Acknowledgment of receipt: Item 23 of the Franchise Disclosure Document (FDD) signed by the prospective franchisee to acknowledge receipt of the FDD.

Advertising fee: The fee franchisees contribute to a fund used for consumer marketing material, including TV, radio ads, and placement costs.

Advertising fund: Also known as the system brand fund, it's a fund that supports the cost of advertising and marketing campaigns for franchisees.

Agent: A party authorized to act on behalf of another, either through express or implied authority.

Approved advertising materials: Marketing materials provided by the franchisor for the franchisee to use in local markets, or created by the franchisee and approved by the franchisor.

Approved site: A location that meets the franchisor’s criteria but doesn’t guarantee success or sales.

Arbitration: A method of resolving disputes outside the court system.

Area franchisee (multi-unit): A franchisee committed to developing a specified number of franchise locations within a defined territory.

Authorized or designated supplier: A supplier approved by the franchisor to sell products or services to franchisees.

Broker or franchise sales organization: An outside salesperson or firm that markets and sells franchises, typically for a commission.

Business-Format Franchising (BFF): A franchising model where the franchisor provides not only the brand but also the operational systems and methods.

Business Plan: A document detailing the objectives, processes, and measures to achieve business goals.

Capital Required: The initial investment necessary to start and run the franchise.

Certification: A process by which franchisees test and attest to a manager’s ability to meet the franchisor's standards.

Churning: The practice of reselling underperforming locations to new franchisees, often resulting in repeated failures.

Company-owned location: Franchise locations owned and operated by the franchisor or an affiliate.

Continuous training: Ongoing training provided to franchisees and their employees throughout the life of the franchise relationship.

Conversion franchisee: An independent business owner who converts their business to operate under the franchisor’s brand and system.

Copyright: The franchisor’s ownership rights over materials like manuals and other published content used in the franchise system.

Culture of Compliance: A franchisor’s commitment to ensuring franchisees and their staff adhere to company standards, not just contractual obligations.

Customer Information: Information gathered about customers, which is often considered confidential.

Days: Refers to calendar days unless otherwise specified.

Day-to-Day Management: The responsibility of the franchisee to oversee the day-to-day operations of the franchise, ensuring it meets franchisor standards.

Default: Failure to meet obligations set out in the franchise agreement.

Design: The visual and structural elements that make a franchise location consistent with others in the system.

Disclosure Document: A document that provides essential information about the franchise, required by law before entering into a franchise agreement.

Distributorships: The right to sell a manufacturer’s or wholesaler’s products.

Financial Performance Representation: The disclosure made by the franchisor about the financial performance of franchise units, often found in Item 19 of the FDD.

Exclusive Territory: A geographical area where no other franchise or company-owned location will be opened by the franchisor.

FDD: Franchise Disclosure Document, a document that must be provided to prospective franchisees in the U.S. outlining important franchise system details.

Feasibility study: An analysis of a company’s potential to become a successful franchisor.

Federal Trade Commission (FTC): The U.S. agency that regulates franchising.

Field Consultant: A franchisor’s employee who ensures franchisees comply with brand standards and offers operational guidance.

Footprint: The layout of a franchise location, including the arrangement of furniture and equipment.

Franchise: A license that allows a franchisee to operate under a franchisor’s trademark and business system.

Franchise agreement: The contract between the franchisor and franchisee that outlines the franchisee’s rights and obligations.

Franchise attorney: A legal professional who specializes in franchise law.

Franchise Consultant: A business advisor specializing in franchising, who helps guide prospective franchisees through the process of choosing a franchise.

Franchise fee: The one-time fee paid by a franchisee to the franchisor to join the system.

Franchisee: The individual or entity that operates a franchise business under the franchisor’s brand.

Franchisee in good standing: A franchisee who meets all obligations under the franchise agreement and is compliant with brand standards.

Franchising: A business model in which a franchisor grants a license to a franchisee to operate under the franchisor’s trademark and system.

Franchisor: The individual or company that owns the franchise system and grants the franchisee the right to operate under its trademark.

Gray Marketing: The sale or use of franchised products or services outside the authorized franchise system.

Gross Sales: Total sales before tax and with specified deductions, used to calculate royalties.

Initial Investment: The upfront costs of starting a franchise, including fees and operational costs.

Inquiry: A person who requests information about a franchise opportunity.

Internet sales: Sales made through the internet.

Key Supplier or Vendor: A supplier whose products or services are integral to the franchise system.

Lead: A person who has expressed interest in a franchise opportunity and has been pre-qualified by the franchisor.

Location: The physical site of a franchise operation.

Manual (Operations and or Brand Standards): A document that provides detailed instructions on how franchisees should operate their business according to franchisor standards.

Market Introduction Program: Marketing activities used to launch a new franchise location.

Master Franchisee: A franchisee who has the right to sell sub-franchises within a designated territory.

Multi-Unit Franchisee: A franchisee who owns more than one franchise.

Operating Principal: The person authorized to make decisions on behalf of the franchisee.

Product and Trade Name Franchising (Traditional Franchising): A franchising model focused on selling products under the franchisor’s name and logo without a full business system.

Prospect: A person who has expressed interest in becoming a franchisee and has submitted an application.

Protected territory: A market area where the franchisor guarantees not to open competing locations, though other locations may be nearby.

Registration: The process in certain states where the franchisor’s FDD must be approved before it can be offered.

Registration States: States that require franchise systems to register and gain approval for their FDD.

Retrofranchising or Refranchising: The process by which the franchisor resells existing company-owned locations to franchisees.

Royalty Fee: A recurring fee paid by the franchisee to the franchisor, usually based on a percentage of sales.

Service mark: A mark used to identify services rather than products, protected under law.

Single-Unit Franchise: A franchisee who operates a single franchise location.

Start-up Costs: Initial costs to establish a franchise, including fees, inventory, and working capital.

Successor Agreement: An agreement allowing the franchisee to continue operating for additional terms after the initial franchise period.

System Brand Fund: A fund used by the franchisor to promote the brand, sometimes including more than just advertising.

Trademark: The brand name or logo associated with the franchisor's system.

Turnkey: A fully equipped and operational location that the franchisor builds and sells to the franchisee.