Franchising is a deep topic. You could talk about it all day and never cover everything there is to talk about.
Franchising is defined as “A method for expanding a business and distributing goods and services through a licensing relationship.
But within that blanket category, there are different paths to take and goals to set for your participation in the franchise. In this post, we are going to talk about a few of the different roles you can take on as a franchise and give some details about each.
Types of Franchise Licenses
Unit Franchisee
Simple and sweet, the unit franchisee simply owns and manages one unit of the franchise.
Once you have your bearings and feel comfortable with the way your first unit is running, you can move onto a multi-unit franchise license.
Multi-Unit Franchisee
A multi-unit franchisee is one that is granted rights by the franchise to open up and operate more than one unit. This is different from the standard franchising license and is sometimes not included by default!
If you aspire to own multiple locations of the same franchise business, keep this in mind.
Area Developer Franchisee
When your franchisor considers you an “area developer,” it means you are expected to open more than one unit during a specific time in a specific area. Simply put, you have the rights to one part of your town or city where you will be “developing” your brand.
A franchisee could, for example, open 10 units of the franchise over a 10 year period in New York City, only. Another franchise owner or prospect would have claim to the areas outside of NYC.
The franchisee is given exclusive rights to the area in most cases.
Master Franchisee or Area Representative
These two terms are interchangeable depending on the company. in this franchise business model, an area representative would purchase a territory to sell and service unit franchisees.
In layman’s terms, this means you would buy a territory and become the representative of that territory for the franchise.
For example, if you were to purchase this type of franchise from McDonald’s, you would own the NYC territory and any other franchisees in NYC would be brought in and serviced by you.
In return for doing this service for the franchise, the area representative or master franchisee would receive a portion of the initial fees and royalties paid from each unit franchisee to the franchise.
A royalty in relation to franchising is a payment made from the franchisee (business owner) to the franchise. It’s typically based on a percentage of monthly gross sales.
Kind of like the franchise’s “man in the field.”
That’s pretty much it…
As far as the ways you can become a franchisee, these are the three main paths you can take. We hope you found this information useful!
If you have any questions about the topic, leave us a comment or get in touch with us.
Talk soon!
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