4 Types of Franchise Agreements: Single Unit, Multi-Unit, Area Developer & Master Franchise
Franchise agreements are legal contracts made between franchisors and franchisees granting the right to operate a franchised business. The franchising industry can be difficult for new franchisors to navigate, the 4 options available for franchisees are explained below.
Single Unit Franchise Agreement
This franchise agreement grants the franchisee the right to operate one franchise unit. If you are new to franchising, this agreement is the simplest and most common type of franchise. Once the franchise is open and prospering, the franchisee can consider the possibility of opening further units.
Multi Unit Franchise Agreement
The multi unit franchise agreement allows the franchisee to open and operate more than one unit. In this case, a time frame is established for the opening of the other predetermined units. These units may be opened in different areas and are not tied to a specific territory.
Area Development Franchise Agreement
An area development agreement grants the franchisee the right to open multiple units with exclusive rights in a particular geographic location, no other franchisees can open units in the specified area. A time frame is also determined for the opening of the units.
Master Franchise Agreement
Master franchise arrangements give the franchisee even more rights than an area development agreement. In addition to the right to open multiple units within a defined area, this agreement allows the master franchisee to sell sub-franchises within their territory. The master franchisee will still have the support of the main franchisor, but takes on the role of the franchisor, providing training and support for his sub-franchisees and in return receives fees and royalties from them.