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Whether you are interested in buying or selling a franchise, it’s important to understand the different flavors of franchise agreements in the state of Texas. There are four primary variants of franchise agreements. In this article, we provide an overview of the four variants of franchise agreements available in Texas. For assistance buying, selling, or operating a franchise, please contact an experienced Austin franchise law attorney for assistance.
Franchise Benefits
A franchisee is a third-party who purchases the brand rights from a franchisor to operate a franchise. Typically, the franchisee pays an initial franchise fee for the rights to use the franchisor’s brand in addition to ongoing fees for marketing, royalties, and more. There are many potential benefits to becoming a franchisee, including:
- Business assistance
- Brand recognition
- Buying power
- Profits
- Lower risk
- Built-in customer base
Franchise Agreement Variants
Single-Unit Franchise Agreement
The first type of franchise agreement covers a single-unit franchise. With this type of franchise agreement, the franchisee is granted the rights to operate one franchise unit within a brand. This variant of franchise arrangement is the easiest and most common, making it appealing to first-time franchise owners. Often, when a single-unit franchise relationship is successful, the franchisee and franchisor expand their contract to cover more locations.
Multi-Unit Franchise Agreement
A multi-unit franchise agreement allows a franchisee to operate multiple franchise units. Multi-unit franchise agreements may have specific territorial protections, parameters, and development schedules. For example, a multi-unit franchise agreement may require the franchisee to adhere to an agreed upon schedule for the development of a specific number of units within a specific time frame. Under this arrangement, if the franchisee fails to meet the deadlines, then the franchisor may have the right to pursue development with other parties or terminate a contract.
Area Development Franchise Agreements
Like a multi-unit franchise, an area development franchise agreement is an arrangement in which the franchisee has the right to open and operate multiple franchise units during a specified timeframe. The difference between this type of franchise agreement and a multi-unit franchise agreement is that area development franchisees are typically given exclusive development rights within a specific territory, which generally precludes other franchise operators from opening units in that area.
Master Franchise Agreement
A master franchise agreement gives franchisees the most rights of any variant of franchise arrangement. In addition to the contracted obligation to open a specific number of units within a defined area, master franchisees are sub-franchisors, which means that they are responsible for introducing the brand in a new region. In addition, master franchisees can sell franchise units within their area to other franchisees. Master franchisees are very similar to franchisors, but on a limited scale.
Contact an Austin Franchise Lawyer
Whether you are looking for legal assistance regarding buying, selling, or operating a franchise, we are here to help. At the Kumar Law Firm PLLC, we advise clients on franchise law and the complicated legal issues this area entails. When you come to us for assistance, we will endeavor to provide you with sound legal advice and diligently pursue a successful outcome in your situation. Please contact us today to schedule an initial consultation with an experienced Austin franchise law attorney.