Franchise Agreements Broken Down

As defined by the International Franchise Association, a franchise is an agreement or license between two legally independent parties, which gives a person or group of people the right to market a product or service using a franchisors name and their operating techniques. Furthermore, it explicitly obligates the franchisee to pay the franchisor for these rights and obligates the franchisor to provide such rights and future support to franchisees.

That being said, did you know that there are different types of franchises and franchise agreements? While the idea behind the legal relationship between franchisors and franchisees is essentially the same, the way in which it is executed can happen in a variety of ways; see below.

Types of Franchise Agreements:

  1. Single Unit Single unit franchises occur when the franchisor gives the franchisee the rights to own just one facility. Typically used for first time franchisees, this agreement is known to be one of the most common.
  2. Multi Unit – Multi unit agreements permit a franchisee to open one or more locations at a time. Though it is the franchisee that owns each of the locations, a different manager may be appointed to each to help with the day-to-day operations.
  3. Area Development – This type of agreement refers to the idea that a franchisee must open a certain number of units within a specific period of time. The territory in which locations will be opened is generally determined in advance and similar to multi-unit agreements, the franchisee may choose to hire additional managers to help with the different locations on a day-to-day basis.
  4. Master Franchise – While most of the agreement is similar to that of an area developer, individuals at this level are given the opportunity to sell franchises to other people in a specified location. In this case, the franchisee essentially becomes a franchisor as well since they are now responsible for their own sub franchises.

Are you interested in acquiring a franchise of your own in the near future? As you start to connect with potential franchisors, be sure to ask them about the different types of agreements available so that you can determine which is the right fit for you.

For more information about the agreements and opportunities available to bluefrog Plumbing + Drain franchise owners,contact us at 888-490-9850 today!

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