FRANCHISE RESOURCE CENTER
Area Representative Defined
An Area Representative, often referred to as Area Developer, is offered the opportunity to secure the rights to open and develop a specific number of units in a designated territory,
as well as to solicit prospective new third party franchisees for the Franchisor in their defined territory. Unlike a master franchise, an area representative dose not
actually award a new franchise. This responsibility remains with the Franchisor.
Because an area representative’s responsibilities is not as broad as a master franchisee, are representative often do not receive or share royalty fees generated by each franchise
unit opened in their territory. However, the area representative normally receives a portion of the franchise fees for compensation for franchise recruiting.
The Designated Market Areas (DMA) system is an excellent, almost standard, method of awarding territories to area representatives and large multi-unit franchisees. These areas are
grouped simply because the market is a region where the population can receive the same mass media (television and radio) offers as well as newspapers
even internet content. There are 210 standard nationally accepted DMA markets in the United States.
Rights of the Area Representative
The area representative is granted the right to open a pre-determined number of outlets in a certain geographic territory. Typically a schedule is provided as to how many
units must be opened within a certain time period. Other franchisees may not operate in the assigned territory. Once the franchise is up and running in that particular
territory, the franchise fees and ongoing royalty payments sometimes may be decreased for the area representative.
Responsibilities of an Area Representative
Since area representatives are responsible for financing each unit as it opens, they have a vested interest in ensuring that each unit is operated in the best possible manner.
The area representative spends a great deal of time working to initiate each site. During the same time that the representative is ensuring the successful startup of one unit, he
or she is scouting out a location for the next outlet. As the outlets are being set up, the area representative typically hires some support staff to run each location. Eventually,
the area representative will oversee all the units at a higher, simpler level.
Characteristics of an Area Representative
Area representatives can typically expand their business rather quickly. Since they are usually required to put some of their own money into the franchise, representatives have a vested
interest in creating successful units under them. These representatives are very knowledgeable about franchising. They have had the experience of operating a franchise or two prior
to becoming an area representative. With some of these opportunities, area representatives are required to continue operating a particular unit at the same time as serving as an area
Advantages of becoming an Area Representative
Several area representatives have expressed that the close partnership with the franchise organization has helped lead to their success. Most of the time the franchise company assists
the area representatives by offering them the tools that they need to run a successful operation. This includes technical support, continuous training, and marketing tools. Some
organizations also offer other services such as guidance in location selection. All in all, area development can be quite a lucrative and solid business type to be involved