Get a Head Start With These Common Franchising Terms
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Get a Head Start with These Common Franchising Terms

If you’ve always wanted to run your own business, a phenomenal route to take is franchising.. You’ll finally know what it feels like to be your own boss. You can also avoid most of the biggest risks of a typical startup.

While there will always be some risk when you start a business, a franchise comes with established systems, structures, and support — plus that all-important brand recognition. If you find the right opportunity, you’ll have all the support you need to run a thriving enterprise.

How, though, will you know which franchise is the best option for you? The more you know about the franchising industry before you start your search, the better you’ll be able to evaluate each opportunity.

Key Franchising Terms to Know Before You Buy

As you start researching franchises in your preferred industries, it will help to learn some of the most important industry terms. We’ve broken them down into a few categories for your convenience.

Franchising Basics

One of the first things you need to become familiar with are common terms used in franchising:

  • Franchising: The process of licensing an established brand name and trademark of an existing business to distribute goods or services.

  • Franchise: Legally, the license that establishes the franchising relationship, but widely used to mean the specific businesses under a brand name.

  • Franchisor: The company that owns the brand and is giving others the option to open a location in their name and do business in a certain area.

  • Franchisee: The individual who pays the franchisor to operate a business using their brand and existing systems.

  • Protected territory: The specific region where a franchisee can operate without competition from other franchise owners.

Types of Franchises

Franchises typically fall into one of three categories:

  • Business format franchise: In addition to the product or service and license, the franchisee gains access to a complete set of business practices including operations and marketing plans.

  • Product distribution franchise or product format franchise: The franchisee only sells the franchisor’s service or products and doesn’t adopt their business practices.

  • Resale franchise: A franchise being sold by the current franchisee that is often more expensive but comes with existing staff and clients.

Franchising Fees

When purchasing a franchise, you’ll be responsible for fees paid to the franchisor. These can include:

  • Franchise fee: A one-time payment to the franchisor for the right to operate a franchise. The franchise fee can vary based on territory size and other factors.

  • Royalty fee: A specific percentage of gross sales paid from franchisee to franchisor on a regular basis.

  • Management service fee: A recurring fee from franchisee to franchisor for support services.

Franchising Documents

These two documents will be extremely important as you vet and later decide on a franchise:

  • Franchise Disclosure Document (FDD)/Disclosure Statement: A document the franchisor is legally required to share with prospective franchisees. It provides in-depth information about the franchisor, the existing franchise network, and the offer.

  • Franchise Agreement: The legal contract between franchisee and franchisor outlining their roles and responsibilities

Why Invest in a Visiting Angels Franchise?

Visiting Angels® has been a top-tier home care franchise for decades. We have a robust and well-supported network of more than 600 franchises across the United States.

To maintain our reputation for consistent and compassionate care, we provide ample training and ongoing support for our franchise owners from day one. That’s why we’ve been consistently rated as the best home care franchise by Franchise Business Review.

Ready to take the next step in your professional journey? To find out more about franchising with Visiting Angels, you can request information online or call 800-365-4189.