Franchisors use different ways of developing their franchise. The types of franchise arrangements include:
With this arrangement the franchise buys the right to run just ONE franchise unit. They may at a later stage be offered to buy additional units from the franchisor, this is called multi-unit franchising.
This is when a franchisor owns more than one unit in the same franchise network. E.g. many food franchises only look for those with the money to buy more than one unit. They may initially only start with one but as time goes on they will be required to develop the business into a multi-unit operation.
An area developer franchisee is granted the exclusive rights to develop the franchise system in a defined territory e.g. city, state, within a specific time frame. They do not sell franchises.
A master franchisee is given the rights to open and develop franchises in a defined territory, and is also allowed to sell franchises within that area. They sell them to sub-franchisees. Master franchisees may hold the rights for regions, states and the US as a whole if the franchise is from outside of the US. The master franchisee becomes technical the franchisor for their territory, i.e. they do the recruiting, training, marketing etc.