Area Developer Franchises
An area developer agrees with a franchisor to open a certain number of units by a set date in a specified, exclusive territory. The area developer pays a development fee up front for this exclusivity, and a franchise fee each time they open a unit. They often benefit from financial incentives as they open additional units, enjoying reduced fees in exchange for building the brand successfully in their territory.
Area developers can also recruit and train franchisees to launch new units in their territory. The area developer receives a percentage of the franchise fee for each new unit sold to a franchisee, along with a percentage of the ongoing royalty fee.
An area development agreement is attractive and suited to an individual or company looking for a significant investment opportunity to which they can bring their strong management experience, proven track record and, often, knowledge of the industry concerned.
Increasingly, franchisors are using the area development model as their main method of expansion, preferring to (a) deal with one entity operating several units and (b) allocate the recruitment and support of franchisees to experienced representatives who are often more familiar with the territory than the franchisor because they already do business there. Having the right area developer in place can greatly accelerate the growth of a franchise system.