What does Franchising mean – Dictionary

Franchising Dictionary

“But what does franchise mean? And franchisee and entry fee?”

From the “outside”, the world of franchise might seem complex and structured. In our experience, it often means we have to start from scratch, first explaining what franchising is and what franchise means when starting up a franchise. On the “other side”, it is simpler and more straightforward. With a little practice and a good memory it will be easy to jump right in. We at Soluzioni will give you a hand in understanding just what we’re talking about and what has been for years the core of our business.

User pool

This is the potential pool of customers to whom the franchisor may propose his own product or service. Based on this pool some economic predictions can be made on the affiliate’s return of investment and the strategy to achieve maximum efficiency on the market.

Entry fee and initial investment

This is the payment the franchisor may require from the franchisee at the time of signing the contract which ensures a number of concessions: the license for the using of the franchisor’s sign and brand, the know-how and generally whatever the mother company decides to grant to the affiliate both operationally and strategically. Often in the franchising descriptions, the term simply of “initial investment” is referred to: this wording includes specifically the entry fee and all the complementary expenses that must be paid to set up a shop or undertake new service activities (shop rental costs, exhibition, first delivery, training, advertising materials and so on).

Territorial exclusivity

This represents a territory area that is literally “bought” by the franchisee thus becoming its territory of action. Having an exclusive territory means the franchisor cannot give exclusive rights to another affiliate for the same area or establish direct stores; for the franchisee it means they can undertake advertising strategies within that exclusive area only.

Franchisee or affiliate

Person signing a franchise agreement.

Franchise or affiliation

The contract is established between two parties, the franchisor and the franchisee, whereby the former allows the latter to undertake a business, by the payment of a fee, to use its own brand, products, know-how and providing continuous assistance in business management.

Franchisor or afiliator

An entrepreneur who makes available his know-how and brand to third parties, creating a network they directly manage.

Franchise in sales account

A franchise formula whose contract provides that the goods that the franchisor supplies to the franchisee are paid for only after actual sales. At the end of the season, everything unsold returns to the franchisor as it is the owner. By eliminating inventories significantly reduces management expenses. This is a formula used exclusively for franchisors that deal with the sale of products, especially in the franchise clothing industry, accessories and generally in franchising stores.

Master franchisee

This is an agreement whereby a franchisor grants franchise rights to a franchisee for a given area, who may conclude some franchise agreements with third parties, dividing their territory. When this agreement is extended to a party (entity and individual) abroad, we are talking about a Master Franchise. The Master Franchise can sometimes generate contracts with Master franchisees within its country of operation.

Royalty

A periodic fee that the franchisee is required to pay to the franchisor. It can be a fixed amount or calculated as a percentage of sales. It is used to pay for the activities of the franchisor (such as advertising and marketing), including the rights for the brand. Not all franchisors provide for payment of royalties.

Business Plan

The business plan is a document that summarizes the content and the characteristics of an entrepreneurial project. It is a “handbook” of the company or business idea, used for planning activities, in ordinary company management and, finally, for external communication.

As a rule, the business plan is divided into:

  • entrepreneur and company data
  • description of the project
  • market analysis
  • Marketing Strategy
  • organizational structure
  • Financial economic forecasts
  • investment coverage sources
  • balance sheet and income statement
  • Cash Flows
  • any attachments.

If you have read our website and there is something that you do not understand or you just want more clarification on some terms or procedures, please contact us at web@soluzioniitalia.it. We’ll try to provide you all the answers you are looking for!

 

 

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