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Single Unit Franchise

  • 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

  • Area Development
  • Master Franchise (Sub-Franchising)

Area Development

  • 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.

Master Franchise

  • 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.

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