Business - Franchise

Franchise jargon is pretty much well established as this is a fairly old industry with many tried and tested methods.  Much of this franchise jargon is is clearly put and easy to understand unlike some other forms of jargon we encounter.

Franchise jargon is required to fully understand certain legalities of business especially when first considering a business to start up. New business owners need to fully understand what they are committing themselves to and franchise jargon serves this purpose very well.

Any business will experience jargon from time to time so cutting your teeth on franchise jargon is a very good start. No business can avoid the jargon and much of the business franchise jargon has legal overtones that needs to be assessed by the business owner.

Franchise Jargon.

AREA DEVELOPER

Effectively a regional-size franchisee who has the rights to expand a region by either appointing sub-franchisees or managed outlets

BFA

The British Franchise Association, which celebrated its 25th anniversary in 2002. It was set up by Business Format Franchisors in an attempt to regulate the business on an ethical basis, granting membership to those franchisors it considers meet the demands of its Code of Ethics and procedures

BLOCK EXEMPTION

The European Union concessions to franchising which bypass the normal EU anti-restrictive trade practices legislation seeking to protect competition - which, for example, 'exclusive areas' can be deemed to contravene

BUSINESS FORMAT

The purest form of franchise in which the franchisee buys into a total system of brand, know-how, training, methodology and support

BUYBACK

Where the franchisor agrees to purchase a franchise back from a franchisee if the latter no longer wishes to continue - sometimes in packages for 'peace of mind'

DISCLOSURE

The practice of revealing detailed information about the franchisor's business track record and franchise package. This is a legal obligation in, for example, the US, but only voluntary in this country

EXCLUSIVE AREA

That territory licensed out to the franchisee in which to conduct the business. It is exclusive only in the sense that the franchisor contracts not to allocate more franchises there. Beware contracts which do not exclude the franchisor from setting up company outlets in the designated 'exclusive' area

FDS - Established in 1981 by Roy Seaman. Now recognised as one of the world's largest and most comprehensive franchise companies. Offices around Europe, the Middle East and Asia along with representatives around the world allow us effectively to provide Franchise products and services to everybody interested in Franchising.

FRANCHISE/LICENCE

The operating package licensed to the franchisee by the franchisor - for which an Initial Franchise Fee is charged by the franchisor

FRANCHISE CONTRACT

Also known as the 'Franchise Agreement', it documents the legal relationship of obligations existing between franchisor and franchisee

Franchisee - The person who buys a licence to replicate a business system. The Franchisee pays fees to the Franchisor in exchange for the training and materials required to start up in business and receive ongoing training and support. They become their own boss and run their Franchise themselves.

FRANCHISING

Method of marketing goods and services via a proven business formula licensed for others to copy

Franchisor - The owner of the original operation. The Franchisor decides to allow other people to replicate their system in exchange for a fee.

FRANCHISE PACKAGE

The sum total of franchise system rights licensed to the franchisee, including branding, know-how, systems, territory and initial training - for which an Initial Franchise Fee is charged by the franchisor

INTELLECTUAL RIGHTS

Intellectual property rights refer to the franchisor's secrets of doing business and to his various trade marks, branding, manuals etc which should be legally protected before being sold in a franchise package

JOB FRANCHISE

A franchise type in which the franchisee is a hands-on owner-operator rather than a manager, usually linked with van-based services such as cleaning, maintenance and supplies

JOINT VENTURE

Franchise co-operation where the franchisor also takes a financial stake in the project - often seen in major international collaborations

KNOW-HOW

The sum of the franchisor's secrets of doing business, also referred to as 'intellectual property'

MANAGEMENT OPTION

A franchise in which the owner manages the operation and co-ordinates operatives to do the actual work while he focuses on business-building

MASTER FRANCHISE

The owner, known as the 'Master Franchisee', of a large territory licence - a country, region or city. Mostly used in global situations

MASTER FRANCHISOR

The entity which grants master franchises to others, usually found in an international context

MSF - Management Service Fees

another term for Royalties, usually in the form of a fixed fee or percentage

OPERATIONS MANUAL

The detailed document or 'bible' which describes every item of the business system and work procedures. It is closely linked with pilot experience and training elements and should act as the franchisee's personal one-stop 'owner's guide' to running the business, incl. troubleshooting

P&L PROJECTIONS

The calculations, based on the franchisor's, pilot's or franchisees' experiences, which try to predict how soon franchisees can expect a return on their investment

PILOT OPERATION

Although franchisors often use their own experience as the 'pilot' basis for shaping a franchise package, P&L projections and training programme, it is recommended that a true independent pilot operation is tested out - which incorporates actual financial, organisational and logistical pressures to be faced by franchisees in different areas

REGIONAL FRANCHISE

Another term for Area Developer or Area Franchisee

RENEWAL

Refers to the legal provisions in the Franchise Agreement for renewing or not renewing the franchise for a further term of years. Non-renewal could result from breach of contract

RE-SALE

Refers to a franchised area already developed or 'established' by a franchisee, offered for sale because the original franchisee wants to realise his investment, move on, or simply retire. More expensive to buy than a 'virgin' franchise area, but with the advantages of an ongoing customer base, referrals, goodwill and income from day one - so very attractive indeed

RETURN ON INVESTMENT

The calculations or expectations which franchisees work on to assess when they can 'break even' on their initial investment in the franchise and start earning profits

ROYALTIES

Ongoing fees paid to the franchisor by franchisees in respect of ongoing training and support services provided, usually a % of turnover

SUB-FRANCHISEE

A subordinate level of franchisee to a Regional Franchisee or Area Developer, usually appointed after the Regional or Area franchise has set up a training and support infrastructure for the territory

TERM

Refers to the agreed period of years (eg., 5, 10, 15) for which a franchise is granted through the Agreement.

TERMINATION

Refers to the legal provisions by which either party in the relationship may terminate the contract , eg., 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

TIE-INS

Where part of the Agreement is for the franchisee to buy product from the franchisor - often justified in terms of quality control or cost

TRADING ACT (UK)

Better known as the Trading Schemes Act (1996), this was introduced to combat the excesses of 'pyramid selling' which reached a peak in the 1980s. It is valuable in that it distinguishes franchising from such dubious schemes. Today, the diluted offspring of pyramid selling are often to be found in magazines covering 'network marketing' or 'direct selling', where it is still the norm to earn money chiefly from recruiting subordinate levels.

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