What does it all mean?

Your mind might be completely boggled when looking up information on franchises. You may not be familiar with the jargon and therefore not understand what any of it means. Well, we here to help you! Here are some commonly used words explained for you:

Franchisee

A franchisee is a person or entity to whom the right to conduct a business is granted by the franchisor or licensor. Basically, once you have bought and own a franchise, you become a franchisee.

Franchisor

The Franchisor is the parent company that grants franchisees the right to use its name and system of business operations.

Franchising

Franchising is a method of doing business within a given industry. The contract binding the two parties involved in franchising, namely the franchisor and the franchisee, is the franchise.

Master Franchisee

This describes an individual or company owning the exclusive rights to develop a particular territory for the franchising company.

Franchise Agreement

The Franchise Agreement is a written contract detailing the mutual responsibilities of franchisors and franchisees. It usually lasts for a several-year term and once the term is up, the contract expires and must be renewed. In most cases the franchise agreement may not be sold, transferred, or otherwise assigned without the franchisor’s permission.

Franchise Fee

The franchise fee is the up-front entry fee in order to obtain a franchise. It is usually payable upon the signing of the franchise agreement for the right to use the franchisor’s name, logo, and business system. The franchise fee also includes initial training, site selection, operations manuals and any other help given by the franchisor before the opening of the business.

Royalty

The royalty is a continual payment to the franchisor throughout the term of the franchise agreement. The royalty payment is for compensation for the continuing services given by the franchisor (training, field services) as well as payback financing of the true market value of the franchise. Royalty payments can be either fixed amounts, based on percentage of gross sales, or based on a sliding scale, with graduated breakpoints

Estimated Initial Investment

This is a detailed listing of all fees and expenses that you can expect to acquire in starting your franchised business. This listing represents the total dollar amount that you would need to pay or obtain financing for, including fees paid to the franchisor. This estimate should include a provision for working capital through the start-up phase.

Now you know! Go ahead and read about all our fantastic franchise opportunities.

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