What is an Area Developer in the Franchise Industry?

In the Franchise industry, there is an agreement between the franchisor and area developer that the latter, i.e., Area developer will have the exclusive rights to develop a specific market in multiple locations for a specific duration or time period.

Though it is advantageous to both Area Developer and franchisors, the franchisor should be vigilant.

With the passage of time and good growth, good profit earning, the franchisee tends to expand its business and operations of the franchise in multiple locations, an area developer agrees to abide by the legal terms to develop the multiple locations acquired.

Financial incentives are paid to the area developer with each addition of the new branches apart from the development fee and the franchise fee paid by the franchisor to the area developer in order to maintain the exclusive rights. However, if the area developer does achieve the agreed goals, the franchisor has the right to penalize or end the contract in the agreement.

 

Key roles of the area developer in the franchise industry:

1. Expanding and developing the franchise into a larger region in a multi-unit model.

2. With multi-unit development, both parties have to enter into a multi-unit development agreement and have to abide by the terms as outlined in the agreement.

 

Advantages of an area developer

1. Exclusive rights to a larger territory by preventing other franchise businesses from operating in your specific calculated area.

2. The franchise fee reduces as more units grow from the initial fees paid.

3. Simple expansion process as the exclusive rights lies with the area developer.

4. Economies of scale benefit the area developer.

 

Advantages of the franchisor in Franchise area development:

1. Good control of market development.

2. Fast expansion of the franchise as the model is multi-unit development and profit yield is much higher.

0