Additionally, each of the franchise business models can be available in one or more of the following arrangements:

Single unit: If you’re a new entrepreneur looking to get your feet wet, this would be the simplest way to start your franchising journey. It is the most common type of franchise, which gives you the rights to open and operate one franchise unit.

Multi-unit: Multi-unit arrangements allow high-performing franchisees the ability to operate multiple units to grow their small business. 

Area developer: This type of franchising arrangement typically allows you to operate a greater number of units over a larger territorial area. The benefit is that it restricts other franchisees from opening any units in your territory during the contract term.

Master franchise: A master franchise agreement offers you a great path to building wealth and a residual income source. It gives you more rights than an area development agreement would and allows you to sell franchises to other people (sub-franchisees) within your territory. 

Finally, there are 3 types of royalty models. As part of the franchise model, you as a franchisee are responsible for paying an ongoing license or royalty fee to the franchisor. This allows you to use their intellectual property, among other things. 

You will usually need to pay this fee monthly or quarterly, and it can be calculated in a few different ways. The following are the three most common royalty models.

The Fixed Dollar Amount: This is the most straightforward of all the franchise royalty models. It means you simply pay a specific amount of money on a regular basis (i.e. $150 per week) to the franchisor. This stays the same, regardless of whether your franchise business’s performance is going great guns or not.

The Fixed Transaction Amount: In this more complicated model, you regularly need to pay a dollar value that’s equivalent to a predetermined number of transactions. For example, the franchisor may determine that your royalty payment will be the equivalent value of ten standard product sales, which you need to pay monthly.

The Fixed Percentage Method: This model is the most common, as it is easy to grasp and good for both you and the franchisor. The royalty amount you need to pay is based on a set percentage of your franchise’s gross sales. 

Our team at Evergreen Franchise Advisors, LLC is excited to assist and guide you throughout the entire franchise acquisition process. Our goal is to help ensure your success and allow you to reach your goal/dream of business ownership.