Multi Unit Franchise Opportunities
You may already own a single franchise and are interested in buying multiple franchises, or you could be just getting into owning a franchise and want to know what your options are to start with more than one location. Either way, an experienced franchise attorney can help you navigate your choices and help decide what is right for you.
In addition to selling just one franchise to one person, most franchisors in the United States have a program that will allow them:
- to sell several units to one person;
- to sell a geographic territory to one person who in return will find qualified franchisees, and who will train and care for the franchisees in the territory once they have signed up; and
- who will buy an entire state or even country in which the franchisee will act as the franchisor.
As long as these programs have been around, franchisors have called the relationships by whatever name the franchisor wanted. That caused confusion in the franchise industry.
To put to rest the confusion, the North American Securities Administrators Association (NASAA) in conjunction with the Federal Trade Commission has come up with now-legal names for each relationship. Here they are:
AREA DEVELOPER: This is the name of the relationship between the franchisor and a franchisee who is granted the right to open multiple units over an agreed period of time. Here, the franchisor signs the franchise agreement with the “AREA DEVELOPER” who is then tasked with the timely opening of the agreed upon number of units.
SUBFRANCHISE: This is an arrangement whereby the franchisor grants the franchisee (now called the “SUBFRANCHISOR”) the right to grant to third parties, the franchise rights owned by the franchisor. Here, the franchisor is allowing the subfranchisor to step into the franchisor’s shoes by granting the third parties (now called the “SUBFRANCHISEES”) the right to open the franchisor’s units. Here, it is the Subfranchisor who will sign the franchise agreement with the Subfranchisee. Also, BOTH the franchisor and the Subfranchisor must deliver a franchise disclosure document to the prospective Subfranchisee.
AREA REPRESENTATIVE: In this relationship, the franchisor grants the “Area Representative” the right and obligation to: (i) find qualified franchisee candidates in a certain geographic area (often called a “development area” or “development territory”); (ii) introduce the qualified candidates to the franchisor, who will sign the franchise agreement with the qualified candidate; and then; (iii) train and otherwise manage the franchisees within the development territory on behalf of the franchisor.
Whether you’re buying or selling a franchise or multiple franchises, a franchise lawyer can help you make sure you know what you’re getting into and it’s beneficial to all parties involved. Contact us today to see how we can help with your franchise.