1. BUYING A MASTER FRANCHISE Chantal ZIMMER French franchise federation INTERNATIONAL FRANCHISE CONFERENCE ABU DHABI FRANCHISE 2013

2. An agreement between a franchisor and a master franchisee in which the franchisor grants to the master franchisee the right to sub franchise the concept within an exclusive territory The master franchisee acts as a franchisor within the territory using the franchisor’s system and trade marks The master franchisee grants the right to sub franchisees within the territory to use the system and the brand and trade marks to develop their own business. What is precisely a master franchise ?

3. FRANCHISE 2013 Specificities of the master franchise system: A three levels distribution channel: franchisor – master franchisee – franchisees FRANCHISOR Master Franchisee Sub franchisee Master Franchise agreement Sub Franchise agreement A two contractual relations

4. FRANCHISE 2013 A geographical distance between the franchisor and the master franchisee A double transfer of a concept and of a franchise engineering package

5. FRANCHISE 2013 A double position of the master franchisee: franchisee and franchisor The task for the master franchisee of establishing, maintening and supervising the franchise system in the country The long term master franchise agreement

6. FRANCHISE 2013 Advantages of the system for the master franchisee A marketing concept which efficiency is proven The learning of the franchisor’s mission: developing and animating a franchise network A gain of time

7. FRANCHISE 2013 Drawbacks of the system for the master franchisee Obligation to respect the concept Obligation to share the “profit” with the franchisor: entrance fees, royalties

8. FRANCHISE 2013 Conditions of success: The cultural, legal, economic features of the target country call for concept adaptation and step by step commitment - Piloting the business in the territory  to adapt the concept to the consumer tastes and habits - marketing  to adapt the final pricing, margins,  to adapt the communication

9. FRANCHISE 2013 - Adaptation of the sub franchisee’s business model: entrance fee, royalties…. - Adaptation of the sub franchise agreement The specificities of the franchise system requires skilled staff: need of investment in the staff and in the organization;

10. FRANCHISE 2013 What should be the master franchise approach in a territory (country): a 3 steps pathway Investigation of the cultural differences and concept acceptance - Step 1: Market test – pilot operation Test the concept Test the adaptations : product- price- advertising  If the adaptations affect the core of the concept: withdrawal  If the the core of the business remains standardized, go to step 2

11. FRANCHISE 2013 - Step 2: Franchise test – franchise experimentation on a limited local territory Receive and test the franchising engineering package  If the franchise does not work: withdrawal  If the franchise is profitable and works, go to step 3 - Step 3: Launching of the national network – Long term franchisor/master franchisee relationship

12. FRANCHISE 2013 Question: at which moment should the master franchisee sign the agreement? Consequence: the level of the license fees? Does the franchisor conduct the pilot operation in order to adapt the concept and support the costs? Does the master franchisee conduct the pilot operation? Do both conduct the pilot operation?

13. FRANCHISE 2013 Other points for the potential master franchisee to check: - The training provided by the franchisor Regarding the concept Regarding the master franchisee’s role as the franchisor for the territory

14. FRANCHISE 2013 - The assistance provided by the franchisor to the master franchisee during the duration of the agreement: capacity of the franchisor to transfer know how and innovation to the master franchisee human means – organization - The development of the franchise network on the targeted market Is there an obligation to first open some own stores before starting to franchise?

15. FRANCHISE 2013 How and where to find concepts to buy: The potential master franchise has to identify, on foreign markets, concepts that could be developed in his targeted country Concept on traditional market Concept that is going to open a new market

16. FRANCHISE 2013 Where? Franchise exhibitions, websites, specialized magazines etc…. FRANCHISE EXPO PARIS – International franchise expo - 500 concepts from all over the World 23- 26 th March 2014 – PARIS Website: www.franchiseparis.com

17. FRANCHISE 2013 Conclusion The necessary conditions to succeed are that the franchising techniques are used well, by informed actors and are adapted to the specificities of the market- territory on which the franchise network will expand.

18. FRANCHISE 2013 Thank you