How to own state rights to an international franchise in Australia

How To Own State Rights To An International Franchise Brand In Australia On Franchise Buyer

If you’ve always thought a little bigger than a single franchise location with an established franchise brand, then master franchise rights for a state in Australia might be an option for you.

A master franchisee is one who has the rights to develop a brand within a defined region. They generally establish a location themselves for proof of concept and presentation in the region, and then sell individual locations to franchise owners.

Speaking recently to Grant Garraway, an experienced master franchise consultant, he describes two main types of people he commonly sees who are attracted to the prospect of a larger slice of the pie and scale in a master franchise.

Grant Garraway On Franchise Buyer

First Type

“They’ve had a franchise in a good brand, and know they can achieve more with that experience. They face a choice at some point of buying more locations in that brand, or buying into another brand which can be problematic for their existing franchise relationship.”

“Master franchise rights in another brand are often an attractive proposition to these experienced operators.” 

Importantly, Grant explains, “These people are already familiar and comfortable with the franchisee, franchisor relationship structure and way of doing business.”

Second Type

The second type of people that Grant sees attracted to a master franchise arrangement are “Those who consider themselves good people managers and maybe with some QSR experience (Quick Service Restaurant). They’ve typically been on holidays in the US especially, or friends have, and seen a concept that they feel is right on trend and with potential.”

“These experienced managers generally have some longevity in their work experience with some cash and home equity, and are looking to go next-level.”

Australia is attractive to USA concepts

The majority of masters into Australia are US brands eyeing this market off according to Grant.

“They see Australia as a relatively easy transition culture wise in alignment with the US. However, they do often underestimate what the brand might need in refinement as a result, and they overestimate how many sites are possible and feasible in our market.”

A two-tier master franchise market

Grant broadly see’s two-tiers to investment in Australia for master franchises.

Tier 1 - Multi-million $ investments to purchase rights and establish locations which the larger brands are chasing, and they deal with larger players of corporate scale in our market. “Think Restaurant Brands (Carl’s Jr, Taco Bell, Pizza Hut, KFC), and others who have lofty development goals and requirements as part of it.”

Tier 2 - Approximately $200-$250k rights to own a state(s) to focus on development by smaller rights holders, mostly with smaller emerging brands.

America Franchise Concepts On Franchise Buyer

How to find and buy master rights

Grant still sees the US as the mecca for franchise concepts exported globally. 

“In the US you can go to regional places and discover unique local food concepts as an example for export using master rights into Australia. They may be doing great things in their regional market, but don't have the capital to open 30+ stores in Australia. People find concepts and approach them, and deals get done.”

“I know a lot of development deals like this also get done at franchising expos and conventions around the world, and particularly the bigger US trade shows - that’s what they are for. You also see master rights advertised in most of the same places you see single location franchises advertised. ”

“At the tier 2 investment level we are talking on, I’d be looking for a concept that is doing well in perhaps just one city or state, that’s where the emerging concept value can be found. Maybe even the next ‘big thing’.

“Find a niche that isn’t done well by Australians today.”

But, of course, just because it’s working where it started in the US, does not necessarily mean it will work in the Australian market.

Grant wraps it up with a warning. “Look for, and take professional advice, as you are going to invest a lot of money. There are a number of brokers and consultants like me who specialise, and have experience in bringing concepts to our shores.

The trail is littered with concepts that came with high hopes, only to retreat with little to show for it.”