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Exploring the Four Types of Franchises You Can Buy
Written by: Michael HemenwayArticle Overview: There are four kinds of franchise agreements available when you go to buy a franchise. The single-unit franchise is the most basic one while the master franchise program is the costliest one.
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Exploring the Four Types of Franchises You Can Buy
Did you know that there are four kinds of franchise agreement that you can choose from while answering a franchise business for sale offer? Here are the four of them with detailed descriptions and what you can expect from them:
1. Single-Unit franchise: This is the most basic of all franchise agreements and is the easiest of them all. A single-unit franchisee buys the rights to operate and maintain a single location either from the franchisor directly or from the master franchisees. The start-up cost depends on what franchise opportunity the franchisee has gone for. Generally, single unit franchisees run the unit on a day-to-day basis and are known as owner-operator. Top franchises often provide restricted territory, which can be a certain radius around the unit or if it’s a home-based franchise, then the territory can be certain zip codes. Basic business skills are the fundamental requirement to buy a franchise as a single-unit operator.
2. Multi-Unit franchise: When a single-unit franchisee is successful with one location, most franchises allow such a franchisee to start another unit in the same geographical area (but in a new territory, if the franchisor is providing restricted territory). Many franchisors offer reduction in the franchisee fee and other costs when it’s starting a franchise for the second time. Only successful franchisees who have the required financial capabilities in terms of both liquid capital and net worth qualify as multi-unit franchisees. The franchisees hire competent managers to help them run the additional units. This type of franchise is a good sign for a franchise system, as it shows how profitable the business is.
3. Are Developer: Area developer can be groups, individuals or business “entities” who buy a large geographical area and then sub divides them and develops them one at a time. As long as they develop the required number of units within a given period, the area is exclusive. The size of the area can be anything between a part of a city to a county or a state. Franchisors that have such a franchise business for sale offer generally look for people with years of experience in the market and very good financial capability. The area developers get to build the franchise units at a reduced royalty fee and franchise fee.
4. Master Franchise: The most coveted, costliest and biggest of all franchise agreement – it’s offered only by a very few companies. The area of operation for a master franchisee can be a whole city or even a whole country! The master franchisee is like a mini franchisor; its main aim is to sell the areas under it to prospective single, multi and area developer franchisees. A single location is often developed as a training facility and income source. Master franchisees get a percentage of the franchise fee and royalty fee that people who buy a franchise pay to the franchisor. Additional income is generated from distributing products through the franchisees and by real-estate interests. International franchises often use this form of franchise agreement to expand in a new country, as it makes their job easier and faster.
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Article Tags: business entities, competent managers, developer area, financial capabilities, franchise agreement, franchise agreements, franchise business, franchise opportunity, franchise system, franchisee, franchisor, fundamental requirement, geographical area, home based franchise, liquid capital, master franchisees, new territory, single unit, successful franchisees, unit operator
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About the Author: Michael Hemenway RSS for Michael's articles - Visit Michael's website  Click here to visit Michael's website   Franchising Continues to Work Better Than a StandAlone Business How Franchising Works Location is Crucial to a Franchisees Success Franchising Is a Better Path to Success than Opening a StandAlone Business Employment Franchises Show Continued Growth |
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franchisebrief.com good clean design
- I actually really like the design - it's clean and not busy. The information is easy to find.
You mentioned you didn't want to monetize from the site thru the use of adwords but what about JV'ing with all or most of the Franchises you are referring people to.
Is that possible in the Franchise industry?
Re: Franchise Support. What is it to you?
- To be honest I have never been a big believer in Franchises.
Which of them did you have the best and worst experience with, when you called in as an "interested buyer"?
Clothing Franchises
- I believe that there are quite a few franchises for larger brands such as Diesel, Lacoste and Bennetton etc... but I am not sure how these contracts work.
In New Zealand, Canada & Switzerland Clothing Franchises are for smaller designer brands & Outdoor clothing -- such as Bivouac, the great Outdoors etc
Ian
Top performing Franchise Loans
- Evan,
There are over 120 Franchises listed by the SBA with 0% Loan Failure from 10-1-00 to 9-30-05 these companies have at leat 10 loans disbursed.
A number of the companies are Hotel/Motel Franchises so I listed them separately.
Since all the ones listed have 0% loan failure I listed them descending by # of loans disbursed.
Top 20 (by # loans Disbursed) 0% SBA Loan Failure (does not include hotels/motels)
1 21425--CULVER'S FROZEN CUSTARD 85
2 66910--PRIMROSE SCHOOL (DAYCARE) 76
3 14467--CARTRIDGE WORLD STORES 54
4 68021--QUIZNO'S SUBS 41
5 06560--AUNTIE ANN'S (SOFT PRETZELS) 40
6 29912--FIREHOUSE SUBS 35
7 31154--FOOT SOLUTIONS 35
8 52707--MEDICAP PHARMACY 35
9 09802--BEN & JERRY'S ICE CREAM 33
10 67759--COMFORT SUITES 33
11 70150--RITTER'S FROZEN CUSTARD 32
12 05650--ARBY'S 31
13 65160--PLATO'S CLOSET 31
14 67417--PUMP IT UP 30
15 69149--REMAX 30
16 71456--SALAD WORKS, INC. 30
17 76282--SONIC DRIVE-IN 27
18 84725--UNION 76 OIL 27
19 17049--CHRISTIAN BROTHERS AUTOMOTIVE 26
20 78950--SUNOCO SERVICE STATION 26
Top 10 0% SBA Loan Failure Hotel/Motels
1 10275--BEST WESTERN INN 104
2 67750--COMFORT INN 98
3 38605--HOLIDAY INN EXPRESS 87
4 36680--HAMPTON INNS 57
5 53165--MICROTEL 33
6 75385--SLEEP INN MOTEL 26
7 04160--AMERIHOST INN 18
8 69134--RED ROOF INN 13
9 17230--CLARION INN & SUITES 11
10 20715--COUNTRY INN 11
New Small Business Topic
- Hello everyone,
I'm on the lookout for new topics to add to my site. We just launched a Franchising section and are planning Human Resources section. Do you have any thoughts for a new section?
Here's a list of what we currently have:
Angel Investors
Branding
Bank Loans
Business Coaching
Business Plan
Franchises (New)
Insurance
Legal
Marketing
Public Relations
Sales
Small Biz Loans
Venture Capital
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