Which Franchising Structure Fits Your System?

Franchise systems must consider carefully whether a multiple-unit franchising approach is appropriate for their business.

IFA:

A variety of terms have been used to describe the techniques in franchising known and described below as area development, subfranchising and area representation. The most common of these terms are ‘multiple-unit franchising,’ ‘multi-tier franchising,’ and ‘master franchising.’ Close analysis of these terms indicates that perhaps the term ‘multiple-unit franchising’ is the most appropriate to describe all of these techniques.

The term ‘multiple-unit franchising’ recognizes the common goal of these techniques to establish relationships which provide for the opening of more than one unit.

The term ‘multi-tier franchising’ appears to provide an inadequate description because it fails to recognize the distinction between ordinary franchisee-franchisor relationships, which are two-tier in nature, and area development relationships (described below), which are also two-tier in nature.

The term ‘master franchising’ could be used to identify the techniques, but may not be the best choice because it describes neither the common goal of the techniques to establish multiple-units, nor the structure of the relationships which are established.

Thus, the term ‘multiple-unit franchising’ will be used to refer to the group of techniques identified above.

The common goals of multiple-unit franchising are to establish many units with speed, to leverage both money and personnel by relying upon another person’s resources, and to obtain a local presence. These goals recognize the following potential advantages of multiple-unit franchising…