Advertising Fee
– It' s a contribution made to an advertising fund that
the franchisor manages for the franchise system. The franchisor
customarily uses the fund for national advertising and marketing,
or to attract new franchise owners, but not to target your particular
outlet. It's usually less then three percent of the franchisee's
annual sales and usually paid in addition to the royalty fee.
Not all franchisors charge advertising fees.
Advertising Fund – see advertising fee
Approved Supplier - Suppliers approved or chosen
by a franchise company.
Area Franchisee/Area Developer – Buys
the rights from the original franchisor to develop the system
in a defined region. An area developer cannot sell franchises.
Broker – These are independent professionals
who market on behalf of franchisors, selling their franchisees
on a fee-paying basis. Potential franchisees must always independently
evaluate their chosen franchise.
Business Format Franchising - A license to operate
a business using a franchisor's product, service and trademark
under certain guidelines for a specified time.
Business Plan – A plan that outlines the
objectives of a business and the steps necessary to achieve those
objectives. This can include financial projections and the planned
steps for expansion. If you are seeking funding from a bank or
building society you will often be asked to provide your business
plan to secure borrowing. In fact, many of the well-known banks
can offer advice and assistance on formulating a comprehensive
and achievable business plan.
Company-Owned Outlet - An outlet operating under
a franchise company brand, but that is owned by the franchisor
as opposed to a franchisee. Company-owned outlets are often used
by franchisors to trial new ideas and systems before implementing
them across the franchised outlets within the network.
Copyright – The franchisor produces manuals
and other documentation to ensure the franchise system is uniform.
These are the franchisor's documents and he/she has copyright
over them.
Designated Supplier – see Approved Supplier
Development Type - The Development type is the
method by which the franchisor wishes to build their franchise
network. See Unit Franchise, Multi-unit Franchise, Area Developer,
Regional Franchisee and Master Franchise .
Distributorships - Manufacturers and wholesalers
grant permission to businesses and individuals to sell their products.
A distributorship is normally not a franchise. However, certain
distributorship arrangements may qualify as a franchise, may be
licensed or be adjudged a business opportunity requiring disclosure.
Earnings Claim - is any information the franchisor
gives to a prospective franchisee which allows you to attempt
to predict a range or level of potential sales, costs, income,
or profits.
Estimated Initial Investment - A detailed listing
of all fees and expenses you can expect to incur in starting a
franchise. This listing represents the total amount that you would
need to pay or get financing for, including fees paid to the franchisor;
estimates for furniture; fixtures and equipment; opening inventory;
real estate costs; insurance inventory, etc. This estimate should
include a provision for working capital through the start-up phase.
Exclusive Territory - As a franchisee you can,
with the consent of the franchisor, be given an exclusive area
around your operation. This area can be large or small and no
other franchisee or company owned business would be allowed to
operate there.
Franchise - The rights you acquire to offer
specific products or services within a certain location for a
declared period of time.
Franchise Agreement - outlines the expectations
and requirements of the franchisor and describes their commitment
to the franchisee. Includes information that covers territorial
rights of the franchisee, location requirements, training schedule,
fees, general obligations of the franchisee, general obligations
of the franchisor, etc.
Franchise Fee - An up-front entry fee, usually
payable upon the signing of the contract (franchise agreement)
for the right to use the franchisor's name, logo, and business
system. Often, the franchise fee is also the consideration paid
for initial training, site selection, operations manuals, and
other help given by the franchisor before the opening of the business.
Franchisee - The operator or owner of a franchise.
Franchise Resale – The process of buying
a franchise that is already up and running. Franchisees sell on
their franchise for a number of reasons; retirement, another business
venture, moving overseas, have made their money etc. Whilst the
investment may be higher than buying a new franchise, buying an
existing franchise minimises the risk of failure and is operational
from day one.
Franchise Type - The franchise type identifies
in general the type of work involved in running the franchise.
There are five main categories, retail, management, single operator
manual, single operator executive and investment.
Franchising - a method of doing business within
a given industry that involves at least two parties - the franchisor
and the franchisee. The contract binding the two parties is the
franchise.
Franchisor - The parent company or person that
grants, for a fee and other considerations, the right to use its
name and system of business operations
Initial Investment - The funds needed to initially
set up a franchise and begin trading. This amount must cover the
franchise fee paid to the franchisor and also includes outlay
needed to secure space, purchase products, and cover any other
initial set-up costs.
