development agreement

A term used to describe the agreement traditionally used to grant multi-unit development rights to franchise developers or multi unit franchisees. In the development agreement, the franchisor grants semi-exclusive “development rights” to a developer, which in turn agrees to establish a specific number of franchised units within a certain geographic area (called a “development area”) in accordance with a predetermined “development schedule.” Before the developer opens each franchised business, it typically is required to sign a franchise agreement for that franchise. The developer typically pays a “development fee” to the franchisor, a portion of which may be credited toward the initial franchise fee due under the unit franchise agreements.

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