Franchising Trends
Area Development vs. Master Franchise: Which is Best?
If you are thinking about starting a franchise, you should first learn the different types of franchise agreements available in the market. Today, franchisors are keener on taking aboard people who can own and operate more than one unit. There are many ways you can be such a franchisee; you can have a multi-unit franchise business or go for Area Development program or respond to the Master franchise offers of the company. The last two can be confusing for people who are unaware of this form of business. So, to help you out, here is a comparison chart between area developments and master franchise agreement.
| Area Development | Master Franchise Agreement |
|---|---|
| The franchisees generally get the license to open a fixed number of franchised locations within a given territory. | The franchisees get the license to develop a large area or region by not only opening units, but also by selling “sub-franchises” in that area. |
| The franchisee is required to open and maintain more than one franchised locations. | The main aim of the master franchisee is to sell sub-franchise offers and he may or may not develop a unit of his own. But generally master franchisees develop one unit to showcase the franchise business for sale offer and use it to train new recruits. |
| The territory size can be anything between a county and state to a part of a city. | The territory size is generally large, which can be a whole city, state or even a country. |
| The franchisees have to be involved in the opening of the first store and scout for location for subsequent ones. He or she is supposed to work in the development of the first few units after which he or she can relegate the work to competent persons. | The thrust of a master franchisee is towards selling single-unit, multiple-unit or area development programs in the given territory. He or she is seldom involved in the actual running of the unit (even its own) and is more like a business consultant. |
| Area development franchisees develop the units on their own and so don’t get to sell new locations or earn from the royalty or franchise fee. | The main source of income for a master franchisee is a part of the franchisee fee and the royalty fee that people who buy a franchise under them pay to the franchisor. |
| Area developers don’t have to train new franchisees and their source of income is the revenue earned from different locations. | Master franchisees have to train the new franchisees and have different sources of income. Apart from getting the part of the franchise and royalty fee, master franchisees generate income by distributing products through the chain and by offering real-estate services. |
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January 22nd, 2009 at 12:10 pm
[…] now the emphasis is on Master Franchise, Area Development and Multi-Unit Operator. Moreover, previously franchising meant that the franchisee is not entitled […]