10 Must Know Franchise Terms

Have you been checking out franchise opportunities lately but are unsure of the lingo used? If you are new to franchising then industry jargon will be hard to understand. It’s a veritable mine of business-speak, technical terms, and phrases that only seem to make sense if you are already intimately familiar with the subject matter. Below highlighted are 10 commonly used franchise terms, along with their meanings and descriptions, which should help make your foray into the world of franchising a little bit easier.

Related Read: Tips to Consider in Buying a Franchise


The proprietor of the franchise system and trademark is known as a franchisor. Many franchisees may be granted a license by a franchisor.


A franchisee is an individual or organization who has been granted permission to operate a business under a specific franchise trademark.

Related Read: Basic accounting know-how for a franchisee

3.Franchise Agreement (FA)

The rights, duties, and obligations of the franchisor and franchisee are outlined in a franchise agreement.

Similar Read: Tips to succeed the Franchisor Interview

4.Franchise Disclosure Document (FDD)

A franchiser is required by law to give every potential franchisee a Franchise Disclosure Document.

The Federal Trade Commission requires it, and it provides information about the franchisor’s finances, history, contractual commitments, investment costs, etc.

5.Franchise Fee

The sum that must be paid to the franchisor right away following the completion of the franchise agreement is known as the Franchise Fee.

6.Royalty Fee

The franchisee regularly pays the franchisor the royalty fee on a yearly, monthly, weekly, or daily basis.

For allowing the franchisee to use their franchise system, training, support, etc., it is typically a percentage of sales.

7.Initial Investment

The initial investment is the sum of money needed by a franchisee to launch, set up, and run a franchise business for at least three months in a specific location.

Start-up and ongoing costs are included.

8.Term of Agreement

The franchise agreement’s term, which might last anywhere between five and twenty years.

If the franchisee is doing well at the end of the term, the franchisor might elect to renew your contract.

9.Single & Multi-unit Franchisee

A person or organization that has acquired just one franchise location is known as a single-unit franchisee. A Multi-unit Franchisee is a person or organization who has purchased two or more franchise locations.

10.Area Developer

A franchisee who has obtained the rights to open numerous franchise locations within a specific region and time frame is known as an area developer.

So you are interested in working in the franchise industry. It’s good to know a little bit about the different terms you will come across. Franchising has been around for a long time and it is constantly changing.

Related Read: Creating a Franchise Plan

To get to know who are the industry key players, visit our Interview of the Week page.

To stay updated, visit our Franchise News section.

To learn more, visit our Franchising Tips section

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