SUB-FRANCHISEE: Unit Franchisees of a Master Franchisee

Pursuing a multi-franchise operation for an expansive territory, professional legal advice for a master franchise is invaluable.

Contact Neufeld Legal PC for franchising legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

Sub-franchisees (unit franchisees) are the individual business owners who purchase and operate a franchise unit (a single location or business) from a master franchisee. Sub-franchisees operate within the master franchising structure, engaged and reporting to the master franchisee, which has its own contractual arrangement with the master franchisor (the top most franchisor in a multi-tiered franchise system), which entails:

• Contractual Relationship: The sub-franchisee signs their franchise agreement directly with the master franchisee (effectively a sub-franchisor), not the original franchisor. Although the franchise agreement might be comparable in many respect to the franchise agreement of the master franchisor, there also tend to be distinctive elements, many of which are required by the particular franchise legislation and related laws of the particular jurisdiction.

• Operator of the Business: The sub-franchisees are the ones who run the day-to-day operations of the specific franchised unit, using the main brand's system, trademarks, and know-how (subject to the specific modifications that the master franchisor has approved and tend to arise because of distinctions in the territory, which are often dictated by laws of the jurisdiction).

• Support and Reporting: For most operational purposes, the sub-franchisee's main point of contact, trainer, and support provider is the master franchisee. They pay their initial fees and ongoing royalties to the master franchisee. Sub-franchisees are not apprised as to the arrangement that the master franchisee has with the master franchisor as to the division of those fees based on the master franchise agreement.

• Local Network: They are the final layer in a multi-tiered franchise system, responsible for maintaining the brand standards and customer experience at the local level. They serve to grow and broaden the global franchise brand (while having responsibilities to both the master franchisee and the master franchisor).

Christopher Neufeld is a business lawyer knowledgeable in the rigors and challenges of an expansive franchise enterprise that is undertaken by way of a master franchise agreement, together with the legal constructs that are critical to their effective operation. For experienced legal representation in starting, acquiring / selling, operating and managing a franchise, contact franchisee lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.