In a Distributorship Franchise, the franchisor grants sales territories to either its existing employees and/or new prospects. For these territories, the Distributor pays a franchise fee to the wholesaler or manufacturer for the rights and then begins operating under prescribed sales guidelines.

This type of franchise is highly applicable to manufacturers and wholesalers. Often they have been at the mercy of their distribution channel. By selling franchises, the manufacturer or wholesaler achieves a higher degree of loyalty in its distributors, as they are no longer independent.

Other benefits include:

-	Ability to remove under performing distributors with motivate franchisees
-	Ability to introduce and maintain good business practices among distributors
-	Obtaining a fee for an opportunity that is currently being given away
-	Highly motivated distributors due to business ownership
-	Savings on salaries, benefits and expenses currently paid to employees