Understanding Legalese With Ease: Master Franchise
This week’s Legalese with Ease word is Master Franchise
The definition of Master Franchise is:
Within a specified geographical area, a franchisee with the right to appoint sub-franchisees is authorized by the franchiser in this specific type of arrangement.
What does it mean?
A master franchisee is, in some ways, a middle-man between the franchisor and the unit franchisee. For example, if Bobby’s Burgers’ Franchisor is based in Dallas, Texas, they may sell a master franchisee rights to sell unit franchisees in various areas throughout the country. There might be a master franchisee in Seattle, Washington that sells unit franchises in the state of Washington and another master franchisee in Baltimore, Maryland that sells unit franchises in Maryland and Virginia.
So how can you tell if you are buying from the franchisor or a master franchisee?
Master franchisees will have their own name, and will simply be doing business as (d/b/a) the master franchisee. So, if you were to purchase a Bobby’s Burger franchise from the Seattle master franchisee, your contract might say something like “Bobby’s Burgers of Seattle d/b/a Bobby’s Burgers.” Of course, the company names are not always so transparent, you could also see something like “Seattle Corp d/b/a Bobby’s Burgers.”
This is an important distinction because it means that although you are still tied to all the franchise rules and regulations of the franchisor, you will be primarily dealing with your master franchisee and will be at the mercy of their support (or lack there of). It should also be noted that master franchisees are often used as a legal barrier for the franchisor.