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Working with the right people and using the best services can make life much easier for potential franchisees who are considering entering the industry.
In the franchise industry, communication is key. Thus, it is essential that that you understand the basic terminology that is often used.
For assistance, we have listed nine commonly used franchise terms with explanations below.
It's a good starting point for anyone who is considering getting involved in a franchise business.
Franchise Disclosure Document (Sometimes referred to as an FDD)
This document is provided to potential franchisees by a franchisor and it details the franchise system that the potential investor is considering buying into.
These details include the following; information on the franchise and its officers; the initial investment required and other fees; training and support and the rights and obligations of both the franchisee and franchisor.
As part of the Canadian Franchise Association (CFA) Code of Ethics, all CFA members agree to provide disclosure documents to prospective franchisees.
Franchisee
A franchisee is the person who purchases the rights to operate a franchise business. As part of this agreement, they use the franchisor's name and system.
Franchisor
A franchisor is a company that allows a franchisee to run a location of their business, while using their trademarks, products and their processes.
Franchise Agreement
This is an important document, which can be described as the contract between the franchisee and franchisor that details all the rights and obligations of both sides.
It contains other information, including details on territory, training, renewal and suppliers.
Franchise Fee
If you are purchasing a franchise, this is the initial investment which is made to the investor in order for you to use the franchise’s brand name and their likeness.
Master Franchise
This is an agreement where the franchisee is given control of franchising activities within a certain territory.
Royalty Fee
If required, this is an ongoing payment to the franchisor from the franchisee. It allows the franchisee to use the franchisor’s brand, trademarks etc.
Single Unit
This is a single franchise business.
Single-unit franchise businesses and multi-unit ownership (in which one franchisee owns several franchise units) are options that are available from franchisors on Franchise Direct.
Trademark
The word 'trademark', refers to the marks, brand name and logo that identify a franchisor, which are then licensed to the franchisee as part of a franchise agreement.
Now that you know some of the basic lingo, you can check out our fantastic franchise opportunities here.