Five common franchise terms explained

I’ve only ever worked for a franchise a couple of times, but it seems to be one of the most stable forms of investments.  That’s saying something in these economic times, too.  But before you hop on the wagon, there are some things you need to understand.

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Buying a franchise is a wonderful idea. But before you jump straight into the scene, you need to know the lingo. There are several franchise terms that most people aren’t aware of, and you need to know them if you’re going to survive in the industry. Here are the five most important terms explained.

Franchisee:

This is you. The franchisee is the person who purchases the franchise from the owner. As a franchisee you are entitled to use the name, trademark, products and processes of the franchise. This is a huge benefit, as you already have a foundation and a reputation. It does, however, come at a fee. This is the agreement that is made with you and the owner of the franchise.

Franchisor:

This is the person you buy the franchise from – the owner. They are giving you permission to use their name, trademarks, products and processes as long as they receive a slice of the income. You will make a profit and so will they. Coral Homes are a good example of a company who offer this opportunity.

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Franchise Disclosure Document:

It is a requirement that all franchisors provide their potential franchisees with a copy of the franchise disclosure document. These documents are updated each year, and contain vital information such as costs and fees, the company’s history and your obligations as a franchisee. This is one of the most important things to take note of before committing to buying a franchise. Make sure that you thoroughly read the franchise disclosure document, so that you are fully aware of what you’re getting yourself into.

Initial Investment:

This is the sum that will be paid to the franchisor prior to you opening up your franchise. It is outlined in the franchise disclosure document. Among other things it includes the franchise fee (flat fee for purchasing the business), and covers real-estate, supplies, equipment and business licenses. Make sure that you’re fully aware of every item included in the initial investment. You want to start your business in the most organised way as possible, completely aware of exactly where your money is going.

Royalty Fee:

The franchisor will require their franchisees to pay a royalty fee at set periods of time. This can range from weekly, monthly to yearly. Generally, you pay the franchisor a percentage of the money you have made from sales. Although sometimes, they ask for a flat fee. Some businesses may require an added fee on top of royalties of advertising purposes. Again, make sure you’re aware of exactly how much you will be required to pay and when. It’s important to get this information out of the way as soon as possible.

These are, among others, some of the most important terms to be aware of when becoming a franchisee. Keep researching and you will be ready in no time at all. There is no experience like being in the job, so stick to it and you will have your franchise open for business in no time. For more information about running a successful franchise business in Australia visit Coral Homes franchise business.

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    posted on by Little Bunny posted in Uncategorized

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