If you’re new to franchising, you might find yourself a bit intimidated by some of the terminology you’re coming across. Whether you are just beginning the research process or you’ve already made the decision to invest in a green energy franchise like SuperGreen Solutions, it’s important that you can talk the talk – or at least have a clear understanding of exactly what you’re signing up for.
Without further ado, here are ten important franchising terms and their definitions:
Franchisor and Franchisee
Before you begin franchising, you should understand the relationship between the franchisor and the franchisee. The franchisor is the overarching company which allows other people and companies to use its name, products, brand images, and so forth. The franchisee is the person who buys the franchise versus starting a new company from scratch.
Franchise Disclosure Document (FDD)
This legal document must be provided to prospective franchisees 14 days before the signing of the franchise agreement. Every FDD is 23 items long and contains information on everything from the history of the franchisor, to franchise performance data, to franchise fees and other costs, and more.
Federal Trade Commission (FTC)
The Federal Trade Commission is the federal agency that regulates franchises. The FTC oversees the Franchise Rule, which requires franchisors to provide prospective buyers with the Franchise Disclosure Document.
The franchise agreement is the official legal contract that outlines the agreed-upon arrangement between franchisor and franchisee allowing the franchisee to use the overarching company’s name, business model, and so forth
In a franchise set-up, trademarked items can be words, symbols, logos, and other design elements. The purpose of a trademark is to differentiate one brand from another. Unless you have an agreement (like a franchise agreement) from the parent company allowing you to use its name and likeness, you cannot have the same or similar branding as an existing company.
This is the initial fee that a franchisee pays to the franchisor in return for use of the brand name and other trademarked images as well as access to the company’s systems and processes, training and support, marketing, and more. Every franchise has a different franchise fee, which is always disclosed in Item 5 of the Franchise Disclosure Document. SuperGreen Solutions is proud of the high level of training and support we offer to all of our franchisees!
A royalty is a fee paid to the franchisor on a recurring basis, which could be weekly, monthly, or annually. These fees help to cover the cost of the ongoing support you’ll receive, along with the use of our brand name. Each franchise handles royalty fees differently, with some requiring a percentage of franchisee’s sales and some choosing to implement a flat fee.
Liquid capital refers to the funds you need, in the bank, in order to meet the requirements of a particular franchise. Where you might be able to use borrowed funds for other parts of your franchise investment, SuperGreen Solutions requires franchisees to start their business with cash, to help pay for both expected and unexpected costs until the franchise is generating a profit.
Territory plays an important role in most franchises. The territory is the geographical area in which your business is contractually allowed to operate in. If your territory is protected or exclusive, that means other franchisees of the brand are not allowed to operate in the same area as you – giving your business complete control of the market there.
Turnkey is a term you will hear often in franchising. A turnkey investment is one where, once you have made the initial franchise investment, the franchisor provides you with just about everything you need to get your business up and running. A turnkey franchise opportunity such as the one offered by SuperGreen Solutions can save you time, money, and frustration and is often ideal for new (or busy, multi-unit) business owners.
Now that you have a basic understanding of frequently used franchise terms, it’s time to learn more about why a green energy franchise like SuperGreen Solutions is a smart way to join the lucrative – and growing – sustainable energy market. Download our free franchise brochure today to find out what SuperGreen Solutions can do for you!