Franchise Glossary of Terms

Acknowledgement of Receipt
The final page of an Offering Circular, which once signed, indicates your reception of documents on a specified date.

Agreement
The franchise "contract."

Arbitration
A dispute mediating process in which each side selects their representative, in addition to the participation of a chosen third (impartial) individual.

Area Development Rights
Your entitlement to open several franchise locations in a specified area.

Assignment /Fees
The monthly fees paid to the franchise company in order to support corporate marketing and advertising. This fee is typically a percentage of your gross revenues.

Business Format Franchise
A type of franchise that establishes you as a business owner, who offers distinguishable products and services in the marketplace.

Capital Required
The amount of cash you are required to have available.

Default
To discount the manner in which you agreed "to perform."

Designated Supplier
Approved, chosen suppliers of products and services - all of who meet the requirements of a particular franchise company.

Disclosure Document
Also referred to as an "Offering Circular," this is the FTC required background and contractual information presented to you by franchise companies.

Earnings Claims
Assertions of specific acquired sales levels or profitability levels declared by franchise companies.

Exclusive Territory
The "territory" offered to you by a franchise company, which prevents the franchisor from establishing any other location within your designated area.

Federal Trade Commission (FTC)
The federal agency, based in Washington, D.C., regulating a variety of trade practices, including the franchise industry.

Financial Matters
Franchise Opportunities’ solution to your questions pertaining to monetary needs. Housed on the left side of your screen, Financial Matters provides a list of franchisors that have financing programs, as well as referrals to third parties who lend capital to potential franchisees.

Franchise
The rights you acquire to offer specific products or services under explicit guidelines at a certain location for a declared period of time.

Franchise Explorer
Franchise Opportunities’ answer to simplifying your franchise search. Displayed on the left side of your screen, the Franchise Explorer allows you to search through our directory of franchises in a swift and simple manner – via industry and sector, capital requirements or your desired investment range.

Franchise Fee
The amount of money you pay to the franchisor to acquire the franchise. This gives you the limited rights to their proprietary information (i.e., trade name, trademark, etc.).

Franchisee
The operator or owner of one more franchises.

Franchisor
The company owning / controlling the rights to grant franchises to potential franchisees.

FTC Rule 436
Passed in 1979, this law regulates the franchise industry by setting forth "disclosure" requirements and prohibiting franchisors from making earnings claims.

Industry
The category of business that a specific franchise belongs to; an all-encompassing area of business that incorporates several different sectors.

Initial/Ongoing Training
The initial and all subsequent training offered to franchisees in the operations of a specific business.

Initial Investment
Typically considered as the initial cash investment required for you to begin a franchise. This can include the franchise fee and other "startup" expenses you may sustain, but may not be reflective of your total investment.

Master Region
A significantly large territory obtained by a franchisee with the objective of subdividing and reselling individual franchise locations.

Net Worth
Total assets, once you’ve subtracted your total liabilities.

Non-Compete Clause
Some franchise agreements exclude you from competing in any way with the franchised company upon termination, non-renewal or other sale or transfer.

Offering Circular
Also referred to as the "Disclosure Document" and "Uniform Franchise Offering Circular (UFOC)," this document provides background information from over 20 different categories as well as a copy of the proposed franchise agreement.

Operations Manual
Generally consists of several volumes, it contains all pertinent information regarding the operation of a distinct franchise.

Product Format Franchise
Once the rights to market a product or service have been acquired, and they do not constitute the majority of all that you offer, you have a "product franchise."

Public Figure Involvement
The nature of the agreement between a well-known public figure and a franchisor must be disclosed, when regarding the endorsement of a franchised product/service.

Renewal
When pertaining to the context of a franchise relationship, it refers to your signing a new franchise agreement once the prior agreement expires.

Resource Center
Franchise Opportunities’ explanation to your questions and your research guide as you investigate those franchises you wish to pursue. It includes a Self-Evaluation, Glossary and Tips and even an online method of calculating your net-worth – our “net worth” calculator.

Sector
The categories included within a broader scope of franchise opportunities, otherwise known as the Industries. The sector permits for a more detailed look into the franchise you desire, as well as easing the search process.

Start Up Costs
The required amount of money the franchisor will request that you – a new franchisee – have to invest in the new franchise unit it its earliest stages of development.

Uniform Franchise Offering Circular (UFOC)
Also referred to as the "Disclosure Document" and "Offering Circular," this document provides background information from over 20 different categories as well as a copy of the proposed franchise agreement.

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