Are Area Developer Opportunities the Brass Ring of Franchising?
At some point before or after buying their first franchise candidates sometimes stumble across the terms Area Developer (AD), Regional Developer (RD) or Master Franchisee.
Most will initially dismiss the discovery and focus on what they are working on, but some ask us the question: “Who are these people and what do they do?”
Franchising as an industry shares revenue and profits and leverages untapped talent to, as quickly as possible, consolidate fragmented inefficient markets.
In the typical franchisee role we see franchisees as the front line purveyors of services, products and customer service. Instead of expanding their brand footprint through opening company stores or territories the franchisor is leveraging the more advanced expertise and capabilities of a pool of franchise owners who will keep the lion share of the profits in exchange for growing faster as well as developing more sales and raving fans.
While the franchisor gives up profits that corporate stores would generate they also save money on the countless layers of middle management that a corporate store structure would require since their franchisees often operate at a more advanced level than an employee operator.
Area Developers, and those who operate under the other associated titles for this role, are a further leveraging of talent by the franchisor but instead of this being a front line role this is the franchisor using skilled operators to cover some combination of support, training, site selection and construction management. This enables the franchisor to make use of talent it might not be able to hire as employees to provide franchisees with an added layer of support at the local or regional level.
Much like in franchise operations the goal of the franchisor is to find someone for this role that will have a vested interest to go with their advanced skills that will operate in that role better than an employee would.
This advanced support layer tends to be used in particular businesses that can benefit from local support layered on top of the direct support provided by the franchisor’s corporate office alone.
With technology enabling better direct franchisor support than was possible 20-30 years ago we tend to see these Area Developer opportunities most often in brick and mortar concepts, though they are not universally utilized even there, to assist with tasks that are uniquely local. Prior to the training and operations support tasks, Area Developers often lead the development process with potential franchisees in their market, they oversee site selection as they are able to go visit real estate easily and they act as Project Manager on the unit construction process.
Being involved in these front line unit development tasks tends to keep most AD’s busy in the minutiae of opening franchise units so that they can get the franchisees operational and move on to the training and support functions that most AD’s were excited to do when they first signed on.
The one challenge in being a brick and mortar AD comes with the financial game plan. These roles are attractive since the AD tends to share in a portion of both the franchise fee and the royalty stream. The franchisor is counting on the benefit the AD brings to the franchisees will be far beyond the cash flow they share in on the franchisor side of the equation. But for the AD the development schedule in brick and mortar concepts can result in a cash flow that is out on the horizon instead of in the near term. In cases where the AD has to cover the costs of finding new franchisees the share of the resulting franchise fees may simply be recouping money spent on the development process.
AD candidates need to spend time to look into the role they will be asked to fill, the costs they will incur after being approved into the role and the timeline for developing their territory.
If we look at AD opportunities across the board we see a few lightning fast growing concepts that make the role very attractive, but they tend to be in the minority. Most are good steady builds where the AD has to have a long view for their personal financial plan. It is not uncommon for us to talk to a current AD who is past their first contract and has renewed, often over 10 years, and has yet to complete opening all the potential units in their region.
Then there are the unicorns.
One of the most interesting of the rarely seen applications of the Area Developer model is when they pop up in very strong territory (non-brick and mortar) concepts. The benefit in this application of the AD role is that the development process can be very different than in the brick and mortar brands. A large owner with brick and mortar locations typically opens one every 6 months, or so. A franchisee that buys ten, twenty or more locations could take years to get them all open. But, in a territory based service concepts the development process is very different. From the day a franchisee gets approved their entire territory tends to be open and active. Since they are not restricted by site selection and construction they have the opportunity to move faster towards their goals.
We have assisted candidates looking for both brick and mortar and territory based AD opportunities. There is a bit of skill and understanding required to apply for them and in some cases they are not made public knowledge as the franchisor wants to take extra care to find just the right partner in that role.
A final word of caution: The fact an AD, RD or Master franchisee role is offered does not make it worth buying. There is a lot to consider in making sure the particular opportunity is a good one. Having a consultant, coach or adviser that is very experienced in this part of the franchsie world would play well in your favor.
What will your success story be? Let’s go find it!
George Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution. Contact the Franchising USA Expert George’s Hotline 703-424-2980.