Unit Franchise
Agreement with each Unit Franchisee. We can assist you with
drafting the Master Franchise Agreement, the Unit Franchise
Agreement and other relevant agreements as well as advising you on
legal and commercial issues that you will need to consider.
Other points to consider
There are several other issues that you may need to consider or
discuss with us further. We set out some example issues below: