Master Franchise Agreements: Beyond the Basics

When you start concerning yourself with master franchise agreements, you can rightfully tap yourself on the shoulder. You may not yet be a billionaire like the guy from the screenshot below, but you’re well on your way to creating generational wealth! 

Since a Master Franchise Agreement (MFA) lets you expand your empire under certain rules, you receive certain rights to develop and operate franchise units beyond those given to individual franchisees. 

In a lot of instances, you’ll even be able to sub-franchise to other franchisees under the terms you’re agreeing to with the company you’re contracting with. 

As a master franchisee, you’re a mini-franchisor who is given specific rights within a defined area. In addition, you often benefit from less direct management from the parent company. 

As a franchise consultant, I’ve looked at a fair number of MFAs – all to your benefit! 

Critical details are often missed by these hopeful entrepreneurs that commit, and as a consequence, the probability of success is lessened considerably. 

Looking at an MFA is part science and part art. While you develop a franchise, there are tons of things to look out for that could make or break you. Some companies are definitely more franchisee-friendly than others! 

Maybe you’re an emerging brand or someone who is already active in the franchising world, but that doesn’t mean it’s a straight forward process to evaluate MFAs. For that reason, I go beyond the basics in this article, explaining some things to look for in a master franchise agreement. 

When you’re ready for your own adventure in the space, make sure to book a call with me. 

Beyond the basics & the basics

It’s not just about ticking boxes in the process, but making sure you know your rights. It means both knowing the basics and going beyond those basics in the master franchise agreement. 

🚩 Clause / Topic	What to Verify & Why It Matters	Easy-to-Miss Consultant Insight	Creative Tip / Idea
Development Schedule	Milestones (LOI, first unit open, X units per year). Penalties? Grace periods?	Negotiate “force-majeure for permitting delays” — missing in many MFAs.	Offer to front-load your marketing fund to unlock a 3-month schedule extension.
Master Fees & Royalties	Split between initial master fee, unit-opening fees, and the royalty you keep from sub-franchisees.	Request a “step-down” royalty to sub-franchisees once they cross pre-set sales bands.	Tie your sub-fee holiday to hitting regional social-media KPI targets.
Marketing Fund	Required spend %, who controls creative, local vs. national split.	Ask for quarterly fund-use transparency reports—rarely volunteered.	Run a region-wide “TikTok Dessert Duel” to crowd-source UGC.
Right of First Refusal (ROFR)	Does franchisor get ROFR on any sale of your master rights?	Cap the ROFR response window (e.g., 15 days) to avoid deal drag.	Offer a franchisor equity kicker in exchange for shorter ROFR.
Termination & Cure Periods	Default triggers, cure timelines, assignment rights.	Secure “economic hardship carve-out” for catastrophic local events.	Set up key-metric alerts so you’re never blindsided by default letters.

Enquire About Master Franchise Structuring

Territorial exclusivity

Starting out with one of the basic principles to look out for is the territorial exclusivity that should be described in the master franchise agreement. It will also explain how you can sub-franchise within a given area.

Development schedule

Timelines and benchmarks should be specified. This includes the number of units you’re required to open. However, it’s important to examine what happens if you don’t hit those deadlines. In a lot of instances, you will want to make sure you’re sticking to the development schedule. If not, you risk losing exclusivity. 

Franchise fees and royalties

The franchise fee you pay is often tied to the number of units you’re building. Multi-unit agreements include higher fees than singular-unit agreements. Whether one or several units, you need to know what to look for in item 5 and 6 and examine what happens under the agreement you’re signing. 

Training and support

Brand standards. Operational manuals. Initial and ongoing training. Enforcement. These are all aspects that will be discussed in the MFA. Understand fee structures related to each of these components so you know your financial commitments after signing. There’s often some degree of training included in MFAs, but it could very well be that you’re paying extra for more people trained. 

IP protection

I get it. The company wants to protect its IP when they’re extending certain rights to a person like you through an MFA. However, make sure you understand how you’re allowed to use the various IP through marketing initiatives and other efforts. 

The franchising company is likely to spell out enforcement very clearly in the MFA. 

Termination clauses

It always sucks when a franchise is terminated, whether it’s the franchisee or the company because it usually means money is lost. For whatever reason, one part is unhappy with the other and things went south. 

In those instances, it’s critical that you understand your rights and your obligations. I’ve seen too many FDDs from companies outlining vague termination clauses, and I sure wouldn’t want to be the person signing with a company that can terminate you seemingly at will. 

When it comes to a master franchise, those clauses are even more important to scrutinize. 

Performance cure periods and flexibility

Things don’t always go according to plan, and it’s no different when you’re developing a number of units all at once. Rigid development schedules can break you if you’re not careful. 

You don’t always anticipate everything that will happen, so consider whether you can live ith the performance cure periods and flexibility worked into the MFA. It’s a lot of money at risk! 

Sub-franchisee approval rights

If you’re looking to sub-franchise part of a territory, you need to know what your rights are. In the MFA, make sure to look out for terms requiring the franchisor to retain final approval rights. 

You need to personally figure out with yourself what you’re comfortable agreeing to, but it can add delays if you don’t make the final call. 

Local adaptation rights

In most situations, the franchisor controls a lot of rights. It includes things like what goes on the menu and more. When you’re the master franchisee, you’ll need to know if you’re OK with the rights included when it comes to being able to make local adaptations. 

Does the suggested menu fit with the local landscape or are you allowed to adapt it to local preferences? 

Post-termination options for sub-franchisees

The franchisor retains a lot of rights if you’re just buying one Crumbl Cookies, but what happens when you’re the master franchisee? 

What happens to your sub-franchisees? The rights, whether owned by the parent company or you, should be spelled out in the MFA.

Will you take over for the sub-franchisee? 

Is there any exit compensation for the goodwill? 

Fair market compensation and a buyout formula should be included in the MFA. 

Look out for carve-outs and reserved rights

Carve-out rights are rights retained by the franchisor, and they’re easily overlooked. 

If the franchisor offers online sales in your territory, how is that handled? What about supermarkets, mass retailers, and more? 

Airlines, universities, and military bases. Those are other locations where you should be sure you understand carve-outs. 

Revenue sharing or full control of specified channels is something I encourage franchisees to consider when they’re about to enter a master franchise agreement. 

When you’re ready to look for a master franchise agreement with a company, make sure to book a call with me first to ensure you stay protected!