Glossary

Franchise - The authorisation of a manufactory/service provider to distribute his products under an established name. This is not a branch of the Franchisors business but a separate business under the original business name. The franchise is also run using the original business concept.

Franchisor - The owner of the original business that is franchised. The Franchisee buys the right to use the franchisors business in the form of a franchise.

The Franchisee - The purchaser of the franchise who has acquired the right to operate the system and use the name, as set down by the franchisor under the terms agreed under the franchise contract

Franchise Contract - The legal agreement between the parties which sets out the terms under which the Franchisee will operate the business. Whilst individual headings will vary, it will normally include :

	The right to use the trade name
	The Franchisee’s obligations
	The Franchisor's obligations
	The premises and the territory
	Length of Franchise contract
	Financial aspects such as initial franchisee fee and ongoing royalties
	Renewal terms
	Control of standards
	Rights of sale
	Performance targets
	Termination
	Effects of termination

Whilst Franchise contracts may look at first very daunting they are normally fair to both parties whilst giving protection to the Franchisor who has developed the business system.

It is important however to ensure that you take legal advice before entering into a contract to make sure you understand all aspects of that contract.

Do not expect the Franchisor to change parts of his contract just for you. It is important that once established the Franchise contract is unchanged to ensure standards remain constant and that a level playing field exists between Franchisees.

Term of Contract - Normally between 5 and 10 years

Operations Manual - The bible setting out how the Franchise should operate. This is the system that the Franchisee has bought into and must follow. It is based on the Franchisor’s experience and best policy and procedures.

Glossary

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