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.
Exploring the Four Types of Franchises You Can Buy - To learn more about this author, visit Ray Flores's Website.
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