Easy guide to (franchise) legal language

Sarah Stowe

ACCREDITATION: A banking loan scheme that provides franchisees with some of the finance they may need when buying the franchise.

ASSIGNMENT: When a franchisee sells their business to a new franchisee. 

FRANCHISEE: An individual who runs a franchised business using the intellectual property of the franchisor. 

FRANCHISE ADVISORY COUNCIL: A structure  for franchisors to seek and receive feedback from their franchisees.  

FRANCHISE FEE: An up-front cost paid to the franchisor. It covers the use of the brand name and business system. 

FRANCHISE TERM: This is the period granted for trading under the franchise agreement. 

FRANCHISOR: The franchisor grants permission to the franchisee to conduct business using its intellectual property, brand name, working methods and marketing. 

GREENFIELD: A brand new site. 

GOODWILL: This is a calculation of the value of trade in an existing business that is likely to continue and benefit the incoming business owner. 

INTELLECTUAL PROPERTY: The trademarks, copyright, designs, patents, branding, methodologies, manuals and/or recipes franchisors license to franchisees.

LOCAL AREA MARKETING: This is marketing the franchisee is responsible for in their area. 

MARKETING & ADVERTISING LEVY: A regular flat or percentage-based-fee paid into a centralised advertising or marketing fund. 

OPERATIONS MANUAL: The franchisee’s guide to operating the franchise business. 

ROYALTY: Fee paid by the franchisee to the franchisor for the ongoing use of the brand and systems, management and technical support. 

TERMINATION: The ending of the franchise contract between franchisee and franchisor, usually for breach of contract. 

TERRITORY: The area assigned to franchisees for their business. Territories can be exclusive or non-exclusive. 

TURNKEY FRANCHISE: A franchise package that includes all the equipment, information and systems required for a franchisee to open up the business and start trading.