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Franchisee, Franchisor, and Other Terminology You Should Know


You’re trying to learn all about franchising but spend more time with a confused look on your face than a smile. You grab a pen and notebook but even writing it down doesn’t help. It’s time to take things back to basics and look at some definitions. We don’t think anybody should be excluded from the business world, so we’re going to define some basic business and franchising terms. From franchisee to franchisor and beyond.

Knowing the definitions of terms can be helpful (it means you don’t have to sneakily look something up while on a video call!). In the world of franchises, we have the franchisee – the savvy individual who buys the ticket to entrepreneurial success. And then we have the franchisor – the brilliant mastermind who grants permission to operate under their name, like a true business wizard.

Those who have come across and searched territory and exclusive territory will have also seen that this is a confusing field. Don’t fall into the trap like others and mix up the two. A territory is like a VIP zone where the franchisee has the green light to operate, while an exclusive territory is like a “no-entry” sign for any other franchises of the same brand. It’s like having your own little kingdom within the business realm.

In the world of franchising, we encounter the intriguing concept of “royalty” – not the regal kind, but the ongoing payments that franchisees must make to the franchisor. It’s like a small tribute, a percentage of their sales, keeping the franchise empire thriving. You might think of it as the cost of keeping the franchisor sweet and to keep using its name and systems. Think of when musicians get royalties when their music is used elsewhere, the same goes for the franchisor.

When diving into the world of franchising, don’t forget about these gems: the “marketing fee” (aka the brand promotion contribution), “training and support” (your secret weapons for business success), and the “franchise agreement” (the legal love letter between franchisor and franchisee). Keep these terms in mind and conquer the franchising game.

We should also spend a little time differentiating between various terms. Here’s the scoop: there’s a distinction between a single-unit franchise and a multi-unit franchise. A single-unit franchise means running the show at one spot, while a multi-unit franchise means rocking multiple locations in a specific territory. Get ready to multiply your franchise game. You can also transform an existing business into a franchise and some people call this conversion franchising.

We’re sure you’ll come across other words and terms that cause confusion, but we’ve given you a great starting point (you’re welcome!). As you dive deeper into the world of franchising, remember that definitions might vary slightly like toppings on a pizza – depending on the franchisor and their unique business model. So, before taking a big bite into the world of franchising, make sure to do your research and understand all the cheesy terms to avoid any unexpected surprises. Get help from Guerrilla Franchising to take this opportunity to the next level!

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