What is a Master Franchise?

Master franchisees typically purchase the rights to develop and own an exclusive territory (typically a major market or region), and
then sell portions of this territory to new franchisees. Master franchisees then function as a sub-franchisor and split the roles and
responsibilities as well as the franchise fees and ongoing royalties with the franchisor.

What are the benefits of becoming a Master Franchisee?

Master franchisees are drawn to the potential for significant financial gains in a business with low overhead and few employees
needed. However, that is not the only reason to investigate this opportunity master franchisees enjoy the benefits of an improved
quality of life by owning their own business with exclusive territory rights, and the opportunity to grow as quickly as they want
leveraging the capital and full time management of their sub-franchisees.

Low Overhead: Especially in the beginning, master franchise operations can be run with little office space or from a
home office. Typically, you will operate the master franchise yourself, and potentially add just a few support positions to
aid in your growth such as an administrative assistant, a franchise sales manager, or a field training and marketing
manager. Once you reach a certain level of growth and success, you may opt to hire a district general manager to
manage much of the operation.

Few Customers: Your franchisees will be your end customers. You will support a limited number of franchisees in your
master territory. Your franchisees will support a large volume of customers in their daily operation.

Wealth Building: Master franchising offers an unparalleled opportunity for financial growth in the franchising industry,
versus individual franchise operation or even multi-unit development businesses.

What type of support does the corporate franchise office give Master Franchisees?
Typically, the franchisor provides the master franchisee with ongoing innovations, business expertise, training and operating
guidance, rights to use proprietary brand names and trademarks, technology and purchasing advice, and other business building
support effectively making them a mini-franchisor.

Learn how Boardwalk Fresh Burgers & Fries is expanding via master franchising with experienced franchisees at the Fransmart
Blog.

What is a Master Franchisee responsible for?

Master franchisees are responsible for the recruitment, qualifying and sales of individual franchisees in your master territory. You
will also provide certain training, marketing, real estate, and purchasing support. You will act as an ongoing business coach to your
franchisees to help them succeed, and in turn grow the value of your business and royalty stream.

What do we look for in a Master Franchisee?

In certain circumstances, we will award master franchises to experienced and capitalized groups who want to share with the
franchisor at a local or regional level in the franchise fees, royalties, and roles and responsibilities of building and managing a
territory.

Master franchisee must demonstrate success as a multi-unit owner/operator with the highest of standards

Sell and support sub franchisees under you

Markets that can support at least 50 units

Sample Worksheet for Master Franchising:

1)

Master Franchisee opens FLAGSHIP store. May own/operate more units.

__ units x $___ volume/each = $____ total sales x __% profit = $______ Profit

2)

Master Franchisee sells and supports sub-franchisees earning half the franchise fees and royalties:

Franchise Fees:
___ number of franchises x ___ franchise fee = $_____ x 50% goes to Master =
$________ (take this number, and plug into formula below)
$______ - expenses = $___ profit from franchise fees

Royalties:
____ number of units x $___ volume/each franchisee = $____ system wide sales x ___%
royalties = $____ royalty revenue x 50% split with franchisor = $_____ master
franchisees cut x __% expenses = $___ master franchisee profit

This worksheet is for information purposes only. A franchise offering can only be made by prospectus.

Multi Unit Franchises - Restaurants

What is a Multi-Unit Franchise?

Multi-Unit franchisees purchase the rights to develop and own multiple units in an exclusive territory. In a multi-unit operation, a
franchisee will typically work less in the daily operations of a single unit, and instead focusing on managing multiple locations at a
higher level. Frequently, multi-unit franchisees rely on experienced general managers and staff to oversee daily, store-level
operations.

What are the benefits of becoming a Multi-Unit Franchisee?

Multi-Unit franchisees are drawn to the potential for significant financial gains produced by owning multiple units, and the ability to
achieve greater operating efficiencies.

According to the International Franchise Association Education Foundation, while just under 20% of all franchisees are multi-unit
owners, they account for more than half (52.6%) of all units, and they average between 4.3 units (in single-brand systems) and 5.83
units (in multi-brand systems).

This means that more than half of all output produced by franchise businesses is generated by multi-unit franchisees. According to
the International Franchise Associations Report The Economic Impact of Franchised Businesses: Volume III, Results for 2007:

Franchised businesses were the cause of $2.1 trillion of annual output, or 9.0 percent of all private nonfarm output in the
United States in 2007.

What do we look for in a Multi-Unit Franchisee?

Multi-unit franchises are awarded to well capitalized, experienced individuals and investment groups who are committed to growth
and long-term success.

Multi-Unit franchisees must possess a strong background in business and leadership

Capital and drive to develop a minimum of 5 units

Franchise Glossary
Franchise: A type of license agreement that describes the relationship between a franchisor and franchisee including use
of brand name and trademarks, fees, training, assistance and guidelines.

