Sub franchisor refers to a person or company that purchases the rights from a master franchisor to sell and support franchise units within a designated geographic area. They act as a mini-franchisor within their territory. In franchising, sub franchisors help expand brands more rapidly by taking on local development responsibilities.
Sub franchisor in franchising is an entity or individual that contracts with a franchisor (often called the "master franchisor") to develop, sell, and support franchise units in a defined region or territory. Rather than dealing directly with the franchisor, local franchisees within that area sign agreements with the sub franchisor. In turn, the sub franchisor provides training, operational support, compliance monitoring, and other services usually handled by the franchisor. The sub franchisor typically earns a portion of the franchise fees and ongoing royalties collected from the franchisees they recruit and support. This model allows brands to grow more quickly, especially in large or international markets, but it also requires careful oversight to ensure brand consistency and quality across territories.
Also see 'Master Franchisee'
Learn more about franchising in The Educated Franchise - 3rd Edition
Aspect | Sub Franchisor | Area Developer |
---|---|---|
Main Role | Sells franchises and provides training and support to franchisees in a designated territory. | Develops and operates multiple franchise units personally within a designated territory. |
Relationship with Franchisees | Acts like a local franchisor; franchisees sign agreements with the sub franchisor. | Does not sell franchises to others; operates all units themselves. |
Revenue Source | Earns a portion of franchise fees and royalties from franchisees they recruit and support. | Earns revenue directly from the operation of their owned units. |
Level of Responsibility | Responsible for recruiting, training, supporting, and monitoring franchisees within the territory. | Responsible for developing, staffing, and managing their own franchise units. |
Common Use | Used for rapid brand expansion across large or international territories. | Used for systematic growth of company-owned (franchisee-operated) locations within a region. |
The sub franchisor model gained popularity as American brands expanded rapidly across the country and into international markets during the 1960s and 1970s. Franchisors recognized that it was difficult to manage thousands of units across wide geographic areas without local help. By appointing sub franchisors, brands could tap into local expertise, real estate knowledge, and business networks while maintaining system growth momentum. Today, sub franchisors are common in large, complex markets such as California, Texas, and international regions where local cultural knowledge and hands-on support are critical to franchisee success.
Successful sub franchisors are thoroughly trained by the master franchisor in brand standards, system operations, legal compliance, and franchisee support techniques. If the sub franchisor is poorly trained or unsupported, the brand can suffer serious damage in that region.
Sub franchisor arrangements are powerful growth tools in franchising, allowing brands to expand quickly into new or distant markets by delegating local sales and support responsibilities. When well-structured and carefully managed, a sub franchisor system creates win-win outcomes for franchisors, sub franchisors, and franchisees alike, fueling faster and more sustainable brand development.