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MASTER LICENCES - WHAT DO THEY OFFER?

by Simon Lord,
last updated 15/09/2009

in this article:

Looking for a bigger challenge? Wanting to diversify your company's interests? Searching for growth? A master licence from overseas might offer exactly what you need.

Is your business looking to expand? Do you want to develop something new? Do you have the managerial and entrepreneurial skills to develop your own franchise company? Then taking up a master licence from an overseas franchise could be a good option.

Many of the best-known franchises in New Zealand have been brought here by local entrepreneurs or companies. McDonald's and Speedy Signs from the US, The Body Shop from the UK, Mr Rental and VIP from Australia - master licence opportunities cover a wide range of industries. Some are bought by individuals and sub-franchised, while others are acquired by companies such as Restaurant Brands (Starbucks) or Farmers (Freedom Furniture) and developed only as company operations.

Taking up a master licence is a very different matter from becoming a local franchisee. Although a franchise system may be well-established in another country, its success is not assured in NZ where market conditions and competitor activity are different. Some concepts just don't translate well - our ncihes are too small or our population too dispersed. Read more about this here .

A master licensee therefore needs to be more entrepreneurial and prepared to take more risks. They need to carry out their own thorough research into the local market for the product or service, and confirm that the price asked and the number of outlets proposed is realistic. This is an area where professional advice is crucial.

If their aim is to sub-franchise, they will also need to ensure they are properly funded. Franchising takes time. A pilot operation must be established to test the local market, establish supply lines and make any necessary adjustments to products, services, systems or marketing techniques. This will probably take longer than subsequent outlets to become profitable. Profits from the pilot operation may then fund the initial sub-franchising programme, or the pilot may be sold as an established business to the first sub-franchisee.

The pay-back period for a master licensee is longer than for a sub-franchisee. The licensee needs to purchase the licence, learn the business, establish the brand and develop training and support structures before recruiting the first franchisee. Even then, the level of support new franchisees require usually means that it is not until several franchises are established that the investment starts to pay off.

However, once successfully established the payback from a master licence can be very handsome indeed. If you have access to the necessary capital and have the skills to make it work, buying a master licence can offer a truly valuable business opportunity. Our Master Franchise Directory will help you find overseas franchises currently looking for New Zealand partners.

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