What is the term for a franchise agreement that allows a franchisee to sub-franchise to others?

A franchise agreement that lets a franchisee sub-franchise to others is called a master franchise.

In this structure, the original brand owner, or master franchisor, grants a master franchisee rights over a defined territory. The master franchisee can recruit, contract with, train, and support local franchisees, effectively performing many franchisor functions within that region. It commonly pays fees or shares revenue with the original brand owner.

Master franchising is especially useful for international expansion. A brand can rely on a local operator’s knowledge of laws, language, suppliers, labor markets, and consumer habits instead of managing every overseas unit directly. The trade-off is an extra layer of administration, which can make quality control and brand consistency more difficult.

“Multi-unit franchise” is different: it usually gives one franchisee the right to operate several outlets, without necessarily allowing that person to recruit sub-franchisees. “Area development” generally grants the right or obligation to open multiple units in a territory, while a master franchise specifically includes sub-franchising authority.