What is Area Development, or Master Franchising?
In Area Development franchise agreements (also called Master Franchises), an area developer franchisee typically purchase the rights to develop and own an exclusive area development territory (typically a major market or region), and then sells portions of this territory to new sub-franchisees. Area develpment agents (also called master franchisees) then function as a ‘sub-franchisor’ and split the roles and responsibilities as well as the franchise fees and ongoing royalties with the franchisor.
Read a case study on Freshii Area Developer for Chicago David Grossman.
What are the benefits of an Area Development Agreement?
Area development agents are drawn to the potential for significant financial gains in a business with low overhead and few employees needed. However, that is not the only reason to investigate an area development opportunity— area development agents enjoy the benefits of an improved quality of life by owning their own business with exclusive area development territory rights, and the opportunity to grow as quickly as they want leveraging the capital and full time management of their sub-franchisees.
What type of support does the corporate franchise office give Area Development Franchisees?
Typically, the franchisor provides the area development franchisee with ongoing innovations, business expertise, training and operating guidance, rights to use proprietary brand names and trademarks, technology and purchasing advice, and other business building support effectively making them a mini-franchisor.
What is an Area Development Agent responsible for?
Area development agents are responsible for the recruitment, qualifying and sales of individual franchisees in your area development territory. You will also provide certain training, marketing, real estate, and purchasing support. You will act as an ongoing business coach to your franchisees to help them succeed, and in turn grow the value of your business and royalty stream.
What do we look for in an Area Development candidate?
In certain circumstances, we will award area development territories to experienced and capitalized groups who want to share with the franchisor at a local or regional level in the franchise fees, royalties, and roles and responsibilities of building and managing a territory.
Sample Financial Worksheet for Area Development Agreement:
1) Area Developer opens FLAGSHIP store. May own/operate more units.
__ units x $___ volume/each = $____ total sales x __% profit = $______ Profit
2) Area Developer sells and supports sub-franchisees earning half the franchise fees and royalties:
___ number of franchises x ___ franchise fee = $_____ x 50% goes to Master =
$________ (take this number, and plug into formula below)
$______ - expenses = $___ profit from franchise fees
____ number of units x $___ volume/each franchisee = $____ system wide sales x ___%
royalties = $____ royalty revenue x 50% split with franchisor = $_____ master
franchisees cut x __% expenses = $___ master franchisee profit
This worksheet is for information purposes only. A franchise offering can only be made by prospectus.
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