A valuable option for foreign franchisors who wish to expand their franchise in Italy by using a direct franchising approach is to use an Area Representative.
The Area Representative is entrusted by the franchisor with a series of tasks for the development of the franchise, such as:
- recruiting and selection of franchisees candidates in a specific area;
- negotiations with potential affiliates;
- carrying out a series of services in favor of the franchisees such as: identification of the location of the point of sale; training; assistance in the start-up phase; inspections and control; advertising; marketing consultancy, etc.
The Area Representative acts, depending on the tasks entrusted to it, as an intermediary (broker) of the franchisor or as a service provider. In any case, the Area Representative always acts on behalf of the franchisor, who is directly responsible for contractual relationships with affiliates.
Nonetheless, in day-by-day relations with the franchisees, the Area Representative is often perceived by the latter as the “real” franchisor, given the fairly close relationship that arises between these subjects.
The Area Representative receives remuneration for the activity performed, often in the form of a share of the initial franchise fee and royalties paid by the franchisees.
Resorting to an Area Representative allows the franchisor to keep a high degree of direct control over the franchisees, and to enlarge the franchise network faster, given the experience and abilities of the Area Developer in the selection process.
On the other hand, in this way the franchisor retains all the contractual responsibilities connected with the relationship with the franchisees.
Avv. Valerio Pandolfini
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The information contained in this article is of a general nature and is not to be considered an exhaustive examination of the various issues, nor is it intended to express an opinion or provide legal advice. Specific legal advice must be provided with regard to individual cases.