Federal Trade Commission (FTC): The US government agency that regulates the sale of franchises in the United
States.
Franchisor: A company that grants to an individual or entity the right to use its name, trademark, and operating systems
for distribution of a product or service, in return for a fee and other considerations.
Franchisee: An individual or entity who holds a contract to conduct one or more businesses using the name, trademark
and operating system of a franchise company.

Single Unit Franchise: A franchisee owner who operates one unit of a franchise brand.

Multi-Unit Franchise: A franchisee owner or entity who operates multiple units of a franchise brand within a protected
territory.
Master Franchise or Area Developer: A franchisee owner or entity who acquires the franchise rights to a large territory
with the intent to both open locations and resell sub-franchise locations. Master franchisees share a portion of the
franchisee fee and the royalty from their sub-franchisees with the franchisor. Learn more about master franchising here.
Conversion Franchise: The opportunity to convert an existing business to a franchise brand. Conversion opportunities
may allow for lower start up costs.

Franchise Disclosure Document (or FDD): The Franchise Disclosure Document provides information about the
franchisor and franchise system, and full details on start-up and ongoing fees. The FDD allows prospective franchisees to
make an informed investment decision.
Acknowledgement of Receipt: The last page of an FDD (Franchise Disclosure Document), which once signed, indicates
your receipt of documents on a specific date.

Franchise Fee: The initial fee paid to a franchisor, usually due at the signing of the contract, for the right to use the
franchisor's name, trademark and business system.

Royalty: The ongoing regular payment made by the franchisee to the franchisor, usually based on a percentage of the
franchisees gross sale.
Earnings Claims or Item 19 or Financial Performance Representations: The FTCs Franchise Rule permits a
franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisorowned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure
document.

Advertising/Marketing Fee: An ongoing fee paid by franchisees, usually a percentage of gross revenues, enabling
franchisors to create and execute national marketing and advertising programs.

Agreement: A Franchise Agreement is the legal, written document that governs the relationship between franchisor and
franchisee, and specifies the terms of the franchise purchase including use of the franchise system and trademarks,
territory, rights and obligations of the parties, payments and term (duration) of agreement.

Capital Requirement: The total amount of liquid assets a franchise candidate must possess for the start up and initial
operation costs of a franchise business.

Initial Investment: An estimate of the initial cash investment required to buy and open a franchise business. This
estimate includes the franchise fee and other initial start-up costs, but not necessarily the total cost of operating the
business.

Liquid Capital: Cash assets or other assets that can be readily converted to cash.

Net Worth: Sum of all assets minus total liabilities.

Franchise FAQs
Q: Would I make a successful franchisee?

A: Fransmart recommends that all potential franchisees first ask themselves: Am I passionate about owning my own business? Am I
willing and able to follow a proven system? Do I have a strong work ethic and a drive to succeed? Franchising is not for everyone. It
takes a unique mix of business acumen, motivation, capital, and a committment to succeed.

Q: What is Fransmarts role in the franchise sales process?

A: Fransmart is the exclusive franchise developer for all our portfolio brands. This means that if you are interested in exploring a
franchise opportunity with one of our portfolio brands, Fransmart will be your primary point of contact throughout the Discovery
Process. We partner with our brands to streamline the qualification of franchise candidates, and we facilitate your introductions to
the franchisor management team at Discovery Day meetings. Our franchise development team is comprised of experienced
business professionals, providing information and guidance throughout your Discovery Process.

Q: What questions should I consider when evaluating a specific franchise?

A: Among the points Fransmart recommends franchise candidates evaluate are:

What experience is required to join the franchise system?

A complete understanding of the business

Meeting franchisor management team who will I be working with?

Talk to other franchisees in the system

Understand the financial committment

Thorough review of the Franchise Disclosure Document

Q: What kind of investment is necessary to buy a franchise?

A: Each franchise will have a different set of financial requirements necessary for qualification. Each franchise applicant must be
qualified for entry into a franchise system by demonstrating they possess the necessary working capital. Total net worth and liquid
assests are the two primary financial criteria Fransmart will review. For full financial requirements and fees, always refer to the
Franchise Disclosure Document.

Q: What are some of the benefits of owning a franchise?

A: Most business experts agree that franchises have a higher likelihood of success than independent businesses, because a proven
business model is already in place, and has been tried and tested. Franchises also offer additional benefits like group purchasing
power, brand recognition, and franchisee support. Franchisee support is the critical component of successful franchising. Franchise
brands provide initial business start-up assistance ranging from strategic guidance, to real estate selection and negotiation, to
access to suppliers and equipment programs, to ongoing training and marketing support. The franchise model works, because
franchisors are only as successful as their franchisees. Thus, franchise companies provide extensive support to their franchisees to
help them succeed.

