Glossary of Common Franchise Terms
The franchise industry is full of opportunities, however it can be a difficult world to enter for those who are unfamiliar with the dynamic environment. To get you started, let’s look at the terms and words used in the franchise world.
1. Franchisor: A company that is choosing to expand via franchising and is offering the opportunity to investors.
2. Franchisee: An individual who is planning to invest in a franchise to become a business owner.
4. Conversion Franchise: An independent business that joins the umbrella of a franchise system in order to capitalise on the brand and the systems.
5. Franchise Fee: The initial fee that a franchisee pays to the franchisor in order to become a franchisee.
6. Royalty Fee: The ongoing fee that a franchisee pays to the franchisor. It typically is a percentage of monthly franchise sales, but it can also be a flat, predetermined fee.
7. Franchise Broker/Consultant: Their sole job is to help individuals select the right franchise from the hundreds of opportunities that exist.
8. Discovery Day: The day when potential franchisees are invited to visit company headquarters and meet the franchise team.
9. Protected Territories: A promise by the franchisor regarding limitations on the development of competing locations near a franchised location.
10. FDD: The Franchise Disclosure Document is perhaps the single most important document that you’ll come across when making your franchise investment decision.