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Franchise Glossary
Advertising levy
The advertising levy covers the franchise system’s advertising and promotional activities.
Read More Advertising levyAgreement
The franchise agreement is a legal written document that governs the relationship between the franchisor and franchisee. It specifies the terms of the franchise contract such as rights and responsibilities of the parties, fees and payments, territory and duration of agreement.
Read More AgreementApproved Site
The approved site is the location that the franchisor chooses, for the franchisee’s set-up, which meets the criteria of the franchise unit.
Read More Approved SiteArea Franchisee
An area franchisee purchases the right to open and operate a specified number of franchise locations, in a defined geographical area, during a defined period.
Read More Area FranchiseeBusiness Format Franchise
A business format franchise is where the franchisor grants a business format, operating system, and trade mark to a franchisee.
Read More Business Format FranchiseBusiness Plan
A business plan is a document prepared by a franchisee, which summarizes its operational and financial goals and objectives for the franchise, and contains detailed plans and budgets showing how these objectives are to be achieved.
Read More Business PlanCapital
Capital is the wealth required by a franchisee. Human capital consists of the franchisees experience, leadership, and knowledge he/she will bring to the franchise.
Read More CapitalCollateral
Collateral is a form of security that the borrower may offer the lender to guarantee a loan or other credit. Collateral can be resources, belongings, or something of wealth and value to the borrower.
Read More CollateralCopyright
Copyright is the exclusive right of a person to use, and to license others to use, works of art, music, or literature, and to protect these works from the unauthorized use. This statutory right prevents others from copying or exploiting a person’s work without permission.
Read More CopyrightDisclosure Document
See ‘Uniform franchise offering circular’
Read More Disclosure DocumentEarnings Claims
Earning claims are the actual or forecasted franchise sales, profits, or earnings stated by the franchisors. It is described in Item 19 of the UFOC as the financial performance disclosure.
Read More Earnings ClaimsEquity
Equity is the total value or worth of an asset. It is an individual’s or company’s shares and ownership rights of an asset, and does not represent an obligation to pay in the future.
Read More EquityFeasibility Study
A company that is thinking about becoming a franchisor carries out a feasibility study.
Read More Feasibility StudyFederal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, whose purpose is to promote antitrust and consumer protection laws, and to eliminate and prevent anticompetitive business practices in the franchise industry.
Read More Federal Trade CommissionFranchise
A franchise is an agreement in which a firm (franchisor) enters into a contract with other businesses (franchisees), granting them the authorization to operate in the distribution of goods and services, under the franchisor's trade name and guidance, in exchange for a fee.
Read More FranchiseFranchise Attorney
A lawyer who specialises in franchising law is known as a franchising attorney.
Read More Franchise AttorneyFranchise Consultant
A franchise consultant is a business guide with expertise in the franchising industry. They give advice on topics such as franchising operations, companies, and relationships.
Read More Franchise ConsultantFranchise System
A franchise system refers to the different franchises operating in the USA.
Read More Franchise SystemFranchise Unit
A franchise unit refers to each individual outlet, whether company owned or franchised.
Read More Franchise UnitFranchisor
A franchisor is an individual, partnership, or corporation who grants an investor (the franchisee), the right to conduct business under their trade name, using their operational methods and organizational systems.
Read More FranchisorFranchisee
A franchisee is an individual, partnership, or corporation who purchases the right from the franchisor to conduct business under their trade name.
Read More FranchiseeInitial Investment
The total investment is the capital required to start the franchised business.
Read More Initial InvestmentInitial Franchise Fee
The initial fee is a once off lump sum, paid by the franchisee to the franchisor, upon signing the franchise agreement.
Read More Initial Franchise FeeInternational Franchise Association (IFA)
The International Franchise Association (IFA) is a non-profit trade association of franchisors, franchisees, and suppliers. Founded in 1960, the IFA’s office is based in Washington, D.C.
Read More International Franchise Association (IFA)Licensing
Licensing is the legal act of one party granting rights to another party to a legally protected property in exchange for a fee or royalty.
Read More LicensingMaster Franchisee
A Master franchisee is the individual who negotiates the franchise rights for a defined territory (usually a country), and assumes the rights and obligations of the franchisor in that particular territory.
Read More Master FranchiseeMarketing
Marketing is the process or technique of planning, pricing, promoting, selling and distributing products and services to create exchanges that satisfy both the customer and the organization.
Read More MarketingMulti-unit franchisee
A multi-unit franchisee is one that owns and operates more than one unit of the franchise, but does not have the rights to a defined territory.
Read More Multi-unit franchiseeOperations Manual
The manual contains instructions advising a franchisee how to operate the franchise.
Read More Operations ManualPro Forma
The Pro forma document is a description of financial statements which rely on historical data to assume levels of revenue, expenditure, assets, liabilities, and net worth.
Read More Pro FormaRoyalty Fee
Also referred to as the “management service fee”, these fees are the continuous payments the franchisee gives the franchisor to stay part of the franchise system.
Read More Royalty FeeSupplier
A supplier is the authorized individual or company who has been approved by the franchisor, to supply products or services to the franchisee.
Read More SupplierTerritory
Territory is defined as a specific area in which the franchisee has the exclusive right to conduct business, without the threat of competition from fellow franchisees.
Read More TerritoryTrademark
A franchise trademark is a form of identification such as a brand name or logo, which is associated with the franchise.
Read More TrademarkUniform Franchise Offering Circular (UFOC)
The UFOC is a regulatory document produced by the franchisor to the prospective franchisee, containing the franchise agreement, the disclosure statement, financial statements, and other agreements the franchisee will be required to sign.
Read More Uniform Franchise Offering Circular (UFOC)