Q: What are some of the drawbacks to owning a franchise?

A: Franchisors require franchisees to follow their standard operating policies and procedures, in order to maintain brand consistency
across the chain. This can be a challenge for independent-thinker types who like to create their own systems. Franchisees must be
willing to follow a system in order to maintain the level of service and brand standards already established. Most franchisors also
charge ongoing royalties, in exchange for providing ongoing support, services and marketing for their franchisees. As with any
business, owing a franchise also carries a risk of failure.

Q: What is a Master Franchise?

A: Master franchisees typically purchase the rights from a corporate franchisor to develop and own an exclusive franchise territory
(usually a major market or region). They then sell portions of this territory to their own new franchisees. In this model, a master
franchisee functions as a sub-franchisor, splitting the roles and responsibilities (as well as franchise fees and ongoing royalties)
with the corporate franchisor. Master Franchising is the primary wealth-building model available in the franchise industry today.

Q: What is the process for becoming a franchisee?

A: Step 1: Initial Inquiry

Submit basic contact information

Initial telephone contact

Submit in-depth franchise application

Step 2: Qualification

Initial conversations to review qualifications based on business experience and financial strength

Completion of state and federal compliance requirements

Step 3: Discovery Day Meeting

Headquarter Discovery Day: tour restaurants, meet Franchisor team, learn more about opportunity

Step 4: Legal

Discuss deal terms and review legal documents

Formalize and execute the Franchise Agreement; Payment of franchise fees

Step 5: Welcome & Store Opening

Real Estate

New franchisee / staff training

Marketing / Grand Opening

Fast Casual Restaurant Franchises

Fast Casual is the fastest growing, top producing segment of the restaurant industry.
Fast Casual restaurants are positioned between full-service, casual dining restaurants and quick-service, fast food
restaurants. Like casual dining chains, Fast Casual restaurants offer high quality food in comfortable, more upscale
environments. Like fast food chains, Fast Casual restaurants offer speedy menu options, and delivery is generally selfservice. Fast Casual restaurants generally offer price points that are situated between casual dining and fast food. Most
industry experts (and customers) agree that Fast Casual formats offer the best of both worlds, filling the void between full
service and fast food.

Since its inception, Fransmart has focused on the fast casual niche in the restaurant industry. In the mid-nineties,
Fransmart founder Dan Rowe identified an early fast casual superstar, Qdoba Mexican Grill, when it was just a single unit.
Rowe grew the company via franchising to a successful 100-unit chain before it was sold to Jack in the Box for $45
million. Today, Qdoba has over 500 locations. In 2002, Fransmart launched the explosive fast casual Better Burger
niche, growing Five Guys Burgers and Fries from a local, family run business to the powerhouse chain they are today.
Fransmart is the industry leader in identifying fast casual brands that are primed for growth.

Quick Service Restaurant Franchises

Quick Service Restaurants, identified in the industry by the acronym QSR, are typically characterized by food served fast
and minimal table service. The term fast food is also commonly used to describe QSR chains.
The QSR format was popularized in the 1940s and 1950s with burger drive-ins in California. Soon after, McDonalds and
Burger King were launched, forever changing the landscape of the restaurant business. QSR chains have thrived in the
United States and around the world because they cater to the busy lifestyles of modern consumers.
Fast Casual restaurants are a variation on the QSR concept. The fast casual category was created to serve the needs of
busy, on-the-go consumers who desire higher quality menu options. Many fast casual brands also offer food that is
nutritionally superior to standard QSR fare. However, since the advent of the Fast Casual segment, traditional QSR / fast
food chains have tried to compete by rounding out their menus with nutritional options like salads, fruits and healthier
options for kids meals and drinks.
Fransmarts brands, while primarily classified as fast casual, do execute the same practices that made the QSR / fast food
industry successful, such as speed of service, food consistency, clean restaurants and uniform customer service.

Specialty Full Service Restaurants

Full Service Restaurant typically offer complete table service, with waitstaff and service personnel that clear and
set tables for customers. Full service restaurant franchises may present a higher cost of entry or investment
range than fast casual or QSR restaurant franchises.
Fransmart partners with select "specialty" full service restaurant franchises that possess strong concept fundamentals and
sales-to-investment ratios that are on par with the thriving fast casual segment. We also require our specialty full service
brands to possess unique casual dining segment differentiators. For example, we have developed a specialization in
growing full service English-style pub concepts. Additionally, specialty full service chains may allow for smaller footprints
than traditional casual dining chains, and/or offer specific non-traditional prototypes for select real estate opportunities like
airports.