Franchise Terms 101

Business Vocabulary


Welcome to the world of franchising. As you research, you’ll hear and read a slew of franchise terms and acronyms. We compiled this list for you to keep handy.

Franchise Terms You Should Know

Franchise:  A business opportunity that allows the franchisee to legally use a company’s (franchisor’s) expertise, ideas, and processes

Franchisee: A person or group who enters into a contract with a franchisor to own a business that legally uses the franchisor’s expertise, ideas, and processes

Franchisor: A person or company that grants the license to a third party (a franchisee) for the conducting of a business under the franchisor’s marks

Franchise Agreement: An agreement made between you and the larger company that gives you the right to operate as a satellite of the larger company in a certain territory for a given period of time

Contract: A legally binding document that explains what type of relationship and permissions the franchisee and franchisor will have

Mentor: A trusted advisor who you can go to for advice

Location: The territory your franchise will serve

Entrepreneur: A person who organizes and operates a business and takes on greater than normal financial risks and responsibilities

Marketing: Adverting that is used to gain customers and increase brand recognition

Brand recognition: How well consumers know a company and what they think of it

FAB: Features, advantages, benefits; the selling point for joining a franchise

Market: The group of people or area your business serves

Mission statement: What the goals and values of a company are

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