Investment - The franchisee invests a significant
amount of money in the franchise such as a hotel. The franchisee
in this case will be personally working at arm's length from the
franchise and will employ a management team to operate it.
Job Franchise – see Single Operator Manual
Management Franchise - The franchisee will be
using their experience to grow the business and control staff
who carry out the tasks of the job. It will require premises,
which are more likely to be office than a High Street outlet.
The majority of the turnover here is generated from Business to
Business activities rather than from retail.
Management Service Fee - A term for Royalties,
usually in the form of a fixed fee or percentage.
Marketing Plan - a marketing plan should form
part of your overall business plan. The purpose of the marketing
plan is to define your market, i.e. identify your customers and
competitors, to outline a strategy for attracting and keeping
customers and to identify and
anticipate change.
Master Franchisee/License - This is a franchisee
who is given the right by the franchisor to develop and sell franchises
under the brand name within a certain territory. Unlike area development
rights, where a franchisee can open outlets themselves within
a given region, a master franchisee must only sell franchises
in a particular region.
Multi-Level Marketing - A form of distributorship
in which you receive commission on your own sales and on the sales
of others whom you sign up as distributors. Some MLMs are considered
pyramid schemes and illegal in some countires. Some are legitimate
business opportunities. Any business of this nature should be
investigated closely.
Multi-Unit Franchise - The franchisor awards
the right to a franchisee to operate more than one unit within
a defined area based on an agreed upon development schedule.
Offer - An oral or written proposal to sell
a franchise to a prospective franchisee upon understood general
terms and conditions.
Operating Manual - Comprehensive guidelines
advising a franchisee on how to operate the franchised business.
It covers all aspects of the business, and may be separated into
different manuals addressing such subjects as accounting, personnel,
advertising, promotion and maintenance.
Product Format Franchise – Once the rights
to market a product or service have been acquired, you may offer
other products along side your "product franchise."
For example you may have a service station that sells a brand
of gasoline, but you are not restricted on the other products
or services that you can sell. Many times these are not true franchises,
but can be considered distributorships
Regional Franchise - Buys the rights from a
master franchisee or the original franchisor to sell franchises
in a defined region.
Renewal - The rights given to a franchisee to
renew their franchise business once the initial period set out
in the franchise agreement has lapsed. The franchise agreement
should also state the terms and conditions under which both parties
agree that the business relationship can or cannot be renewed.
Retail Franchise - The franchise will occupy
retail premises, selling products or services during retail hours
for ‘walk-in' retail. The business is totally dependent
on the premises and turnover is achieved from walk-in consumers.
Royalty Fees - Ongoing fees paid to the franchisor
by franchisees in respect of ongoing training and support services
provided, usually a % of turnover.
Single Operator Executive - (Also referred to
as a ‘white collar' Job Franchise)- the franchisee will
be working at the franchise which usually takes the form of a
trade supplying, selling and delivering products or service. It
may be mobile, home-based or requiring small office premises.
The type of work is executive.
Single Operator Manual (Also referred to as
Job Franchise) - the franchisee will be working at the franchise
which usually takes the form of a trade supplying, selling and
delivering products or service. It may be mobile, home-based or
requiring small office premises.
Termination - Refers to the legal provisions
by which either party in the relationship may terminate the contract,
e.g., for breach of contract.
Territory/Area - That 'exclusive' portion of
land, on a national, regional/area, county, metropolitan or postcode
basis, which is allocated to franchisees as part of the franchise
package.
Total Investment – The amount of money
estimated for complete set up of a franchisee's business, including
the initial investment, the working capital, and subsequent additions
to inventory and equipment deemed necessary for a fully operational
and profitable enterprise.
Turnkey Package - A package that includes all
the systems, information and equipment a franchisee needs to be
able to ‘turn the key' and start trading.
Unit Franchise – Buys the right to operate
a single unit franchise. A unit franchisee may at a later stage
buy further unit franchises. If they are of the same brand they
are referred to as a multi-unit franchisee.
‘white collar' Job Franchise – see
Single Operator Executive Working Capital - A major cause of business
failure is not having enough cash in the bank, trade credit, borrowing
capacity or cash flow to meet start-up expenses and see the business
through any unusual dips and changes in its daily activity. Initially
funds are needed to pay first and last months rent, utility deposits,
licenses and any number of incidental costs. As it takes time
to build up a new business the first months are usually loss months,
which need to be financed.
(from: http://www.whichfranchise.com/)
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