Here Is The A to Z Of Franchising Business You Need To Know

Want to venture into franchising business? First, familiarize yourself with A to Z of Franchising.

Area Franchisee

A franchisee who has acquired exclusive rights to open franchise units within a defined territory, usually on a schedule or timeline set at the time of signing an agreement.

Breakeven

A breakeven period is considered as the time where a franchise business reaches a point where it makes enough revenue to balance the investment. In simple words, when it reaches the point where the net profit and net loss is nullified.

Company Owned Units

Also known as company-owned locations, these units are owned and operated by the parent company instead of franchisees.

Disclosure Document

Franchise disclosure document is a detailed document which contains all the important information regarding the franchise.

Evaluation

Evaluation is a very important step before signing a franchise deal. People should evaluate whether the franchise concept matches their requirements or not, this must be done within the disclosure period.

Franchise Fee

It is the initial investment made to the franchisor to use the franchise brand’s name and likeness. It is a one-time payment.

Growth

When evaluating any franchise company, it's important to consider the franchise’s rate of growth as it relates to potential risk factors which might arise in future.

Hand-holding

The biggest advantage of becoming a franchise is that the franchisor provides support and guidance. From the initial setup phases to operations, franchisees are taught the “right” way of managing the business.

Invariability

Invariability or uniformity is important for a franchisor.  It is important to ensure uniformity across the entire franchise network to maintain consistency.

Joint Venture Partnership

A joint venture partnership is a type of agreement that two companies sign to work together for mutual profit by sharing costs, risks and rewards.  

Kiosk

Kiosks are small portable carts. It is the perfect franchising opportunity for those you dream of venturing into franchising but is constrained due to lack of capital.

Location

One of the most crucial aspects while starting a franchise business is finding an ideal location. One mistake of landing at the wrong location can cost you extravagantly.

Master Franchise

The Master Franchise agreement is a franchise contract where the franchisors allow the franchisee to the control of franchising activities in a specified territory.

Net Worth

Net worth is the calculation of one’s total value or assets. Many franchise brands require a minimum net worth in addition to a minimum liquid capital for prospective franchisees.

Opening

Franchisor and Franchisee have a very important role to play during the opening of a franchise. They have to be in coordination and work towards achieving a common objective.

Payment

Other than the initial franchise fees, a franchise has to make a regular payment to its franchisor. This payment is also termed as royalty, where the franchise pays a percentage of its earned revenue.  

Question

Ask questions to yourself and your prospective franchise to find the best franchise that matches with your needs and wants.

Relationship

A franchisor-franchise relationship forms the backbone of any franchise system. It is necessary to have a cordial relationship to make your franchise system successful.

Supplier

A supplier provides a service or product to franchisees. Franchisors often establish a good supplier relationship wherein individual franchises receive negotiated discount pricing.

Trademark

Your trademark represents critically important assets to your franchise system. As a franchisor, your entire system will be growing around your trademark and brand. 

Uniqueness

Being unique not only attracts prospective franchise but also potential investors. It portrays them that the brand has their own niche of customers.

Validation

It is a part of “due diligence” when buying a franchise. The prospective franchisee will contact the existing franchise owners in an attempt to validate the virtues of the franchise opportunity.

Wealth

If franchisors are not able to provide an indication of the level of profitability or net wealth their franchise concept could offer, prospective franchisees won’t have a reason to carry on with negotiations.

Younger Franchisees

Participation of younger franchisees is important in today’s competitive world. Persistence, Energy, Ambition, And Creativity Is What Makes A Younger Franchise Successful

Zero Royalty

In this royalty agreement, the franchisors do not impose any royalty fee from the franchisees. The franchisor earns its revenue exclusively from the sale of products to the franchisees.