Master or Area Development
Master and Area Development (AD) opportunities are normally for the big players who want to either develop large territories or work as a sub-franchisor under a franchise company.
A Master Franchisor is a person or company who buys the rights to a large territory and with the franchisers help, sell franchise, collect franchise fees and royalties and divide the money collected with the franchisor. Sometimes they can do all or part of the following: Help set up the franchisee’s, train and give ongoing support to those in their territory. The percentage of the franchise fee’s and royalty they receive is in direct correlation to the work which is expected and given. The split can be 50%, greater and sometimes less.
Being a Master franchisee can be very lucrative if things go well. To receive a royalty on a franchisee’s business can really add up if the franchisee’s can make a good income and it gets multiplied by a large number of them. It is like receiving an annuity over 10, 20 or 30 years depending on the length of the franchise agreements.
A Master franchise is the most expensive way to buy a territory, but has the most potential for making large sums of money. Usually the territory will allow for 20 to a couple hundred franchise locations, depending on the type of franchise and the amount of income each franchisee can make. Territories size could range anywhere from a large city, state, multi-state or even a foreign country. Many times the fee charged is dependent on the population or the number of franchises the area will hold. The amount charged could be anywhere from a few hundred thousand dollars to a few million.
An Area Development franchise is usually when someone has the rights to develop a territory over a certain length of time. The AD agrees to develop the franchise and open a defined number of franchise. The AD usually pays a deposit on the franchises to be opened and then pays an agreed amount as each franchise is under development. Sometimes because they are buying a large territory or a large number of the franchises they receive a discount on the franchise fee’s. If the AD does not live up to the agreement, they can lose the exclusive rights to the territory.
The size of the AD territory could be the same as a Master franchisor; a city, state or a country.
If you are interested in either an AD or a Master franchise, your consultant will help you find the right franchise opportunity for you. Only a small fraction of the 2,000 plus franchisers will sell an AD or Master territory. Because they have to share the franchisee fees and royalties many franchisers to not sell this type of territory.