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.
Effectively a regional-size franchisee who has the rights to expand a region by either appointing
sub-franchisees or managed outlets
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
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
The purest form of franchise in which the franchisee buys into a total system of brand, know-how, training,
methodology and support
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'
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
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.
The operating package licensed to the franchisee by the franchisor - for which an Initial Franchise Fee is
charged by the franchisor
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.
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.
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 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
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
Franchise co-operation where the franchisor also takes a financial stake in the project - often seen in major
The sum of the franchisor's secrets of doing business, also referred to as 'intellectual property'
A franchise in which the owner manages the operation and co-ordinates operatives to do the actual work while he
focuses on business-building
The owner, known as the 'Master Franchisee', of a large territory licence - a country, region or city. Mostly
used in global situations
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
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
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
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
Another term for Area Developer or Area Franchisee
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
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
Ongoing fees paid to the franchisor by franchisees in respect of ongoing training and support services provided,
usually a % of turnover
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
Refers to the agreed period of years (eg., 5, 10, 15) for which a franchise is granted through the
Refers to the legal provisions by which either party in the relationship may terminate the contract , eg., for
breach of contract
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
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.
ADD YOUR OWN JARGON TO THIS SECTION:-