What are common franchise terms?
COMMON FRANCHISE TERMS
- Business format franchise: This type of franchise includes not only a product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals.
Disclosure statement: Also known as the FDD, or Franchise Disclosure Document, the disclosure document provides information about the franchisor and franchise system.
FDD: The Franchise Disclosure Document, FDD, is the format for the disclosure document which provides information about the franchisor and franchise system to the franchisee.
Franchise: A license that describes the relationship between the franchisor and franchisee including use of trademarks, fees, support and control.
Franchise agreement: The legal, written contract between the franchisor and franchisee which tells each party what each is supposed to do.
Franchisee: The person or company that gets the right from the franchisor to do business under the franchisor’s trademark or trade name.
Franchising: A method of business expansion characterized by a trademark license, payment of fees, and significant assistance and/or control.
Franchisor: The person or company that grants the franchisee the right to do business under their trademark or trade name.
- Product distribution franchisee: A franchise where the franchisee simply sells the franchisor’s products without using the franchisor’s method of conducting business.
- Royalty: The regular payment made by the franchisee to the franchisor, usually based on a percentage of the franchisee’s gross sales.
- Trademark: The marks, brand name and logo that identify a franchisor which is licensed to the franchisee.