Updated February 2025
Franchising is an opportunity for aspiring entrepreneurs to own a business with a proven business model, making it less risky than starting a business from scratch. While most franchisees start with a single-unit model, franchise area development is a model for experienced or well-funded investors who want to scale quickly.
Franchise area developers, also known as multi-unit developers, commit to establish a certain number of franchise locations during a set period of time in a specified market area, allowing a franchise to expand efficiently. In addition to signing the regular franchise agreement, they will also enter into a multi-unit development agreement.
The Role of a Franchise Area Developer
Ultimately, an area developer’s role is to introduce the franchise into a larger region than just a standard franchise territory. This is accomplished in the following ways:
- Territory Management – Area developers are assigned a specific geographic region to ensure franchise growth. Specific tasks include identifying prime franchise locations, coordinating real estate selection, and ensuring territory saturation is optimized.
- Recruiting & Supporting Franchisees – A franchise location can’t operate without an owner. Area developers are responsible for finding, vetting, and assisting qualified franchisees as well as providing initial training and support. They also act as a liaison between franchisees and the franchisor to achieve operational success.
- Operational & Brand Compliance – Area developers will conduct regular site visits to ensure franchisees are adhering to brand standards, offering guidance to improve performance when necessary.
Benefits of a Franchise Area Developer
There are significant advantages to selling multi-unit contracts for both the area developer and the franchisor.
Advantages for the franchisor:
- Accelerated Market Growth – Multi-unit owners tend to have access to better finances than their single-unit counterparts, meaning franchisors can expand more quickly than if they had to rely on single-unit franchisees.
- Market Development Control – When a franchisor sells multiple units to an area developer, they no longer have to look for franchisees for that area. This also allows them to plan their support for that area, knowing exactly when units will be coming online.
- Strong Franchisee Support System – An area developer provides hands-on mentorship, improving franchisee success rates.
- Consistency Across Locations – An area developer will also ensure there is a uniform brand experience within their territory, a key characteristic of a franchise.
Advantages for the area developer:
- Increase Revenue Potential – Not only is operating multiple units going to generate more revenue than a single-unit, but area developers also earn a portion of franchise fees and royalties from franchisees within the territory.
- Exclusive Territory Rights – Franchisees who develop an entire area with multiple units get to reap the rewards of being the only franchisee in that entire area for the length of their development agreements.
- Greater Operational Control – Area developers can standardize processes, train employees effectively, and implement regional marketing strategies that benefit all locations.
- Fee Discounts – A multi-unit developer will typically get a discount on their franchising fees for the later units they open. For example, the first one or two units might require the full franchise fee, but the fee for units three and four would be discounted and unit five might be discounted even more. Franchisors might also offer reduced royalty fees once an area developer opens a certain number of locations.
Challenges for a Franchise Area Developer
While franchise area development can be quite lucrative, the barrier to entry is higher than becoming a single-unit franchise owner. A few challenges to consider include:
- High Initial Investment – Naturally, developing multiple franchise units within a certain time frame is going to require substantial financial resources.
- Balancing Multiple Responsibilities – Managing the development of multiple franchise locations is much more complicated than starting a single-unit, requiring strong leadership, staffing, and logistics skills.
- Dependence on Franchisee Performance – An area developer’s success is tied to the success of individual franchisees in the territory, which can go both ways.
- Adapting to Market Conditions – While all franchisees must navigate economic shifts, competition, and local business trends, it’s more complex for an area developer managing multiple locations within a territory.
Key Skills of a Successful Area Developer
Clearly, franchise area development is not for everyone. In fact, franchisors are more selective in approving an area developer due to the expertise needed. Required skills include:
- Strong Business & Leadership Skills – Area developers must be able to mentor, manage, and motivate franchisees.
- Industry Knowledge & Experience – Having prior franchise ownership, management, or sales experience is a prerequisite for area developers.
- Financial Resources & Investment Capability – Of course, an area developer must have sufficient funds to invest in multiple franchise units.
- Marketing & Local Networking Abilities – It’s crucial that area developers understand the local market and are able to develop strategies to attract franchisees and customers.
Interested in Multi-Unit Franchise Development?
Are you looking beyond single-unit franchise ownership? Franchise area development is a key strategy for franchise growth while offering many benefits to the developer. Regardless of whether you want to open a single unit or multiple units, a FranNet franchise consultant can help you explore various opportunities to find the right match. Schedule your free consultation today to get started!