Franchise Area Representatives, is the third in our series on franchise multi-unit series. The Franchise and Business Opportunity Project of the North American Security Administrators Association, Inc. [NASAA] posted, in consultation with the Federal Trade Commission [FTC], Multi-Unit Commentary [“Commentary”] for public comment. This series is based on the NASAA Commentary.
As recognized by the NASAA comment:
These structures [Area Developer, Subfranchise, and Area Representative] are not mutually exclusive; that is, a franchisor may use just 1 structure or may use a combination of 2 or 3 structures. There are no universally accepted terms for these structures within the franchise industry. The terms used to describe the structures in different franchise systems, and in different laws and regulations, vary widely.
Today we are going to discuss Area Representative. Under an Area Representative arrangement, a person or entity pays the franchisor for the right to sell unit franchise to prospective buyers or to provide significant support to the unit franchisees. The Area Representatives, the Subfranchisor, usually receives a portion of the initial franchisee fee and royalty fees paid by the unit franchisees.
This is the graphic depiction provided in the Commentary:
Here are some FAQ about Area Representatives and franchise disclosures included in the NASSA commentary.
Next, look for our blog on Franchise Brokers!