In my over three decades of experience as a franchise consultant, I am often asked about the different methods to franchise your business. There are three main ways to franchise your business:

  1. Individual franchises
  2. Area development franchises
  3. Master franchises

Each of these methods or ways to franchise your business requires a different Franchise Agreement. Each way to franchise your business has benefits and drawbacks.

In individual franchising, you franchise your business by signing a Franchise Agreement granting the franchisee (see franchisee training program) the right to operate one franchise, usually within a specific territory.

Of course, you may sign additional individual Franchise Agreements with a franchisee, each allowing him or her to open an additional franchise.

When you franchise your business through an area development arrangement, you and the franchisee negotiate the following: (1) the specific number of franchise operations to be opened, (2) a schedule for launching those franchises and (3) the area development territory.

If the Area Developer fails to meet the stipulations of the Franchise Agreement, the remaining territory returns to the Franchisor. In that case, the Franchisor can sell another Area Development contract, sell individual franchises in the remaining territory or open company-owned units.

Creative Ways To Franchise Your Business

If you take the master franchising approach when you franchise your business, sometimes called sub-franchising, you grant the franchisee a territory. The franchisee is responsible for selling, training and servicing franchises within this territory. The master franchisee retains the majority of funds generated from the master franchise operation. Again, any remaining territory reverts back to the Franchisor if the terms are not achieved.

You must carefully explore which type of franchising or combination of methods best meets your goals when you study the ways to franchise your business. In subsequent blogs, we will address the pros and cons of each method for you to consider when you franchise your business.