Posted on Oct 17, 2011
Creating Your Franchise Territory
Franchising offers people the chance to be independent while still retaining close ties to the host company, but people never had the assurance that another franchise wouldn't open two doors down. Now, there is a guarantee. Franchises offer "area development agreements", which gives the entrepreneur the right to be the company's sole representative in a given area, at least
for a certain amount of time. In return, the local owners guarantee a big enough investment to help the larger chain expand at a predetermined pace.
Jennifer Solomon is one such person that started her own "little empire" in New York, as highlighted in the New York Times. Solomon decided that she was not going to open just one franchise of Snip-It, a children's hair salon. Instead, she was going to open three. In exchange for this great order of franchises, Snip-It agreed to give Solomon exclusive rights to own the franchise in Westchester for a certain period of time.
This agreement is called "area development franchise agreement." Essentially, what's good the franchisee is good for the franchisor. When Solomon invested in not one, but three Snip-it's, that chain had an immediate strong presence. If Snip-It had allowed other potential franchisees to open in that location, they would have hurt Solomon's chances of success. It was better all around to nurture Solomon's Snip-Its and ensure growth.
Many franchises are now moving in this direction. Although the initial cost is obviously much greater, the pay-off is that much more successful. There is more support on both ends, and in the end the franchisee has developed their own little empire of franchises that they can proudly have control over.
Check out the NY Times article for more information on Jennifer Solomon.
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