Franchisee: An individual who purchases the right to operate a business under the franchisor’s name and system.
Franchisor: The parent company that allows the rights to specific individuals to start and run a business using its trademarks, products, and processes for a fee.
Franchise Fee: The one-time initial fee paid to a franchisor to become a franchisee, outlined in Item 5 of the Franchise Disclosure Document (FDD). For some franchises, this is a flat, one-size-fits-all fee; for others, it varies based on territory size, experience or other factors. Many franchisors offer franchise fee discounts for veterans, minorities.
Franchise Disclosure Document: All franchisors are required by the U.S. Federal Trade Commission to provide this legal document to prospective candidates that might become franchisees. FDDs are updated annually and consist of 23 Items that detail the company history, the fees and costs, contractual obligations, unit data and more. ****IMPORTANT****
Startup cost/initial investment: The total amount required to open the franchise, outlined in Item 7 of the FDD. This includes the franchise fee, along with other startup expenses such as real estate, equipment, supplies, business licenses, and working capital.