AREA DEVELOPMENT AGREEMENT (OFTEN CONFUSED WITH MULTI-UNIT)

 

The Area Development Agreement is another variation of multi-level franchising where the franchisor grants exclusive development rights for a particular geographic area to an area development investment group or an area developer. In return for the rights to an exclusive territory, the area developer pays the franchisor a front-end development fee and commits to develop a certain number of units within a specified period of time.

 

AREA FRANCHISE

 

An area franchise is a franchise relationship that allows the franchisee to open multiple locations, usually in a defined territory within a pre-agreed upon timeline. Area franchisees usually pay an area fee for the rights granted by the franchisor.

 

COMPANY-OWNED LOCATION

 

A company-owned franchise location is owned and operated by the franchisor. This type of location is usually identical in appearance and operations to those of the system's franchises. While not required, most company-owned locations contribute to the system's franchise advertising fund.

 

CONFIDENTIALITY AGREEMENT

 

A confidentiality agreement restricts parties involved from disclosing trade secrets and confidential franchise information. In franchising, this agreement is designed to protect trade secrets and expertise from being misused by those who have learned of them.

 

EMPLOYEE HANDBOOK

 

An employee handbook is one of the initial franchise manuals used by franchisees when hiring and training staff with information covering the process of educating and selling the service.

EXCLUSIVE TERRITORY

 

The franchisee’s territory is the geographic area or domain in which his/her business operates. The franchisor may grant exclusivity to the franchise territory, meaning no other franchised or company-owned outlet may open in the franchise territory.

 

FRANCHISE

 

A franchise is a relationship which typically includes three basic elements: (1) the granting of the right to use the systems mark, (2) substantial assistance or control provided by the franchisor to the franchisee, (3) the payment of a fee before and/or during the relationship.

 

FRANCHISE AGREEMENT

 

The franchise agreement is a legally binding agreement that outlines the franchisor's terms and conditions for the franchisee. The franchise agreement also clearly outlines the obligations of the franchisor and the obligations of the franchisee. The franchise agreement is signed when an individual has made the final decision to buy the franchise.

 

FRANCHISE APPLICATION/PERSONAL PROFILE

 

A franchise application, also referred to as personal profile, is required by most franchisors in order to collect and evaluate information about a prospective franchisee.

 

FRANCHISE ATTORNEY

 

A franchise attorney is a lawyer specializing in, or with significant knowledge of, the laws, regulations and customs governing franchising.

 

FRANCHISE BROKER

 

A Franchise Broker represents multiple franchisors in an effort to identify and introduce perspective franchisees to them. Brokers also work on behalf of individuals or groups helping them identify franchise opportunities prior to making the introduction. If and when a Franchise Agreement is signed the franchisor then pays a commission or finder’s fee to the Broker which is most often based on a percentage of the initial franchise fee.

 

FRANCHISE CONSULTANT

 

A franchise consultant is a business specialist with significant knowledge of the design, development, and operation of franchising and the underlying franchise relationship. Not to be confused with a Broker, who is a sales agent for the franchisor.

 

FRANCHISE DEVELOPMENT

 

Is the process is of growing a franchise system through sales of franchise units in either groups of units or individual locations.

 

FRANCHISE DISCLOSURE DOCUMENT

 

The Franchise Disclosure Document is mandatory in some jurisdictions, and provides information about the franchisor, the obligations of the franchisor and the franchisee, fees, start-up costs, and other required information about the franchise system. It includes a listing of current and former franchisees. In addition to the disclosure portion of the FDD, the document will contain the franchise and other agreements and exhibits. It does not typically include unit earnings information.

 

FRANCHISE FEE

 

The franchise fee is an up-front (one-time) cost that a new franchisee pays to the franchisor. In most cases the franchise fee will cover the costs for training, support and site selection.

 

FRANCHISE INFORMATION PACKAGE

 

An FIP (Franchise Information Packet) is a marketing piece presented to interested prospects detailing the important components of the franchise offering. The packet is created through mining the key aspects of the franchise system and competitors within the industry.

 

FRANCHISE OPERATIONS

 

Franchise operations refer to the day to day operational aspects of a franchise system. They consist of, but are not limited to: vendor relations, day-to-day support, research and development, manuals and office forms, marketing and advertising, franchisee relations and training systems.

 

FRANCHISEE

 

The franchisee is a person or company that gets the rights (license) from the franchisor to do business under the franchisor’s trademark or trade name.

 

FRANCHISING

 

Franchising is a method of business expansion characterized by a trademark license, payment of fees, and significant assistance and/or control.

 

FRANCHISOR

 

The franchisor is a person or company that grants the franchisee the right to do business under their trademark or trade name.

 

GRAND OPENING MANUAL

 

The Grand Opening Manual is prepared by the franchisor, and used by franchisees to help launch their new franchise operation. A quality grand opening manual can be essential to franchisee satisfaction as it provides confidence and increased revenues during the early delicate stages of the franchise relationship. The franchise manual will detail the steps, vendors, staffing, media and advertising needed for a successful grand opening.

 

INTERNATIONAL FRANCHISE ASSOCIATION (IFA)

 

The International Franchising Association (IFA) is the world’s oldest and largest organization representing franchising. Founded in 1960, it is a Washington D.C. based trade group and non-profit association that represents a growing membership of more than 1,300 franchise systems, 10,000+ franchisees and more than 500 firms that supply goods and services to the industry.

 

KEY SUPPLIER OR VENDOR

 

A key supplier or vendor is a company with whom the franchisor has negotiated pricing or product availability and whose products or services are an integral part of the franchise system.

LEAD

 

A franchise lead is an inquiry that is prequalified after the initial interview with a member of the franchisor's development staff as meeting the minimum criteria to become a franchisee, and who is invited to submit a franchise application.