MRM EXCLUSIVE: Structuring a Multi-Unit Franchise

A multi-unit franchise owner can structure its operations in a number of ways, but one approach in particular often makes a lot of sense: a developer entity that acts as the parent company for the individual restaurant locations.  

First some background.  Many franchisors seek out franchisees who want to open three or more units. One approach is to sign a development agreement in which the developer commits to open an agreed-upon number of franchise units in a defined territory over a specified period.  In exchange, the franchisor agrees not to open a company-owned restaurant or to grant a franchise to anyone else in that territory while the development agreement remains in effect.   

In most franchise systems, the developer opens each franchise under a separate franchise agreement. The multi-unit developer typically signs the development agreement and the first franchise agreement at the same time.  Each subsequent franchise is then opened pursuant to a separate franchise…