Types of Franchise Agreements




Before you consider the franchises for sale to investigate, it is extremely helpful to find the right entry level of franchising. New franchises for sale are usually classified into four different categories or levels. Choosing the right level of franchising for personal and professional satisfaction is almost as important as choosing the right franchise.


A single-unit franchise is the most common. Under this arrangement, the franchisor grants a franchisee a license to open and operate one single franchise unit, typically in a geographically designated area.


A multi-unit franchise is one in which the franchisee purchases the right to open more than one franchise unit. The number of units included in a multi-unit franchise is determined mutually by both franchisor and the franchise buyer. Franchisors typically offer considerable discounts to franchisees purchasing more than a single unit.


An area development agreement allows a franchisee the rights to open multiple units within a specified geographic market. Typically, the number of units and the time to build them will be negotiated as part of the area development agreement. Area Developers are granted rights to their specific territory and earn a share of the franchise fees and ongoing royalties by each unit open in their territory. Area developers may or may not have the right to sell new franchises in their market.


A master franchise agreement, also referred to as sub-franchising, is similar to an area development agreement, but with some marked differences. Master franchisees can always sell franchises to other people within its territory. But a master franchisee also assumes many of the tasks and obligations that typically fall to the franchisor. This includes initial and on-going training and support. The master franchisee and the franchisor share both franchise fee sand royalties.


Choosing the type of franchise agreement that is right for you is a specialty of Franstop. Talk to one of our expert franchise consultants today to learn more!




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