Differences between Unit, Area and Master Franchises

I have heard the terms “Unit” franchise, “Area Representative,” and “Master Franchise.”  What is the difference?

A Unit franchise refers to someone who owns and operates an outlet, like a sandwich shop.

An Area Representative, which is also a franchise relation, refers to someone who purchases rights to a large territory, for example, an entire state, then recruits Unit franchisees within that territory, in exchange for a portion of the initial franchise fee and royalties paid by the Unit franchisee.  However, the franchise agreement between the Unit franchisee is with the franchisor.

Franchise Law

A Master Franchise, on the other hand, also purchases the rights to develop a large area, but does so whereby the Master functions as the franchisor, actually entering into the franchise agreement with the Unit franchisee.  Master franchise relations are commonly used in international franchising so that a franchisor can simply appoint one person to function as the franchisor on their behalf in the other country.

 

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