Many established franchise systems have an Area Developer (AD) structure in place. The Area Developer is responsible for carrying out the franchisor’s plan in their assigned territory. This includes recruiting franchisees, locating franchises in the territory, negotiating for locations, and insuring that franchisees are in compliance with franchisor rules and policies.

What does that mean?

The Area Developer is your “Boss”.

I can hear you saying “But wait!!! I’m buying a franchise. I own my own business! I don’t have a boss!”

OK, you don’t have a boss, as long as you understand that the Area Developer can dictate your hours of business. He can and will dictate how many days per week you are open. He can walk in and inspect your business at any time, including your books and records, and can often levy penalties against you. Moreover, if in their judgment, you are not complying with the exact rules of the franchise, they can be responsible for taking your franchise away, and they can approve or deny whom you can sell your franchise to. Hmm, sounds like a boss to me.
Therefore, it is extremely important that you ask these suitability questions about your new boss, I mean, Area Developer.

• Do you relate well to the Area Developer?
• What are the Area Developer’s plans for the territory? More locations, more enforcement, more training, boosting store sales?
• What is the Area Developer’s way of doing business? Supportive or aggressive? Training vs policing? Does the AD enjoy the support of most franchisees, or is the franchisee community highly politicized by the Area Developer?
• What is the process available to the franchisee if they feel that the Area Developer has not been fair to them?
• Can the Area Developer also be a franchisee? If yes, what are their plans for expansion, and how might that affect your plans? Who do you think will get the “cherry” locations if the Area Developer is also a franchisee?
• How is the Area Developer compensated? How much of the initial franchise fee do they get? What percentage of the royalty do they get if they sell you a new location, and how does that compare to the percentage they get if you buy an existing location?

These are important considerations to research before you commit to a particular franchise.