Many of terms and language of franchising comes from its European origins. Needless to say, it’s not always straightforward and easy to understand. To help you navigate the documents you’ll need to read before becoming a ConcreteScience® franchise, we’ve prepared this list of terms. It does not include everything, but it will get you started.

Acknowledgement Of Receipt:
The last page of the UFOC, this document (which you sign) states that you received the legal franchise documents on a certain date.

Advertising Fee:
A fee paid by the franchisee for national/corporate advertising expenditures. Usually this is less then 3 percent of the franchisee’s annual sales and is in addition to royalty fees.

Agreement:
The franchise "contract". See UFOC.

Area Development Rights:
Optional right to develop multiple individual franchises in one defined geographic area.

Area Franchise (Development Agreement, Master Franchise):
A special class of franchise responsible for developing additional franchise locations within a specific geographic territory.

Assignment/Fees:
Monthly fees paid to the franchise corporation. See Advertising fees and Royalties.

Capital Required:
The amount of liquid assets (cash, marketable securities, etc) you are required to have/maintain to start or operate the franchise.

Company-owned Outlet:
Operationally similar to the franchise, but owned directly by the corporation.

Conversion Franchise:
A special class of franchise allowing existing businesses to join the national/international franchise system.

Default:
Failure to perform agreed upon terms.

Designated Supplier:
Authorized suppliers of products and services used in the franchisee business (i.e. printed materials, supplies, equipment etc.)

Disclosure Document:
See UFOC.

Distributorship:
A business authorized to sell the products or services of another business – usually a manufacturer/reseller arrangement. Distributors are usually not franchises, though that is not always the case.

Earnings Claims:
Statements of sales, profit or other financial information made by the franchisor regarding franchisees.

Entrepreneur:
The person or company starting a business.

Exclusive Territory:
A specifically defined geographic area wherein the franchisee retains the sole right to operate.

Federal Trade Commission (FTC):
Federal agency regulating trade practices, commerce and franchises.

Franchise:
A business designed to offer a set range of products or services defined and managed by a franchisor.

Franchise Agreement:
See UFOC.

Franchisee:
The franchise owner (may own one or several individual franchises).

Franchise Fee:
The amount of money you need to pay the franchisor to purchase a franchise.

Franchising:
A method of conducting business in an industry that involves a franchisor and franchisee.

Franchisor:
The person or company that owns the right to manage/sell franchises for a specific product or service.

FTC Rule 436:
The part of franchise law that specifies disclosure requirements and rules governing franchise business, etc. See FTC for more information.

Initial / Ongoing Training:
The training offered or required of franchisees to operate and/or maintain a franchise.

Initial Investment:
The cash investment required to purchase and start a franchise business. This investment usually includes start up fees, franchise fees and other expenses. Your total investment, however, may vary based on variable factors.

Master Franchisee:
See Area Franchise.

Master Region:
A specific geographic area purchased by a franchisee with the intent to divide and sell additional franchises.

National Alliance of Franchisees (NAF):
National organization founded to protect the interests of franchise businesses and entrepreneurs.

Net Worth:
Total assets minus liabilities.

Non-Compete Clause:
Restrictions on competing with the franchised company upon termination of a franchise agreement for any reason.

Offer:
Usually the UFOC, but may also be an oral offer for the sale of a franchise.

Offering Circular (Disclosure Document or Uniform Franchise Offering Circular):
See UFOC.

Operations Manual:
All of the training, reference and business specifications required to operate a franchise business.

Pro Forma:
Complete financial picture of the franchisor including: balance sheet, profit and loss statement, assets, liabilities, net worth and/or cash flow statement. Pro forma statements issued by the franchisor to the franchisee should be based on actual operating results of the franchisor's units or franchise establishments.

Protected Territory:
Geographically defined area where the franchisor grants the franchisee exclusive rights to operate.

Public Figure Involvement:
Disclosure by the franchisor if a well-known public figure has endorsed the product, service or franchise.

Qualification Questionnaire:
Franchisors use the answers the prospective franchisee provides to determine eligibility to purchase a franchise. Each franchisor may have different requirements.

Registration:
Many states require the franchisor to file documentation with that state before a franchise can be sold.

Renewal:
The mechanism used to continue the term of the franchise agreement once it has expired.

Start Up Costs:
See Initial Investment.

Total Investment:
This may include the Initial Investment plus any required inventory, advertising or equipment purchases.

UFOC (Disclosure Document or Uniform Franchise Offering Circular):
Provides background information in over 20 categories as well as a copy of the proposed franchise agreement.

Variable Cost:
Costs that vary with usage or some other factor (i.e. materials).

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