What Is A Sub-Franchise Agreement?

A sub-franchise agreement is a contract between two business entities that allows one to become a franchisee of the other. It allows the franchisor to share the benefits of their business model, brand, and products with a franchisee while granting them the right to operate under the franchisor’s name and business model. Sub-franchise agreements are often used to expand a franchise’s reach into new markets and can be beneficial for both parties.

Advantages of Sub-Franchise Agreements

A sub-franchise agreement can be advantageous for both parties involved. For the franchisor, it can help them expand their business into new markets and increase their brand visibility. Additionally, the franchisor can benefit from the expertise and resources of the franchisee, helping them to better serve their customers. For the franchisee, it allows them to benefit from the franchisor’s reputation and brand, as well as their established customer base, which can help them generate more revenue.

Types of Sub-Franchise Agreements

There are two types of sub-franchise agreements: exclusive and non-exclusive. An exclusive agreement grants the franchisee exclusive rights to operate under the franchisor’s brand and business model in a particular market or region. A non-exclusive agreement, on the other hand, allows the franchisee to operate in multiple markets or regions and allows the franchisor to grant similar rights to other franchisees.

Example of Sub-Franchise Agreements

Here are three sample sub-franchise agreements:

Example 1: Exclusive Sub-Franchise Agreement

This agreement grants the franchisee exclusive rights to use the franchisor’s brand and business model in the specified market or region. The franchisee is not allowed to grant the same rights to other franchisees and must abide by the terms of the agreement.

Example 2: Non-Exclusive Sub-Franchise Agreement

This agreement grants the franchisee the right to use the franchisor’s brand and business model in multiple markets or regions. The franchisor is allowed to grant similar rights to other franchisees and must abide by the terms of the agreement.

Example 3: Multi-Unit Sub-Franchise Agreement

This agreement grants the franchisee the right to open multiple units of the franchisor’s business in the specified market or region. The franchisee is allowed to operate under the franchisor’s brand and business model and must abide by the terms of the agreement.

Conclusion

Sub-franchise agreements can be beneficial for both parties involved, as they allow the franchisor to expand their business into new markets and the franchisee to benefit from the franchisor’s reputation and established customer base. There are two types of sub-franchise agreements: exclusive and non-exclusive, and examples of each are provided above. Additionally, there are also multi-unit sub-franchise agreements, which allow the franchisee to open multiple units of the franchisor’s business in the specified market or region.