16 Common Franchise Terms Explained: PART 2

In our last blog, we introduced you to 8 common franchise terms that are crucial for aspiring franchise owners to know before beginning the process of becoming a partner. But it doesn't end there! In addition to understanding basic language and who the franchisee is compared to the franchisor, there are several other technical terms that are important to know in order to carry out a conversation about becoming a franchise owner.

The following are 8 more common franchise terms and their definitions that will be useful for you to know as you begin to acquire a franchise:

  1. Company-owned units: Company owned units are locations owned and run by the franchisor him or herself rather than by a franchisee.
  2. Registration states: Fifteen states require that franchisors register their Franchise Disclosure Documents with a state agency before they can legally sell franchises in that state.
  3. Conversion: Occasionally, franchisors offer business owners the opportunity to convert their pre-existing, independent business into a franchise.
  4. In-house financing: In-house financing is financing offered to the franchisees by the franchisor. This is done to help the franchisee with expenses such as the initial franchise fee.
  5. Third-party financing: Third-party financing is financing provided by someone other than the franchisor.
  6. Absentee ownership: Absentee ownership is an option that some franchsiors offer, which allows a person to own a franchise without being actively involved in the business on a day to day basis.
  7. Master franchise: A master franchisee is essentially a subfranchisor in a certain territory. Master franchisees have the ability to issue FDDs, sign up new franchisees and more; many of their responsibilities mirror that of the franchsior,
  8. Area developer: Area developers agree to open a certain number of franchise units in a large territory over a certain amount of time.

Thank you to Entrepreneur.com for outlining these great, need to know franchise terms!

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