Like any other industry, the franchise industry has a few terms that you, as a potential franchisee, may not understand. We often get questions about ‘master franchisee’, ‘multi-unit franchise’, and ‘area developer’.
A multi-unit agreement is when a franchisee owns and operates multiple franchised units; these units are usually but not always in the same geographic area.
An area developer is a type of multi-unit franchising. An area developer is a franchisee who signs with a franchisor and commits to develop more than one unit in a geographic region within a defined period of time. An area developer is granted a larger ‘exclusive’ territory where he is able to establish single units. Each unit is owned and operated by the area developer.
A master franchisee is someone given the right by a franchisor to purchase and sub-franchise (sell new units) within a specific territory. The master franchisee does not own the franchises being developed. Instead, a master franchisee usually receives a share of the franchise fee and/or on-going royalty payments for helping grow the system within a region.