THE FOUR TYPES OF FRANCHISE AGREEMENT (2024)

Agreements

There are 4 basic types of franchise agreements: Single-unit, multi-unit, area development and master franchising.

A single-unit franchise is the most common and is simply where a franchisor grants a franchisee rights to open and operate one single franchise unit.

A multi-unit franchise is where a franchisor grants a franchisee rights to open more than one franchise unit.

An area development agreement allows a franchisee the rights to open multiple units over an agreed amount of time within a specified geographic location and / or to own rights to their specific territory and earn money on each franchise sold in their territory through sharing of the franchise fee and ongoing royalties.

A master franchise agreement, also referred to as sub-franchising, gives a franchisee the same rights as an area development agreement but also gives that franchisee rights to sell franchises to other people within its territory. A master franchisee assumes many of the tasks and obligations of the franchisor such as training and support and receives a portion of the franchise fee and royalties. While technically there are significant differences you will find that master franchising and area development are used interchangeably.

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