Franchising Terms

• Franchising

"A marketing system revolving around a two-party legal agreement, whereby the franchisee conducts business according to the terms specified by the franchisor"

• 
  
  Franchise contract

"The legal agreement between franchisor and franchisee"

• Franchisee

"An entrepreneur whose power is limited by a contractual agreement with a franchisor"

• Franchise

"The privileges conveyed in the franchise contract"

• Franchisor

"The party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party"

Types of Franchises

1. Product and Trade Name Franchise
   Grants the right to use a widely recognized product or name


2. Business Format Franchise
   Provides an entire marketing system and ongoing guidance from the franchisor


3. Piggyback Franchising
   The operation of a retail franchise within the physical facilities of a host store


4. Master Licensee
   An independent firm or individual acting as a sales agent with the responsibility for finding new franchises within a specified territory


5. Multiple-Unit Ownership
   Holding by a single franchisee of more than one franchise from the same company


6. Area Developers
   Individuals or firms that obtain the legal right to open several franchised outlets in a given area.

Financial Assistance

• Start-up business costs are normally high and thus by teaming up with a franchise organization, the individual can increase her/his chance of receiving financial help.
• The franchisor might chose to use liberal payment schemes to the franchisee in order to get over the initial financial hurdle.