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.

 

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