How The Internet Killed Off The Master Franchisor
The internet has made the âMaster Franchisorâ obsolete. The rapid growth of online technology removed the need for the âmiddle management ârole of Master Franchise in Australia. Simply, The Internet is âKilling Off âthe Master Franchisor!
In the modern day, how has the internet made master franchisors redundant in Australia franchising?
Answer:Everything that a master franchisor did bring to the table a decade ago, can now be accessed on line for a fraction of the cost that the extra management level of a Master Franchise/Franchisor requires.
What is a Master Franchisor or Master Franchisee?
Robert James and James Home Services: They are the same thing, the changes in the Franchise laws in Australia in recent years have made most systems now call them âFranchisorsâ to make it clear to franchisees who is responsible and to protect the âFranchisorâ from any breeches of the Franchise Code of Conduct by the âMaster Franchisorâ.
The âMaster Franchisorâ buys the rights form the âFranchisorâ to sell and develop âFranchisesâ in a partial system for a set geographical area.
In Australia, we have a huge number of âregional master franchisorsâ, this adds an extra level and extra costs to the franchise system. The âMastersâ can have the âState Rightsâ or the âRegional Rightsâ or in some international systems the âNational Rights. Â
Historically, in the 1980, 1990s and early 2000s,
The main reason for this extra level management was the vastness of our geography. We truly live in the big country. It is a long, long drive from Sydney to Perth. Even within Queensland there is 1682 km between Brisbane and Cairns.
The other factor was franchisee wanted and needed âlocalâ support, training and marketing.
Franchiseesâ in 1990s felt they had to meet and connect with people in their local area.
The local marketing did require a local person (Master Franchisor) to manage it. Mobile phones were just taking off as the âMaster Franchiseâ concept started to took hold in Australia.
Even in the late 90s to early 00s, Franchiseesâ wanted a âlocal âphone number in their region. Franchisees claimed âNo one wants to ring those 1800 numbers!
Regional television had taken hold with the now 3 commercial channels throughout regional Australia and the same as the new radio networks took footholds.
Franchiseeâs wanted one on one personal contact.
People didnât trust the internet as yet and rarely reached out to some random person online. They needed educating close too hand, the required face to face business training. They wanted a âmowing trainerâ to actually be there to show them how to get the edges straight.
Then of course they required ongoing support. They wanted a local master who could âfix âtheir problems. What we did in âJames Home Servicesâ, we actually taught our Master Franchisors to be business coaches.
The business coaching was systemised, and it worked. Our Masters were some of the first âbusiness coachesâ used in Franchising in Australia. This professional level âbusiness coaching system gave our franchisee a clear advantage on their competitors that the time.
At the time the âMaster Franchisorsâ were a great idea that allowed rapid growth of franchise systems throughout the country.
In the early 2000s, the systems with âMaster Franchisorsâ had a clear advantage on the systems without them.
The key was that in the early 2000âs they offered great value to the franchiseeâs business.
Then, the internet changed the world we live in
and the way we perceive it!
#1 People in the year 2018 prefer to talk on line.
We still live in the âBig Countryâ but we now live in a âSmall Worldâ.
We all now connect with people across the planet daily with the mobile phone that once was considered a novelty. We are more likely to talk to someone a thousand kilometres away on Facebook before we say âHiâ to the person sitting next to us that the coffee shop.
#2 Google now knows everything!
We only have to ask Siri and she will help us work it out if Google canât. YouTube can teach you everything, these edges or how to clean a house or how to make a great pizza.
Some things havenât changed new Franchisees or new small business owners still need Support, training and marketing. But these days they are turning to the internet for that direction.
New Business owners actually understand the âbusiness coachâ on line knows more than the âregional masterâ. They know you can get a Facebook Marketing Specialist online for a fraction of the cost of joining a Master Franchise.
#3 The Internet gave âPotential Franchiseesâ more Effective options.
The option available to new small business owners are infinite. If you want to start a business on 2018, there are a lot more options out there online, than just franchises.
No matter what business you are interested in, there is a business coach, training courses and training videos that cover everything.
You can get apps, podcasts and blogs that will keep you up to date every day on what is happening in your industry.
The ânew ageâ small business systems available online are more cost effective, better functioning and more successful than the âOld Schoolâ Master Franchisorâ systems.
More Australianâs than ever are starting home based businesses, but they are choosing to get their support, training and marketing from experts online.
#4 The Master Franchisor systems are way too top heavy, expensive and cumbersome to compete with the Slick Internet Based Businesses.
Master Franchisors, like most middle management become a speed bump that slows the changes, the sharing of ideaâs and the necessary changes to keep up with the fast-paced changes in technology. Franchise systems with master in place canât move as quickly as the growth of the industry online.
How can Australian franchise systems afford the extra middle manager level of the âMasterâ and competed with the online services now available to small business owners?
Alternatively ,The McDonaldâs franchise model is a flat effective system.
They have one âBRANDâ.
There is one corporate Franchisor and only franchisees.
If a Franchisee performs , they are given the opportunity to became a âMulti Siteâ Franchisee.
This the only model that is in the position to survive and thrive into the next ten years.
Is it even possible for a franchise networks with âMaster Franchisorsâ in place to structurally remove them? What happens if it becomes a necessity to cut the cost ,so their franchisees businesses can become financially viability?
In most systems 80% of the franchisees initial fees go to the Master Franchisor, that means the average franchise pays $24,000 to the master franchise. That is on top of the business set up, the master pockets this as a profit before the franchisee even starts.
The ongoing fees paid by the franchisees are 70% to 90% retained by the Master Franchisor.
Win/lose/draw the master franchisor is in front and the franchisee is paying a loan off in most cases.
This just doesnât add up.
Franchisees are paying. The Franchisee have to get business loans and keep pay every week to a master franchisor who has no responsibility or ability to invest to the development of business systems into the modern format.
Franchisors must directly take control of the evolution of their systems.
If franchisors remove the âmiddlemanâ Master Franchisor:
The cost of franchise fees can be reduced.
Marketing funds can be spent on directly increasing sales in each franchiseeâs business using âmodernâ marketing tools. More franchisee profits.
Franchisors have to add more value to their franchisees. Franchisors can build aâ âElite Vital Support Teamâ that is more professionally skilled, relevant and easily adapted as the business environment changes.
Franchising in Australia is in a rapid decline, while home based family businesses are on the rise.
But many Franchisors are running systems that were becoming outdated in the early 2000s.
If you are considering investing in any franchise or starting your own independent business?
Stay away from any system that has Master Franchisorsâ.
Investigate the options on line that can give you Support, Training and Marketing.
Chase your dream and start your own business. Nothing is more rewarding then running an success business.
Australian Franchisor have to wake up to the fact they are competing against the âOnline Vital Business Expertiseâ.
We still live in a âBig Countryâ but we are now also living in a âSmall Worldâ.
âSuccessful family businesses are the backbone to our culture. It feels like in is time for franchisors to reminder that the families that run their businesses are their businessâ. Robert James and James Home Services
Originally Posted: https://www.linkedin.com/pulse/how-internet-killed-off-master-franchisor-robert-james/