Multi-Unit Franchising

In an Area Development Agreement (a.k.a. Area Developer Agreement), a franchisee-developer is granted the right to develop and open 2 or more locations in a specific geographic area determined by the franchisor. Often, the franchisee-developer must meet a development schedule requiring the franchisee-developer to open a certain number of locations by certain milestones. For each location opened, the franchisee-developer signs a Franchise Agreement with the franchisor.

Franchisors can offer single-unit franchises (under a Franchise Agreement) and Area Development Agreements under the same Franchise Disclosure Document (FDD), if all forms of agreements are included in the FDD and the FDD describes both arrangements.

In an Area Representative Agreement, an area representative-franchisee is granted the right, within a specific geographic area determined by the franchisor, to solicit or recruit third parties who will develop and open their own locations under Franchise Agreements signed with the franchisor.

Franchisors offering area representative arrangements must do so under a separate Franchise Disclosure Document from its single-unit offering.

In a Master Franchise Agreement, a master franchisee is granted the right, within a specific geographic area determined by the franchisor, to develop and open locations owned by the master franchisee, as well as the right to recruit other franchisees (called subfranchisees) within the area who develop and open their own locations. The master franchisee acts as a mini-franchisor for a specific area, finding, qualifying, training, and servicing franchisees in that area on behalf of the franchisor.

Franchisors offering master franchise arrangements must do so under a separate Franchise Disclosure Document from its single-unit offering. The master franchisee must provide a Franchise Disclosure Document to prospective subfranchisees.