What Type of Franchise Model is Best for You?
Below are the four levels of
- Master Franchise (Regional)
- Area Development Franchise
- Multi-Unit Franchise
- Single-Unit Franchise
With a Master Franchise (Regional), you own an exclusive territory, for an
investment, which varies in size depending on a number of factors, including the size of the territory
purchased. In most cases, the master franchise agreement gives the Master Franchisee the rights to offer and sell
individual franchises (sub-franchise), and also the rights to collect a pre-determined percent of the franchise
fees and royalties generated by each unit sold in the master franchisee territory. Depending on the franchise
model, the master franchisee may share in the revenue of product sales.
The Master Franchisee, depending on their agreement, may be required to open a specific
number of units in a designated time frame or schedule, this may include a requirement for the Master Franchisee to
own and operate one or several units of their own. Generally, Master Franchisees will be responsible for providing
a specific level of ongoing training and support for their designated territory.
Area Development Franchise
In general, an Area Developer Franchise Agreement offers the developer an opportunity to
secure the rights to open and develop a specific number of units in a designated territory. In addition, the Area
Developer, my solicit prospective new franchisees for the Franchisor in their territory. Unlike with a Master
Franchisee, the area developer does not sell or award new franchises, this responsibility remains with the
Because an Area Developers responsibilities are not as broad as a Master Franchisee, they
sometimes do not receive or share in the royalty fees generated by the units operating in the territory.
Multi-Unit franchise agreements typically allow the franchisee the rights to operate more then one franchise
unit in a specified territory supportive of multiple units. The number of units varies from 2 to 5 units, however
some franchisors may offer an opportunity to open more units.
Single-Unit Franchise agreement is typically the starting point for a brand new entrepreneur. In this franchise
model, the franchisee would only be responsible for running one unit. However, in most cases, not all, the
franchisee would be closely involved with the day to day operations of the single-unit franchise
As with any type of franchise agreement, you should seek
legal counsel to review all documents before moving forward.
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