Four options for franchising your restaurant

Four options for franchising your restaurant
By Chad Finkelstein
July 12, 2012
Options for franchising your Canadian restaurant or foodservice operation

Once you have made the decision to either franchise your restaurant or acquire the rights to develop a franchised restaurant, there are several franchising options available to you. The availability and advisability of these options will depend on the nature of your franchise system, the territory within which you can conduct business and your overall business acumen. The following is a list of four examples:

Direct franchising: Direct, or unit, franchising is the purest form of franchising a business.  Under this model, you grant the franchisee the right to open one franchised restaurant at one location, with a specified geographic range that may be protected from other restaurants of the same system. In permitting the franchisee to open at one particular location (say, an intersection), you may or may not protect a reasonable geographic boundary around that intersection within which you will not franchise any other locations. This is referred to as an exclusive territory, and, depending on your type of restaurant and growth plans, it may or may not make sense to grant on an individual basis. Additional franchises may be granted to your franchisee based on its performance at the first location. In most cases, it will be rare for the franchisee under this model to be required to satisfy performance criteria or sales quotas.

Area development: Under an area development agreement, you grant the franchisee (or, area developer) the exclusive right to open and operate several franchised businesses within a much broader geographic territory. For instance, an area developer may be granted the right to open fast-food restaurants within a particular neighbourhood of Toronto, or maybe the entire province of Manitoba. Area developers typically will be required to open a certain number of stores within a specified time frame, as set by the franchisor.

Master franchising: Master franchising is similar to area development in that the franchisee (in this case, the ‘master franchisee’) is granted the right to a wide territory. However, as a master franchisee, the territory will generally be larger than under the other franchise models – it could be an entire province or all of Canada.

Leave a Reply

Your email address will not be published. Required fields are marked *