10 Franchising Terms You Need to Know

Are you interested in becoming a franchise owner? Moran Family of Brands can help make sure you know these franchising terms before you begin the process.


Pros of Franchising

If you want to pursue entrepreneurship, you can start a business from scratch, purchase a resale, or invest in a franchise. Starting a business from scratch is rewarding, but it can be risky. Plus, you need a fresh idea to develop your unique selling proposition.


If you lack a big idea and want to limit risk, you can buy an existing business or resale. As the baby boomer generation approaches retirement, many small businesses will be up for grabs, Forbes reports. A resale provides a business with an established customer base, but it may have outdated technology and can be costly.


Franchising offers the best of both worlds. You can be your own boss and enjoy access to training, support, and established systems. Investing in a franchise allows you to sit at the helm of a business with a history of success and brand recognition. Investing in a franchise is an ideal solution for a person with drive, ambition, and management experience.


Franchising Terms

As you begin exploring franchising, here are some common franchising terms you will encounter along the way.


  1. Franchisor – The company grants the right to do business under its trademark or name. The franchisor provides training, guidance, and ongoing support as you begin your franchise journey. Finding a franchisor that shares your values and work ethic is crucial to developing a valuable partnership.


  1. Franchisee – The entrepreneur who signs a deal to open a location of an established brand. To succeed as business owners, franchisees take advantage of proven processes and brand recognition. Franchisees operate 753,770 small businesses in the United States, according to Fransmart, a franchise development company.


  1. Franchise Disclosure Document – Commonly known as the FDD, every franchisor is required to file a franchise disclosure document with the Federal Trade Commission. The FDD lays out the details of the franchise agreement. You will often hear people refer to “Item 19,” which is the portion of the FDD that outlines the performance of the company and existing franchise owners in the system.


  1. Initial Franchise Investment – Every new franchisee pays an initial franchise investment to get started. The investment typically includes a franchise fee, real estate, equipment, and working capital.


  1. Franchise Fee – The franchise fee is collected as part of the initial franchise investment and is the price a business owner pays to the franchisor for the rights to use its trademark and licenses.


  1. Royalty Fee – Terms of the royalty fee vary throughout the industry. Some franchisors have a fixed annual royalty fee, regardless of earnings. Other franchisees require a percentage of a franchise owner's earnings.


  1. Territory – Franchisees often purchase the rights to a certain geographic territory where they get the exclusive rights to do business. It’s important to understand what territories are available when shopping for a franchise because your surrounding area may already be taken.


  1. Area Developer – An area developer has the right to develop multiple locations in a defined area. Area developers have a certain expansion schedule they must adhere to in order to retain their rights to a particular geographic location.


  1. Discovery – Discovery is the process a franchisee goes through to learn all the ins and outs of the company they are considering. Most prospective franchisees travel to a company’s corporate headquarters as part of Discovery Days, where they meet staff and spend time visiting one of the locations. During the visit, prospects learn more about the brand and participate in an in-depth review of the unit economics and FDD. An important step in this process is meeting with existing franchisees to gain insight into day-to-day operations and financial performance. Following the pandemic outbreak, many franchisors started offering virtual discovery days to continue franchise sales when people limited travel.


  1. Validation – Every potential franchisee takes part in validation, which is when they vet existing franchise owners to gain perspective and insight into the company. Validation is a chance to ask questions. Find out how long it took a franchisee to generate a profit, the number of hours they work, best practices for hiring, and other insights about owning a franchise.


Auto Repair Franchise Leader

Moran Family of Brands franchises six different brands in the aftermarket automotive and window tinting industry, including Milex Complete Auto Care, Mr. Transmission, and Turbo Tint. By focusing on co-branding and ongoing industry developments, Moran’s franchise locations provide drivers with a one-stop shop for all of their car care needs. We pride ourselves on supplying superior service to our customers and franchise owners. For an initial investment between $118,219 and $296,767, our franchise owners can open one of the best auto repair franchises on the market.


Propelled by technological enhancements, the aftermarket auto industry is poised for growth. Globally, the industry is on track to reach $559.9 billion by 2030, according to Grand View Market Research. Manufacturers are focusing on durability, which is enabling customers to keep their cars longer by making repairs.


<H2>Request Info from Moran

Understanding franchising terms can help make your research easier. If you think franchising may provide a path to achieve your career and lifestyle goals, request information from Moran today.


They consistently follow our company’s vision and mission, and fulfill their responsibilities in that role.


People who are polite and well-mannered toward their customers and employees, who go out of their way to make sure others are being treated well.


They uphold the highest standards in ethics and authority, ensuring that the customer’s interests come before their own.


These individuals always look to the future, seeking out ways to improve both themselves and the franchise they run.


Both franchisees and Staff actively participating in the mission and vision of our company.

Get in Touch with Us!

Interested in franchise? Let’s get the conversation started. Let Moran Family of Brands know how they can help you.

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