BUSINESS FORMAT FRANCHISE

•this type of franchise includes not only a

product, service and trademark, but also the

complete method to conduct the business

itself, such as the marketing plan and

operations manuals

DISCLOSURE STATEMENT

•also known as the FDD, or franchise

disclosure document, the disclosure

document provides information about the

franchisor and franchise system

FDD

•the franchise disclosure document, FDD, is

the format for the disclosure document

which provides information about the

franchisor and franchise system to the

franchisee

FRANCHISE

•a license that describes the relationship

between the franchisor and franchisee

including use of trademarks, fees, support

and control

FRANCHISE AGREEMENT

•the legal, written contract between the

franchisor and franchisee which tells each

party what each is supposed to do

FRANCHISEE

•the person or company that gets the right

from the franchisor to do business under

the franchisor’s trademark or trade name

FRANCHISOR

•the person or company that grants the

franchisee the right to do business under

their trademark or trade name

FRANCHISING

•a method of business expansion characterized

by a trademark license, payment of fees, and

significant assistance and/or control

FRANCHISE OPPORTUNITY

•a business opportunity that involves the

sale of good and services that enable a

novice entrepreneur to begin a franchise

business

MASTER FRANCHISING• a model of multi-level franchising wherein the master franchisor

sells the development rights in a particular geographic market to a

master franchisee, who, in turn, sells individual or single-unit

franchises within the territory

• in return for a front-end master franchise fee, the master

franchisee has the sole responsibility of developing that area or

market under a mutually agreed upon schedule

• the master franchisee is rewarded by sharing in the franchise fee

and ongoing royalties paid by the franchisees within the territory to

the master or parent franchisor

AREA DEVELOPMENT AGREEMENT

• this is another variation of multi-level franchising where

the franchisor grants exclusive development rights for a

particular geographic area to an area development

investment group or an area developer

• in return for the rights to an exclusive territory, the area

developer pays the franchisor a front-end development fee

and commits to develop a certain number of units within a

specified period of time

PRODUCT DISTRIBUTION FRANCHISEE

•a franchise where the franchisee simply

sells the franchisor’s products without

using the franchisor’s method of conducting

business

INITIAL INVESTMENT

•the total capital required to start a franchise

business

•this typically includes franchise fee, renovation,

equipment & fixtures, rent deposits, and initial

inventory

FRANCHISE FEE

•the initial fee paid to the franchisor

•the franchise fee usually includes training,

site selection and evaluation assistance,

and the rights to use the franchisor’s

trademark and business system

ROYALTY

•the regular payment made by the franchisee

to the franchisor, usually based on a

percentage of the franchisee’s gross sales

ADVERTISING FEE

•fee paid to the franchisor as the franchisee’s

contribution to the marketing effort

•this is usually a percentage of the franchisee

sales and is often paid on a monthly basis

TRADEMARK

•the marks, brand name and logo that

identify a franchisor which is licensed to

the franchisee