Three Types of Franchise: How Many Points Do You Know?

Single-unit Franchise, Sub-franchise, and Micro Franchise

by Nick

1. Single-unit Franchise

A single-unit franchise, also known as a unit franchise or individual franchise, is a type of franchise agreement in which a franchisee is granted the right to operate a single franchised location within a specific territory or area. In this arrangement, the franchisee owns and operates only one unit of the franchise brand.

Single-unit franchising is a common and popular model for both franchisors and franchisees, particularly in industries such as food service, retail, and personal services. It offers entrepreneurs the opportunity to own and operate their own business with the support and backing of an established brand and proven business system, while providing franchisors with a scalable growth strategy that allows for controlled expansion into new markets.


2. Sub-franchise

A sub-franchise, also known as a sub-franchise agreement or master franchise agreement, is a contractual arrangement where the primary franchisor (the master franchisor) grants the right to another party (the sub-franchisor) to operate and sell franchises within a specific territory or region.


In a sub-franchise agreement, the sub-franchisor essentially acts as a mini-franchisor within their designated territory. They are responsible for recruiting, training, and supporting individual franchisees, as well as ensuring that they comply with the standards and requirements set by the primary franchisor.


Sub-franchising offers several benefits for both the primary franchisor and the sub-franchisor. For the primary franchisor, it allows for rapid expansion into new markets with minimal investment and risk. For the sub-franchisor, it provides the opportunity to leverage an established brand and business model to build a profitable business within their territory.


Overall, sub-franchising is a strategic growth strategy that enables franchisors to expand their brand presence and reach while empowering entrepreneurs to own and operate their own businesses under the umbrella of a successful franchise system.

3. Micro Franchise

A micro franchise is a scaled-down version of a traditional franchise model that is designed to be more accessible to entrepreneurs with limited resources and capital. Micro franchises typically involve smaller initial investments, lower operating costs, and simplified business models compared to traditional franchises. They are often targeted at individuals in developing countries or underserved communities who may not have the financial means to invest in a full-scale franchise but still want to start their own business.

Key characteristics of micro franchises include:

Low Initial Investment: Micro franchises typically require a smaller initial investment compared to traditional franchises, making them more accessible to aspiring entrepreneurs with limited capital. This may include lower franchise fees, reduced equipment costs, and minimal overhead expenses.

Simple Business Models: Micro franchises often involve simple and easy-to-operate business models that require minimal training and expertise. This allows individuals with limited business experience to start and run a successful franchise operation.

Scalability: While micro franchises may start small, they often have the potential for growth and scalability over time. As franchisees become more successful, they may have the opportunity to expand their operations or upgrade to larger franchise models.

Examples of micro franchises include small-scale retail outlets, mobile food carts, home-based businesses, and service-oriented ventures such as cleaning services or personal care services. These businesses are typically tailored to the needs and preferences of local communities and can have a significant impact on economic development and poverty reduction in the areas where they operate.


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