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Nine franchise terms you need to know

If you are considering buying a franchise, it’s important to understand some of the key terms used within the industry.

This will help ensure you make educated decisions, and that as a franchisee you understand your role, and relationship with others in the industry.

Below is a list of commonly used franchise terms, to help you better understand franchising jargon.

Franchisee:

An individual that purchases and runs a franchise business. A franchisee is responsible for implementing the business model provided by the franchise system.

Franchisor:

The owner of the franchise business system that grants the franchisee a licence to trade under their name.

Franchise:

A licence granted by the business owner (franchisor) to the franchisee through which the franchisee can develop their own business using the name, trademark and business model of the franchisor.

Franchise system:

A franchise is an individual business, meanwhile a franchise system is the parent company that is comprised of multiple businesses under the same brand. The franchise system allows others (franchisees) to set up and trade in their name as a franchisee.

Franchise opportunity:

A specific opening for individual(s) to purchase from a franchise system (parent company). Reed Commercial offers useful information including the location of potential opportunities, upfront costs and whether the opportunity is a new or re-sale opportunity.

Franchise agreement:

The contract that details the responsibilities of the franchisee and franchisor.

Terms of agreement:

The length of time that the franchise agreement is valid. At the end of the agreement you could have the opportunity to renew. A the typical franchise term usually lasts between five to 10 years.

Royalty Fee:

A fee that is regularly (monthly, yearly) paid to the franchisor from the franchisee. This is usually either a flat fee or a percentage of sales revenue stated in the franchise agreement.

How can Reed Commercial Help?

Franchises for sale:

You will find opportunities listed on Reed Commercial – opportunities are location specific openings available to purchase from the franchise systems. Here you can find out useful details including opportunity location, upfront costs and whether the opportunity is a new or resale opportunity.

Franchise Profile:

All franchise opportunities listed on Reed Commercial are accompanied with Franchise profiles. These provide you with an introduction to the brands and business types that are available to select from. The information provided creates a ‘shop window’ into what the business does, how they do it and what they’re looking for.

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Sandy Purewal

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