The advertising fee covers the franchise system’s advertising and promotions. It is usually calculated as a percentage of the franchisee’s gross sales or net sales. According to a franchise survey carried out by NatWest/BFA the average advertising fee is three and a half per cent in the UK.
This is a legal written document between the franchisor and franchisee. It specifies the terms of the franchise contract such as rights and responsibilities of the parties, fees and payments, territory and the duration of the agreement.
The approved site is the territory that the franchisor chooses for the franchisee’s business.
An area franchisee purchases the right to open and operate a specified number of franchise locations, in a defined area, over a certain period.
Business format franchise
A license to use the franchisor’s product, service and trademark. The entire business format is provided, including (where relevant) the operating system, accounting systems, trademark, marketing and training.
This is a detailed document that defines the development goals and objectives of a business.
This is the wealth required by a franchisee. Working capital is the money needed for the running and operation of the franchise until it becomes profitable. This includes legal costs, salaries, insurance, advertising costs, leasing costs, and living expenses.
Collateral is a form of security that a borrower may offer a lender to guarantee a loan or other credit. Collateral can be resources, belongings, or something of wealth and value to the borrower. If the borrower fails to pay back the credit, the asset acting as collateral may become subject to seizure. This ensures payment or performance of the obligations stated in the lending agreement.
Copyright is the exclusive legal to use, reproduce, publish or sell works of art, music, or literature, and to protect these works from any unauthorised use. This right prevents others from copying or exploiting another person’s work.
This is a document provided by a franchisor when approached by a potential franchisee and both like each other. The document contains key information about the franchise and the franchisee's obligations.
Forecasted franchise sales, profits, or earnings stated by a franchisor. If a franchisor is a member of the bfa (British Franchise Association) it is required by law to state its financial earnings.
Equity is the total value of an asset. It is the ownership of an asset after all debts have been paid, and the asset liquidated.
An exclusive area in which the franchisor will not set up another franchise to compete with the franchisee that holds that territory.
A company looking to franchise its business will carry out a feasibility study. This includes market factors and business issues that may influence a franchise opportunity in the future.
A relationship entered into between the owner of a business and an individual or group, to use the same identification name and format.
The person (business owner) who receives the license from a franchisor to conduct business under their trademark. Franchising A business method that involves a parent company (franchisor) and someone who pays for the right to sell the parent company's products (franchisee) to use their trademark/name.
The person or company that owns the right to sell the business under a trademark to a franchisee.
A lawyer who specialises in franchising law is known as a franchise attorney.
This is an expert in the franchising industry. They give advice on franchise operations, companies, and relationships.
The initial fee or amount of money that the franchisee needs to pay the franchisor to purchase the franchise concept for an agreed period.