Acknowledgement of Receipt
The last page of an Offering Circular that must be signed to indicate your reception
of the document.
Active Participant
The franchisee is required by the franchisor to actively participate in the
operation of the business.
Advertising Fee
A fee paid by the franchisee to the franchisor; for corporate advertising campaigns,
in addition to the royalty fee.
Assignment
The transfer of the rights and obligations of the franchise contract or agreement
from one person or entity to another person or entity.
Assignment Fee
The fee charged by the franchisor when you seek to assign your franchise agreement
to another person.
Business Format Franchise
A franchise offering in which the franchisor provides both; a business concept
as well as a structured method of operating, marketing, and promotion of the
business in conformity with that concept, specifications and associated trademark
licenses. There is usually significant operational training and assistance provided,
and operations are subject to franchisor oversight and control.
Capital
The available amount of cash available for investment.
Capital Required
The initial amount of cash you are required to have for use in the start up
and proper operation of your business.
Company Owned Outlet
A unit owned by the franchise company, typically identical to the franchised
outlet.
Dealership
The definition of a dealership varies from state to state. It generally requires
a contract and a right to sell or distribute the grantor's product or use its
commercial symbols, together with a community of interest between the grantor
and the "dealer".
Designated Supplier
Approved, chosen suppliers of products and services that meet the requirements
of a particular franchisor.
Development Area Rights
Your entitlement to open several franchise locations in a specified area.
Disclosure Document or Statement
By Federal Trade Commission rule and the laws of some states, franchisors must
provide disclosures in writing concerning 21 areas of information to the potential
franchisees before the purchase of the franchise, also called Uniform Franchise
Offering Circular.
Distributorship
The granted right by a manufacturer or wholesaler to sell or distribute a product
to others. Distributorships may also be considered a franchise or business opportunity.
Earnings Claims
Information given to a prospective franchisee by, on behalf of, or at the direction
of the franchisor or its agent, from which a specific level or range of actual
or potential sales, cost, income, or profit from franchised or non-franchised
units may be ascertained. It includes, but is not necessarily limited to, a
chart, table, or mathematical calculation presented to demonstrate possible
results based on a combination of variables such as multiples of pieces and
quantity to reflect gross sales.
Exclusive Territory
A specified area granted by the franchisor for operation of a particular franchise,
which prevents the franchise company from assigning another franchise within
that specific area.
Federal Trade Commission (FTC)
The federal agency, based in Washington, D.C., regulating a variety of trade
practices, including the franchise industry.
Financial Statements
A set of documents prepared by an accounting professional in accordance with
generally accepted accounting principles which reflect the financial condition
and historical transactions of a person or entity at a given time or period
of time.
Franchise
A business which is operated by the business owner (franchisee) under a license
from another party (franchisor) which grants the franchisee limited rights to
use the franchisor's trademarks, trade dress, confidential operational and marketing
plans and other proprietary information, in keeping with the franchisor's specifications
and procedures, for a specified period of time within a specified area or at
a specified location.
Franchise Agreement
Contract in between the franchisor and the franchisee, with all restriction,
rules, operating procedures, terms, conditions, and general obligations of the
franchisor and franchisee.
Franchise Fee
The initial fee you pay to a franchisor to acquire a franchise.
Franchisee
The owner of one or more franchises.
Franchises In Operation
Number of operating franchises that the franchisor has.
Franchising
The franchiser and franchisee's manner of doing business in a particular industry.
A way to distribute a product and/or service.
Franchisor
The company offering to license the rights to utilize the trademarks, logos,
confidential information and a business plan to potential franchisees.
FTC Rule 436
Passed in 1979, this law regulates the franchise industry by setting forth "disclosure"
requirements and prohibiting various trade practices by franchisors.
Initial Investment
Estimated initial cash investment required to open the business franchise. This
may include the franchise fee and other start-up costs and expenses, may not
be reflective of your total investment.
Initial And Ongoing Training
The initial and all subsequent training offered to franchisees in the operations
of a specific business.
Liquid Capital
Cash available and assets that can be turned into cash immediately.
Master Franchise
Exclusive rights from the Franchising Company to develop a specific territory.
Master Franchisee
Exclusive rights from the Franchising Company to an individual or Corporation
to develop a specific territory.
Master Region
A significantly large territory obtained by a franchisee with the objective
of subdividing and reselling individual franchise locations.
Net Worth
Total assets minus total liabilities.
Offer
Verbal or written proposal to sell a franchise to a prospective franchisee upon
the understanding of the general terms and conditions.
Operation Manual
A set of rules, specifications and procedures provided by the franchisor which
you agree to follow in the operation of your franchised business.
Other Fees
Other than royalty and advertising fees.
Passive Participant
Franchisee is not required by franchisor to operate the business.
Product Format Franchise
A structured method of offering the franchisor's products for sale to the public.
Protected Territory
An area granted to the franchisee in the franchise agreement that protects from
the franchisor to open another franchised or company owned business.
Registration
About 15 states require various forms of registration and approval of the franchise
offering circular by the franchisor before the particular franchise can be offered
for sale to the potential franchisees residing or businesses to be operated
within its states.
Restrictions
Franchisor restrictions to the franchisee in business operation.
Royalty Fee
A continuing periodic fee paid by the franchisee to the franchisor in addition
to the initial franchise fee. It is usually calculated as a percentage of your
gross sales or revenues.
Standard Operating Procedures
Formal procedures designed to maintain uniformity of product and service quality
within the franchisor's system and public image.
Start Up Cost Estimated
The estimated amount of money the franchisor will request to open the new franchise.
Total Investment
Estimated amount of money needed for a fully operational franchise or business,
which includes; initial investment, working capital, equipment and/or inventory,
etc.
Trademark
A legally protected name, symbol, design or other distinctive mark used to differentiate
the source of goods or services.
Turnkey
A business format franchise which offers complete training, equipment, inventory,
supplies, marketing plans and set up so that when you "turn the key in
the door" you are open and ready for business.
Uniform Franchise Offering Circular (UFOC)
This document provides background information in over 20 different categories
and a copy of the proposed franchise agreement. Also referred to as the "Circular",
"Offering Circular", and "Disclosure Document".
