FREE online courses on Franchising Business and You - Forms of Franchising - Subfranchising

 

Subfranchising, sometimes called master franchising, is like area development franchising, except it involves three parties. In the typical subfranchising arrangement, the franchisor grants the subfranchisor a territory, and within the territory the subfranchisor commits to establish unit franchises according to a development schedule. Unlike an area developer, a subfranchisor usually has the option of either opening units himself or of selling unit franchises to third parties. The third parties subfranchisees (or unit franchisee) execute unit franchise agreements using form agreements usually specified by the franchisor.

 

The three-party form of franchising is the most common method of international franchising used by American franchisors. When used internationally, the concept is often called 'master franchising', and the subfranchisor is called the 'master franchisee'.