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Learn Franchising
Discover how franchising works, the key steps to long-term success, and how to identify the right opportunity that fits your vision for business ownership.
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Glossary
Advertising Fund
A pool of money contributed by franchisees for the purpose of funding collective advertising and marketing efforts at the national or regional level.
Area Development Agreement
An agreement between a franchisor and an individual or entity (area developer) giving the area developer the right to open and operate multiple units within a defined geographic area over a specified period.
Conversion Franchise
A franchise model where an existing independent business converts to a franchise by adopting the branding, systems, and support of a franchisor.
Discovery Day
An event organized by a franchisor to provide potential franchisees with an opportunity to learn more about the franchise system, its operations, and the overall business model. It is a critical step in the mutual evaluation process where both the franchisor and the potential franchisee have the chance to interact, ask questions, and assess the suitability of entering into a franchise relationship.
Franchise
A legal and commercial relationship between the owner of a trademark, brand, or business system (franchisor) and an individual or entity (franchisee) that is granted the right to operate a business using that trademark or system.
Franchise Agreement (FA)
The legal document outlining the terms and conditions of the franchisor-franchisee relationship, including rights, obligations, and the use of the franchise system.
Franchise Disclosure Document (FDD)
A comprehensive legal document provided by the franchisor to potential franchisees, containing detailed information about the franchise system, its financial performance, and other relevant aspects.
Franchise Disclosure Period
The minimum number of days that a franchisor must wait after providing the FDD to a potential franchisee before the franchise agreement can be signed.
Franchise Fee
A one-time upfront payment made by the franchisee to the franchisor for the right to operate the franchise. It is typically paid at the time of signing the franchise agreement.
Master Franchise
A contractual relationship where an individual or entity (master franchisee) is granted the right to sub-franchise within a specific territory. The master franchisee acts as a regional franchisor.
Master Franchise Fee
A fee paid by a master franchisee to acquire the rights to sub-franchise within a specified territory.
Multi-Unit Franchise
A franchise arrangement where a single franchisee owns and operates multiple units or locations of the same franchise brand within a specified territory.
Renewal Option
A provision in the franchise agreement that grants the franchisee the option to extend the term of the agreement upon expiration.
Royalty Fee
Ongoing payments made by the franchisee to the franchisor, usually calculated as a percentage of the franchisee's gross sales. Royalty fees are paid regularly throughout the franchise relationship.
Support and Training Fee
An additional fee paid by the franchisee to cover ongoing support, training, and services provided by the franchisor.
Term Sheet
A concise and non-binding document that outlines the key terms and conditions of a potential franchise agreement.
Territory
The geographic area or region within which a franchisee has the exclusive right to operate their franchise. Territory rights are outlined in the franchise agreement.
Trademark
A legally registered symbol, name, or logo that represents the brand and distinguishes it from others.
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