Even if you have years (or decades!) of experience in a traditional business or corporate setting, franchise systems have their have their own set of terms and processes to learn.
Keep reading to learn some of the most important terms you’ll need to know before investigating potential franchise opportunities.
Franchise.org gives the following definition for franchising: “a method for expanding a business and distributing goods and services through a licensing relationship.”
In other words, the franchisee enters into an agreement with the franchisor (i.e. the entity granting the franchise) that allows the franchisee to sell trademarked and/or proprietary goods and/or services. In exchange, the franchisee (the individual or entity buying one or more units of the franchise) is provided with operational support and systems, training, and marketing/branding that they otherwise would not have in starting a business from scratch.
There are thousands of franchise opportunities in the United States and around the globe in every industry from restaurants, to cleaning and home services, to weight loss.
FDD (Franchise Disclosure Document)
By law, a franchisor must provide its FDD, or Franchise Disclosure Document, to all prospective franchisees. At 23 sections long, this detailed document is updated annually and outlines everything from franchising costs, to the history of the franchisor, to franchisee obligations, and more.
The goal of the Franchise Disclosure Document is to provide interested parties with standard information about each franchise they’re considering so they can make a more educated investment decision. When the time comes to review a franchisor’s FDD, be sure you give your full attention.
A multi-unit franchisee is the owner of multiple “units,” or locations, within a franchise system. While many multi-unit franchisees are seasoned investors who have experience owning and operating multiple businesses at once, in some cases a single-unit owner may find success with a brand and will decide to expand their operation into additional locations. Each franchisor handles “area development” contracts differently, so if you have an interest in multi-unit franchise opportunities, you should bring it up with the franchisor early on in your initial conversations.
Typically, franchisors provide their franchisees with operations manuals that cover day-to-day business processes. Some of the topics typically covered in the operations manual usually include: brand guidelines like the correct use of trademarked names; hours of operations; health and safety information; recommended or required manufacturers or inventory suppliers; and much more.
Some franchisors, like Jenny Craig, also offer a franchise resource site which provides similar information in an online format that can be accessed any time of day or night. Additional resources might include social media content, client-facing forms and tools, company updates, and press releases. Jenny Craig also provides an online Marketing portal, so you can customize and have printed materials sent right to your center.
Royalties, as they are related to franchise opportunities, are defined as fees that are paid by the franchisee to the franchisor. All royalty fees will be discussed in detail in the Franchising Disclosure Document and Franchise Agreement.
Term (of the Franchise Agreement)
The “term” of the franchise agreement refers to how long the agreement is valid, normally in the range of 5-20 years. After the term expires, a franchisor may permit its franchisees to renew their franchise agreements.
A franchisee’s territory is the area in which they are permitted to sell products, open a retail store, etc.
Understanding the terminology is just one small part of the franchise journey. To dig deeper and find out if you’ve got what it takes to open your own Jenny Craig weight loss center, contact us today.