MASTER FRANCHISE AGREEMENT/LICENSE

 

A Master Franchise Agreement is a model of multi-level franchising wherein the master franchisor sells the development rights in a particular geographic market to a master franchisee, who, in turn, sells individual or single-unit franchises within the territory. In return for a front-end master franchise fee, the master franchisee has the sole responsibility of developing that area or market under a mutually agreed upon schedule. The master franchisee is rewarded by sharing in the franchise fee and ongoing royalties paid by the franchisees within the territory to the master or parent franchisor.

 

MULTI-UNIT DEVELOPER

 

A multi-unit developer is a franchisee who agrees to open two or more locations, generally in a defined market over an agreed upon period of time.

 

MULTI-UNIT FRANCHISING

 

Multi-unit franchising creates the opportunity for a franchisee to open more than one unit. In this type of operation, the franchisee partakes less in the day-to-day operations of the unit. Instead, the multi-unit franchisee manages all the locations at a higher level. Usually the franchisee will hire managers and staff for each location to perform the daily operations. This type of franchising is not typically limited to a particular area. Therefore, the franchisee may have several units located in different parts of a town, or even in other countries. Although the initial total investment is higher than opening a single-unit franchise, the risk is sometimes lower for the franchisee. Owning more units can increase the overall probability of success. Also, the multi-unit franchisee is likely to have more input with the franchisor, creating a win-win situation on both sides.

 

RETROFRANCHISING OR REFRANCHISING

 

Retrofranchising occurs when existing franchise locations, that may or may not have ever been franchised, and which are currently operated by the franchisor, are offered for sale to prospects. Not the same as churning - the franchisor has an expectation that the retrofranchised business will be successful.

 

ROYALTY

 

A royalty is a regular payment made by the franchisee to the franchisor, usually based on a percentage of the franchisee’s gross sales.

 

SEARCH ENGINE OPTIMIZATION (SEO)

 

Search engine optimization is the franchise internet marketing process of improving the visibility of a website or web page in search engines via the “natural” or unpaid search results. In general, the earlier (or higher on the page), and more frequently a site appears in the search results list, the more visitors it will receive from the search engine’s users.

 

SPECIFICATIONS MANUAL

 

A specification manual details all specifications, including material, pertaining to brick and mortar, build-out and construction of a retail location.

 

START-UP COSTS (INITIAL INVESTMENT)

 

The initial investment is the amount of money the franchisee will spend in becoming a franchisee. Generally includes the franchise fee, the cost of fixed assets, leasehold improvements, inventory, deposits, other fees and costs, and working capital required during the start-up period.

 

TRADEMARK

 

A trademark is a distinctive sign or indicator used by an individual, business organization or legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products and services from those of other entities.