A single-unit franchise is an agreement where the franchisor grants a franchisee the rights to open and operate ONE franchise unit. This may be the simplest and most common type of franchise.
It is possible, however, for a franchisee to purchase additional single-unit franchises if the franchisee qualifies. This is then considered a multiple, single-unit relationship.
Multi Unit Franchise
Master Franchise (Sub-Franchising)
Under an area development franchise, a franchisee has the right to open more than one unit during a specific time, within a specified area.
For example, a franchisee may agree to open a specific number of units over an agreed to period of time in a specified territory.
The franchisor grants the franchisee exclusive rights for the development of that territory.
A master franchise agreement gives the franchisee more rights than an area development agreement.
In addition to having the right and obligation to open and operate a certain number of units in a defined area, the master franchisee also has the right to sell franchises to other people within the territory, known as sub-franchises.
Therefore, the master franchisee takes over many of the tasks, duties and benefits of the franchisor, such as providing support and training, as well as receiving fees and royalties.
Another hybrid-type of multi-unit franchise is an area representative franchise in which the area representative buys a territorial franchise to sell and service unit franchisees in the territory.
The area representative does not contract with the unit franchisees (who sign agreements directly with the franchisor), but does receive a portion of the initial fees and ongoing fees paid by the unit franchisee to the franchisor.