Definitions surrounding franchising

Franchise – The right or license granted to an individual or group to market
a company’s goods or services in a particular territory

Franchisee – The owner of a single or multiply units

Franchisor – The one who grants a franchise

Territory – An assigned geographic area in which a franchisee will operate

Start up cost – Initial costs that are needed to get your franchise operating

FDD – Franchise Disclosure Document

Operating costs – On going, regular costs of operating your franchise

Franchise Fee – An initial cost that gives you the right to operate a business
of the Franchisor and access to all of the Franchisor’s systems

Discovery Day – A day spent with the Franchisor to see how the franchise
is run. This is one of the last steps before you purchase a franchise

Franchise agreement – The legal document signed between franchisor and franchisee

Royalty Fee – The Franchisor’s share of the customer’s money generated by
each Franchisee using the Franchisor’s systems. This is usually based on gross sales.
Paid monthly.

Advertising & Marketing Fee – Used to build Brand presence to benefit all
members. Usually a portion of gross sales. Paid monthly.


If you would like to learn more about the franchising process including finding the right franchise, checking availability in your area, investment requirements, franchise fee, etc… Please contact TC Franchise Specialists & Tull Consulting at 248-569-2539

The Franchise Broker Association

Posted in Franchise Basics, Franchise Systems.