Words
to Know

Reading Dictionary

Words to Know

Important terms that potential franchisees should know.

By Susan Scotts

Absentee ownership: The potential to manage and own a franchise without active involvement in the day-to-day operations. The franchisee will purchase the franchise unit but will hire someone else to manage and run the unit.

Owner-operator: The franchisee will run the franchise unit him or herself and be hands-on during day-to-day tasks.

Advertising fee: The amount that is paid, annually or monthly, by the franchisee to the franchisor to cover some of the costs relating to advertising. These are sometimes calculated as a percentage of gross sales.

Discovery day: The opportunity to visit a franchise’s corporate headquarters in order to meet the management and support team and learn more about the franchise. Not all franchisors require them or offer them.

Franchise Disclosure Document (FDD): The Federal Trade Commission mandates that franchisors provide detailed of information about the franchisor. This information, which includes the buy-in costs and initial start-up expenses, is packaged in a 150-page document known as the Franchise Disclosure Document. It is commonly referred to as the FDD.

Franchise: The authorization of a right or brand name to a person to sell or distribute the company’s goods or services. Franchisee: The person or entity that purchases and is granted a franchise.

Franchise agreement: The actual contract which includes the responsibilities of the franchisor and franchisee. This document is signed by both parties.

Franchise fee: The initial up-front fee a franchisee pays for the right to purchase a franchise and use the trademark and business system. This is typically paid at the signing of the franchise agreement.

Franchisor: The franchise company and owner of a franchise system’s trademark brand that provides usage rights to a franchisee.

Federal Trade Commission (FTC): A federal agency assigned to regulate franchises. This agency protects America’s consumers and assists in protecting them against false, deceptive, or unfair trade or advertising practices.

International Franchise Association (IFA): Founded in 1960, this membership organization includes franchisors, franchisees, and suppliers.

Initial investment/start-up costs: The initial investment that the franchisee makes in becoming a franchisee during the start-up period. These costs can include the franchisee fee, lease improvements, asset costs, inventory, deposits, working capital, and other costs required to establish the business.

Net worth: Total assets minus total liabilities of an individual. A franchisor may require a minimum net worth prior to approval as a franchisee.

Receipt acknowledgement: In franchising, the receipt to be signed by potential franchisee as proof of the date of receiving of the FDD.

Renewal: Franchise agreement lengths vary and expire after anywhere from five to 20 years. After the initial agreement, the contract may be renewed but not always under the same original conditions. A renewal fee may be less than the original franchise fee.

Royalty fee: The share or percentage of gross sales paid by the franchisee to the franchisor on a recurring basis from the franchisee’s generated sales.

Small Business Administration (SBA): The SBA connects entrepreneurs with lenders and funding to help them plan, start, and grow their businesses.

With three decades of experience, Susan Scotts, of The Entrepreneur’s Source®, can help you determine if a franchise may be the best way to achieve your personal income, lifestyle, wealth, and equity goals. For more information, call 561-859-9110 or visit www.SScotts.EsourceCoach.com.

Reading Dictionary

Words to Know

Important terms that potential franchisees should know.

By Susan Scotts

Absentee ownership: The potential to manage and own a franchise without active involvement in the day-to-day operations. The franchisee will purchase the franchise unit but will hire someone else to manage and run the unit.

Owner-operator: The franchisee will run the franchise unit him or herself and be hands-on during day-to-day tasks.

Advertising fee: The amount that is paid, annually or monthly, by the franchisee to the franchisor to cover some of the costs relating to advertising. These are sometimes calculated as a percentage of gross sales.

Discovery day: The opportunity to visit a franchise’s corporate headquarters in order to meet the management and support team and learn more about the franchise. Not all franchisors require them or offer them.

Franchise Disclosure Document (FDD): The Federal Trade Commission mandates that franchisors provide detailed of information about the franchisor. This information, which includes the buy-in costs and initial start-up expenses, is packaged in a 150-page document known as the Franchise Disclosure Document. It is commonly referred to as the FDD.

Franchise: The authorization of a right or brand name to a person to sell or distribute the company’s goods or services. Franchisee: The person or entity that purchases and is granted a franchise.

Franchise agreement: The actual contract which includes the responsibilities of the franchisor and franchisee. This document is signed by both parties.

Franchise fee: The initial up-front fee a franchisee pays for the right to purchase a franchise and use the trademark and business system. This is typically paid at the signing of the franchise agreement.

Franchisor: The franchise company and owner of a franchise system’s trademark brand that provides usage rights to a franchisee.

Federal Trade Commission (FTC): A federal agency assigned to regulate franchises. This agency protects America’s consumers and assists in protecting them against false, deceptive, or unfair trade or advertising practices.

International Franchise Association (IFA): Founded in 1960, this membership organization includes franchisors, franchisees, and suppliers.

Initial investment/start-up costs: The initial investment that the franchisee makes in becoming a franchisee during the start-up period. These costs can include the franchisee fee, lease improvements, asset costs, inventory, deposits, working capital, and other costs required to establish the business.

Net worth: Total assets minus total liabilities of an individual. A franchisor may require a minimum net worth prior to approval as a franchisee.

Receipt acknowledgement: In franchising, the receipt to be signed by potential franchisee as proof of the date of receiving of the FDD.

Renewal: Franchise agreement lengths vary and expire after anywhere from five to 20 years. After the initial agreement, the contract may be renewed but not always under the same original conditions. A renewal fee may be less than the original franchise fee.

Royalty fee: The share or percentage of gross sales paid by the franchisee to the franchisor on a recurring basis from the franchisee’s generated sales.

Small Business Administration (SBA): The SBA connects entrepreneurs with lenders and funding to help them plan, start, and grow their businesses.

With three decades of experience, Susan Scotts, of The Entrepreneur’s Source®, can help you determine if a franchise may be the best way to achieve your personal income, lifestyle, wealth, and equity goals. For more information, call 561-859-9110 or visit www.SScotts.EsourceCoach.com.

2018-08-21T13:56:24+00:00