As soon as you begin to ask about franchises, anyone in the know is willing to talk. However, you may initially find their talk baffling -- a bizarre mix of words and phrases you’ve never heard in your life. Like many businesses, franchising has its own language. If you want to continue exploring the franchising world, it’s useful to become familiar with the phrases and terms.

The Franchising Glossary

Use this as a handy reference throughout this book and any other franchise information you may find.

Advertising Fee:                 

A fee sometimes paid to share in the cost of advertising, which is then handled by the franchisor. This fee is generally calculated based on gross sales.

 Area Development Rights:            

A possible agreement allowing a franchisee to develop more franchises within a given area.

 Assets:

Any cash or property that could be used to repay debts.

BFA:

The British Franchise Association -- a voluntary organization where franchisors monitor themselves and each other to make sure all ethics are observed and enforced. 

Broker:

An outside business that may take on the sale of the franchise in the franchisor’s name.

 Business Plan:

A detailed plan explaining how a business will succeed, where its assets come from, and how it operates.

Continuous Training: 

Training offered to the franchisee after the initial training period.

 Copyright:

A copyrighted name, brand, or image cannot be used without permission from the person who holds the copyright.

 Demographics: 

The people who live in an area. Demographics includes people’s average age, income, gender, race, spending habits, activity levels,  and many other factors.

 Exclusive Territory: 

A territory given to a franchisee. No other franchise may operate within that territory.

 Feasibility Study:

A study on whether a franchise is likely to succeed in a given area.

 Franchise:

A business given the right to use the name, brand, logos, etc. of  a larger corporation.

 Franchise Agreement:    

The Franchise Agreement establishes the terms and conditions of the sale of the franchise -- in other words, it’s the contract

Franchisee:

The person who owns (or is looking to purchase) a franchise

Franchise Fee: 

The initial lump sum you pay the franchisor to purchase your franchise

Franchisor:  

The person selling the franchise or owning the overall business

Marketing: 

Advertising

Market Research:

A study to determine the demographics of a given area and what sort of business will succeed there.

Non-Disclosure Clause:

An agreement signed between you and the franchisor. Because you may have access to sensitive and financial information about the franchisor’s business while you consider your purchase, you must agree not to reveal that information.

Operations Manual:

The manual the franchisor gives to the franchisee. It contains all training and business information the franchisee needs to run the franchise.

Royalty:

A percentage of gross sales paid to the franchisor, usually on a  monthly basis.

Trademark:

A brand or name that represents the franchisor’s business. The right to use it is part of the franchise agreement.

These are the basic terms you will encounter throughout this book. Now you should be ready to take on any franchising document!