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A Master Franchise relationship is similar to an Area Developer, except a Master Franchise has the right to sell franchises (termed Sub-franchises under the Master Franchise relationship) and may have strong operational support responsibilities. It's best to think of a Master Franchisor as a sub-franchisor in which they are organized and trained to run a franchise system.
Under a Master Franchise agreement, you pay a significant fee -- the master franchise fee. As the Master Franchise sells franchises to its franchisees, a franchise fee is paid to the Master Franchise and shared with the Franchisor. Franchisee royalties are also shared with the franchisor. Usually the franchisor holds the right for final approval of the sub-franchisee. And the sub-franchisee typically receives training from both the franchisor and Master Franchise.
Master Franchise relationships have diminished in the States over the years in favor of Area Development agreements. However, Master Franchise agreements are used by most systems in entering into international markets. These are sometimes called International Master Franchise or International Master Licensees (IMLs).