The 4 levels of franchising

Most of us only think of owning a single unit business. We would like you to push
your dreams even farther. In the franchise system, there are many levels of ownership.
Read about each to figure out where you would best be suited.

Single Unit Franchises – This is where most people start. It allows you to
understand the system before expanding. This usually includes and exclusive territory
to operate. You would initially be very involved in the day to day business of the
franchise. Typical liquid capital required starts between $25,000 – $60,000, but
could range as high as $200,000.

Multi-unit Franchises – You may be asked to start out as a multi-unit, or
grow into it. There usually is a reduced franchise fees for multi-units. The risk
is lower because the franchisee can take advantage of the economies-of-scale theory;
by spreading costs across multi-units, the locations may be more successful. A good
sign of the health of the franchise is if many of the franchisees are multi-unit
owners. There is unually no exclusive territory where each franchise is set up.
You wilt be less involved in the day to day unit operations, but will supervise
each unit. You will become a general manager as more units are involved. Typical
liquid capital required starts between $50,000 – $70,000. The rest of the investment
is usually financed when each unit is opened.

Area Development Franchises – The franchisee has an exclusive area and the
rights to open a certain number of franchises with in that area. There is usually
a schedule with an expected number of opens with-in and certain time period. The
territory is much larger than any of the above and could range from a small city
to parts or all of a larger city. You would be involved in the beginning stages
of opening the first location. Then you would need to look for locations and management
for the additional locations. Typical liquid capital required would range from $60,000
– $120,000. This would pay for all franchise fees, securing the area. You many need
additional start-up capital. You would be able to finance the rest of the start-up
costs for each franchise, as they open.

Master Franchises or Regional Developers – You would be given the rights
to a much larger area to develop. You will be able to open franchises at a much
lower rate. Usually a Master Franchisee will open one unit for income and training
purposes. You will then be able to sell unit franchises, multi-unit franchises and
area development franchises. You would then earn a portion of the franchise and
royalty fees of these franchises. Master Franchises are very lucrative, but not
readily available. The territory can range from a large metropolitan area to several
states, or county. A Master Franchisee will usually set up and operate on unit,
but them move to having other manage while the master focuses on selling and consulting
or coaching the new franchisees. Typical liquid capital can range from $100,000
to $250,000 to acquire the territory and to start the area. Financing will be secured
for the start-up of the unit franchise.

Information obtained from the FBA – for additional information go to
Easy Franchise Match

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