If this is your first time considering opening a franchise, you may be confused by all the terms flying around. To do proper research and understand the entire purchasing process, it is important to know some terms so that you are clear about what is going on all the time. This will help you make confident and informed decisions that you will not regret. Read on to find out the 8 most common franchise terms to know!
Advertising Fund
An advertising fund refers to a pool of funds. These funds will be used by the franchisor to market the brand through advertisements, flyers and more. Usually, franchisors collect advertising funds from franchisees once a month, alongside other royalties to be paid by the franchisee.
Area Representative
For big franchises, there are usually area representatives who are in charge of specific areas. They take charge of identifying new franchisees. However, the real contract occurs between the franchisee and the franchisor, which is also known as the corporate entity. Area representatives usually receive commissions from the franchisor for identifying successful franchisees.
Franchise Disclosure Document
All companies that offer the opportunity to franchise in the United States require the Franchise Disclosure Document. This standardized document contains a lot of information regarding the franchise. This includes the estimated costs involved in starting a franchise, the business model, information about the franchise owners and officers, information on the franchise and more.
Breakeven
Breakeven is a common term used by all businesses, not only franchises. It refers to the point when the business has generated enough revenue to balance other costs, like investment costs and fixed costs. This means the point when the business is not making a loss nor a profit.
Royalty Fees or Royalties
Royalty fees are defined as the amount of money the franchisee agrees to pay the franchisor on a regular basis. This is usually monthly, although it can vary based on the contract. These fees are typically 10 percent or lower, but some franchises may charge higher fees depending on the services and support offered by the franchisor.
Transfer
When you intend to move the ownership of the franchise business from one person to another, it is known as a transfer of ownership.
Turnover
This refers to a franchise business that has been terminated, been transferred, not renewed or gone out of business.
Corporate Location
A corporate location is a location or unit that is owned and operated by the company instead of a franchisee.
Now that you know some of the most common terms when it comes to franchises, you can get started on deciding what franchise to open. Educational franchises like JEI Learning Center are meaningful and have a proven track record of success. Visit our website to see how you can get started today!
