5 Types Of Franchise Agreements To Consider

Franchises open doors for professionals looking to own and manage businesses. When a professional signs a franchise agreement, they agree to manage a franchisor’s location. By signing on the dotted line, they enable themselves to skip over the process of launching and marketing a new company. Instead, they can enter the market with a brand name that is already well-established. As a prospective franchisee, you likely see the value in opening a franchise location. Whether you want to open a Firstlight home care franchise or a restaurant location, you can profit. However, you need to learn about the different types of agreements to ensure that you sign the best deal. Continue reading to learn about the different types of franchise agreements to consider.

Single-Unit Franchise Agreement

One of the most popular franchise agreements is the single-unit agreement. If you sign this agreement, you will gain the right to operate one franchise unit. Because a lot of work goes into managing a single location, this is the most common option for new franchisees. Most learn the ropes of operating a franchise location by signing a single-unit franchise agreement. While you will have a smaller territory to work in, you will also participate in the majority of the operations. Consider this type of franchise agreement as a beginner.

Multi-Unit Franchise Agreement

Another common franchise agreement to keep in mind when searching for the best opportunity is the multi-unit franchise agreement. This option is typically offered by numerous franchisors. Inquire about options for ServiceMaster franchises or popular retail ones. Unlike the single-unit agreement, franchisees under multi-unit contracts operate multiple franchise locations at once. These locations are typically in a specific area so that the franchisee can successfully manage both simultaneously. Typically, franchisors offer this type of contract to experiences franchisees because the demands are higher and, therefore, more difficult to reach. Keep this agreement type in mind as you gain more experience in the business world.

Area Development Franchise Agreement

Franchisees also profit off of area development franchise agreements. This type of contract involves opening a certain number of units within a specific location. For instance, you could multiple open dollar store franchise units in one area. If you choose this kind of franchise agreement, you will be responsible for paying any development fees. Franchisors expect franchisees under this type of agreement to stick to their development schedules regardless of the costs. When franchisees fail to stay on schedule, their franchisors have the right to terminate their agreements. Understand both the risks and the opportunities involved in this type of agreement.

Area Representative Franchise Agreement

The area representative franchise agreement resembles the area development agreement. An area representative franchise agreement also involves opening a set number of locations within a designated territory. In addition to limitations on number of units and location, franchisors also set boundaries on time. This is the way that franchisors maintain a relative amount of control over their franchise. After all, a franchisee under this agreement essentially takes on the role of a sub-franchisor. The difference between an area representative franchise agreement and an area development agreement is that the representative contract allows franchisees to sell locations. If you are ready to take on such responsibility, consider this type of franchise agreement.

Conversion Franchise Agreement

Finally, a conversion franchise agreement entails initiating the deal through an independent operator. In most cases, the franchisee is that operator. To sign this type of agreement, a franchisor needs to contact you and request that you convert your establishment to join their franchise system. Franchisors reach out to business owners who operate within the same industry for this opportunity. Thus, if you want to sign a conversion franchise agreement, get noticed by a franchisor within your sector.

In order to take advantage of a franchise opportunity, you need to sign the right agreement for you. Single-unit franchise agreements are the most common contracts because they are the simplest to follow. Franchisees profit off of multi-unit franchise agreements as well. Area development franchise agreements can lead to large development costs, but a wide variety of opportunities. They are fairly similar to area representative franchise agreements only franchisees under representative contracts can sell units. Conversion franchise agreements involve converting business owners into franchisees. Consider these types of franchise agreements to start your next business venture.

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