What is a Unit Franchisee, Area Developer, and Area Representative?

I have heard the terms Unit Franchisee, Area Developer, and Area Representative.  What is the difference?

These terms, especially “Area Developer” and “Area Representative,” saw interchangeable usage until the NASAA drafted a Commentary and guidelines to clarify the distinctions between these franchising programs.

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A Unit Franchisee owns and operates an outlet based on the franchising concept. If the franchisor offers an ice cream shop opportunity, a unit franchisee operates it. A multi-unit franchisee is a franchisee who operates multiple outlets. 

An Area Developer buys the rights to operate multiple units as a multi-unit franchisee in a set geographical area but with an extended opening timetable. If a Franchisor allows an Area Developer program, then the FDD should discuss the Area Developer program in the FDD.

An Area Representative buys the rights to recruit and/or support unit and area developers in a particular territory, typically in exchange for a share of the initial franchise fees and ongoing fees.  

A more sophisticated arrangement may involve subfranchisors, sometimes known as master franchisees in larger areas.  Subfranchisors purchase territory rights and act as franchisors, directly entering franchise agreements with unit franchisees. Subfranchisors may operate within the same country, for example, developing different parts of the country. Master franchise relationships are common in international franchising, allowing a single person to act as the franchisor in another country.

Is it time to franchise your business? Or do you want to learn how we can help you grow your franchise?  Please contact us at (757) 263-4596 or click on the link below to schedule a consultation. 

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