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5 things to do when acquiring a master franchise

And what to look for in the business agreement
By Lyndah Bartolome |

So you\\\'ve finally found a concept from abroad that you\\\'d want to bring to the Philippines. The next step is getting the master franchise. A master franchise, according to BusinessDictionary.com, will allow you to appoint sub-franchisees in a certain geographical area--perfect for when you feel you\\\'re ready to bring your products to different parts of the Philippines.

The application process varies depending on the franchisor, but the following list includes the basic requirements and the things you need to know before and when finalizing a contract for a master franchise.

1. Filled out the qualification form properly.
Be honest and forthcoming when filling in this form. Franchisors do background checks.

2. Visit the franchisor’s head office.
You will have to meet the franchisor face to face to determine your compatibility. Most master franchises have a life span of 10 years or more. Can you work with the franchisor that long? During your visit, request a copy of the Unified Franchise Offering Circular from the US franchisors. These documents contain very important facts about the franchisor.

3. Check the memorandum of understanding or agreement.
This document indicates a level of commitment to do business between you and the franchisor. The franchisor normally will indicate payment of a certain percentage of the license fee. If at this point you have even the slightest doubt about getting the franchise, don’t sign the MOU. Franchisors accept the reality that, sometimes, a franchisee needs time to come to a decision.

4. Map out a business plan.
In the business plan, you—the applicant—map out the strategies for developing the franchise in the Philippines. The franchisor usually provides the format. The business plan and market study should provide you with the initial indicators of the success and viability of the franchise concept.

5. Ask for enough time to read the master franchise agreement.
The franchisor normally will give you enough time to review the Master Franchise Agreement. This document indicates the terms of your relationship in the coming years, and may not be amended except through mutual consent. Don’t be intimidated by the number of pages— usually 45 or more—but read through the agreement carefully, and then write down your comments. Get a lawyer familiar with international franchising to review the document. He should be able to translate legal jargon into layman’s language, and make sure the agreement complies with Philippines laws.

When reading the agreement, pay particular attention to the following:

• Terms of the franchise and its renewal;
• Master franchise license and franchise fees;
• Continuing fees;
• Development schedule;
• Support from the franchisor;
• Responsibilities of the licensee (this refers to you);
• Right to sub-franchise, its terms and the sharing of fees; and
• Termination and defaults.

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After you sign the Master Franchise Agreement, your payment of all the fees gets the development schedule going. You will have to train at the franchisor’s head office for two to four weeks. This is free, but you will have to pay for your airfare, accommodations and other expenses.


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