What is an Area Representative?
Probably created in response to sub-franchising, franchisors did not approve of the loss of power and sharing of royalties when they could easily have the entire cookie. The solution resulted in the arrangement known as the Franchise Area Representative.
The Area Representative pays a certain fee for the right to solicit prospective franchisees and to provide certain service to existing franchisees in a defined franchise territory. The Area Representative acts as a salesperson for the franchisor and once they find a new franchisee, the area representative does not enter into any contracts with the franchisee. They do not exercise any power unlike a Sub-franchisor. All the franchise agreements are entered into directly between the franchisor and the prospective franchisee. All payments by the prospective franchisee are made to the franchisor and no transaction takes place between the prospective franchisee and the Area Representative.
The reason why anyone would choose being an Area Representative is that they are paid a certain portion of the initial franchise fee of each new franchisee they solicit as compensation. Aside from the sales commission the area representative may get paid by the franchisor a portion of the royalties received for servicing franchisees. In some cases, franchisors will pay the area representatives a portion of the fee received from new franchisees in the reps’ territory even though the area representative may have had nothing to do with the screening or recommending that particular franchisee. However, all these and other contingencies- such as compensation for furnishing many of the pre-opening and on-going services to the franchisee- should be covered in the area representation agreement.
The area representative is most often a franchisee in the defined territory, owning one or multiple units. The area representative may own a unit completely or may have smaller ownership in several units.
Choosing a Service Franchise or a Product Franchise
Most of the franchises offering Product oriented goods have very stringent rules. Since their brand is associated with a tangible good they must guarantee the desired quality from the consumer’s expectation. Franchisees must purchase the goods from a designated supplier and must keep items in their inventory as suggested by the franchisor. This can be company regulated policies or simply to help the franchisor launch some of their new products.
Minority, Women Entrepreneurs Find More Opportunity in Franchise World
While there are many risks and hurdles involved in starting a new business, there are also many rewards. If you’re ready to start it up, but aren’t in the position (financially or otherwise) to risk it all in starting something new, you may consider franchising. Franchising offers many benefits to aspiring entrepreneurs, especially to minorities and women, who are seeing more opportunities in the franchise world in recent years.
Best Frozen Yogurt Franchise Opportunities in the USA
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