Area representatives and area development are two relatively new sub-industries in the franchising business that have flourished in two decades. Before sub franchising was commonplace, area representatives were not common around the country. Due to the new shift in favor of sub franchising, the ability for area representatives to enter the market and begin to control territory is relatively easy. It now is the perfect opportunity for prospective area representatives to join in.
For a fee or a percentage of royalties, area representatives have the right to solicit franchisees and sell a service to franchises in a designated territory. Whether you want to work in New York or Nebraska, full-time or part-time, becoming an area representative is a great way to work with new franchisees or prospective franchisees and carve out a piece of territory for yourself.
From healthcare to high schools, the potential for a franchise area representative to make the most of their territory is growing. The opportunity to jump in on the expansion of this industry is now. Franchising is an extremely common way of organizing businesses in local communities, meaning that area representatives have an unprecedented opportunity to work with and solicit franchisees in their communities and create large profits for themselves.
While other franchise operations may require a contract, area representatives do not enter into franchise agreements directly with the franchisors, and generally, no transactions are made between these parties. Instead, an area representative gets a commission of a certain portion of the original franchise fee of every franchise they solicit. This can even extend to a portion of royalties given from the franchisor to the Area Representative for servicing their franchise.
While an area representative’s salary may vary based on the service area or territory, becoming an area representative is extremely attractive. Initial fees and royalties can act as passive income once you expand your area and continue to grow, although the initial start-up can be slow at first.
Aside from the typical ways to get paid, such as fees and royalties, sometimes a franchisor will pay an Area Representative a fee or royalty just for operating within their territory, even if you have no business or deal with that franchise. Aside from all of these benefits, you can also own franchises within your own territory, allowing for easy growth and shortcutting many of the steps necessary for opening a new franchise.
What is the Difference Between Area representatives and Master franchisors?
All over the nation, from North Dakota to Minnesota a master franchisor can be found in most communities with franchises operating within them. The master franchisor is one of the most common franchise positions used in the franchise business. This role is trusted with all of a franchiser’s responsibilities, including signing a new franchise agreement. Unlike area representatives, the franchise master is paid as the franchisor but is also liable to pay an initial franchise fee or royalty to the original franchise owner.
In contrast, the Area representative acts as a franchisor but does not have the right to sign new franchising agreements because they already have a signed agreement with the prospective franchisor. They would not be considered stakeholders and generally abide by a non-contractual relationship with single-unit or multi-unit franchises. In contrast to the franchise master, the area representative works with franchisees in their territory without an agreement or written deal and has a varied scope of responsibilities in a franchise model.
How a Franchise Area Developer Agreement Works
An Area Developer agreement is what allows a franchisee to purchase a franchise in a particular territory. The franchisee buys the rights to operate on the territory and agrees to operate a certain amount of businesses by an agreed-upon date. After the agreement is made, the franchisee will create a development schedule that they must adhere to in order to continue their deal.
Ultimately the franchisor is at the top of the chain of command in this agreement. The Area Representative sits under that position in responsibilities; however, the Area Representative can also be the franchisor. Through the area representative agreement, the Area representative can solicit and support franchisees in a non-contractual relationship with single or multi-franchise operations, unlike sub franchises characterized by a connection between the master franchisor and a franchise unit.
What Are the Advantages of an Area Representative?
Aside from the passive income from franchises operating in your territory, being an Area Representative offers a strategy to grow your franchise operations. This style of business does not require an army of staffers or even an office. The lack of dedicated office space and the lack of staffers means that overhead for the area representative typically stays low, which can translate to greater financial freedom for the area representative.
The great thing about this role is that it can be performed mobile, with little training and supervision. Because you are growing your business with the money of other businesses, personal financial liability is minimized. With rapid growth and working with iconic brands, working as an area representative comes with minor downsides.
While the typical job description for a franchise area representative ranges greatly in responsibility, this burgeoning field is an excellent choice for those who want to make a name for themselves in the franchise business and make income on their own time and their own community. Area representatives enjoy a flexible and fluid schedule and the financial benefits that come with working with many different franchises within their territory.
Although this role in the franchise model can be overlooked, becoming a franchise area representative is an enviable career that pays dividends as you work on expanding and growing your own business operations, in addition to the skills, contacts, and network you will create on the way to creating a sustainable franchise area.