FREE online courses on Franchising Business and You - Forms of Franchising - Area Development Franchising

In area development franchising, the franchisor grants the franchisee, (also called area developer) a territory within which the franchisee agrees to open and operate an agreed number of unit franchised businesses according to a development schedule. In an area development franchise, the franchisee signs two forms of agreement, an area development agreement which specifies the territory and the schedule for establishing the franchised units, and a unit franchise agreements. Before each franchised unit is established, a separate unit franchise agreement is signed. Area development franchising involves only two parties, the franchisor and the franchisee. Usually, if the franchisee fails to open units at the rate required by the development schedule, the franchisor may terminate the development agreement but allow the franchisee to continue operating any unit franchised business that already have been opened.