Glossary of Franchise Terms (P-Z)
Percentage Rent
Percentage rent, also known as overage rent or turnover rent, is a type of rental agreement commonly used in commercial real estate leasing. It is a specific provision in a lease contract that requires tenants to pay a percentage of their gross sales or revenue in addition to the base rent.
Person (in Franchise Context)
In a franchise context, a person refers to either the franchisor or the franchisee involved in the franchise business. A franchisor is the business owner who grants the right to use their trademark, trade name, products, and business format to another person or group of people, called franchisees.
Pro Forma
A protected territory refers to a geographic area within which a company holds exclusive rights to distribute, sell or market its products or services. This protection can be in the form of a contractual agreement or other means and it is usually granted to franchisees, dealers, or distributors as part of an agreement with the business.
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Quality Control
Quality control in a business refers to the processes and activities implemented to ensure that products or services meet or exceed predetermined standards of quality. It involves monitoring and evaluating various aspects of the production or service delivery process to identify and address any defects, errors, or deviations from the desired level of quality.
Qualification Questionnaire
A qualification questionnaire (also known as a pre-qualification questionnaire or PQQ) is a document used to assess the suitability and eligibility of potential suppliers or contractors during the procurement process. It is typically used in larger-scale projects or when selecting vendors for long-term partnerships.
Regional Development Agreement
A Regional Development Agreement in a business context is a contract or agreement between a company and a partner, franchisee, or distributor outlining the terms and conditions for expanding operations into a specific region.Â
Royalty
A royalty is a fee paid for the right to use a particular asset or intellectual property. It is a type of compensation paid by an individual, organization, or licensee to the owner of a property or asset for the right to use it in a specific way.
Royalties can be calculated based on a variety of factors, such as the duration of use, the type of asset or property being used, or the revenue earned by the licensee.
Rules of Operation
Rules of operation refer to the set of guidelines, policies, procedures, and protocols that govern how a business operates on a day-to-day basis. These rules ensure consistency, efficiency, and compliance with legal, regulatory, and ethical standards within the organization.
Rules of operation can cover a wide range of areas.
Slick
Pre-prepared, camera-ready advertising material usually composed by the franchisor for the franchisee for use in local print media, meaning that newspapers or other media can use it without significant additional cost to franchisees for composition and makeup.
Overall, the term “slick” in a business context signifies a high degree of professionalism, sophistication, and attention to detail.Â
Total Investment
The total investment in a business is a critical factor in determining the financial feasibility and sustainability of the venture. It is important for business owners and investors to carefully assess and plan for the total investment required to ensure that the business has adequate resources to start, operate, and grow successfully. By understanding the components of total investment and creating a comprehensive financial plan, businesses can make informed decisions
Trademark
A trademark is a distinctive symbol, logo, phrase, word, or combination thereof that a business uses to identify and distinguish its products or services from those of its competitors. It serves as a form of intellectual property protection and signifies the business’s brand identity and reputation. To obtain trademark protection, businesses must go through a registration process with the relevant intellectual property office in their jurisdiction.Â
Trade Secret (a.k.a. Proprietary product or service)
A trade secret, also known as a proprietary product or service, is a valuable piece of confidential information that gives a business a competitive advantage. It can include formulas, processes, techniques, methods, customer lists, marketing strategies, or any other confidential business information that is not generally known or easily accessible to others.
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Turnkey
In the context of a franchise business, “turnkey” refers to a franchise model where the franchisor provides a complete and ready-to-operate business package to the franchisee. It includes everything necessary to start and run the business, such as branding, marketing materials, operational systems, training, and ongoing support.
Tying
In a franchise business, “tying” refers to a practice where the franchisor requires the franchisee to purchase specific products, services, or supplies exclusively from designated suppliers or vendors. It is a contractual arrangement that binds the franchisee to purchase certain items solely from approved sources.
Venture Capitalist
In the context of a franchise business, a venture capitalist refers to an individual or firm that provides financial investment and support to franchise companies in exchange for an ownership stake or equity in the business. Venture capitalists typically invest in early-stage or growing franchise businesses with high growth potential.
Vertical and Horizontal Competition
In a franchise business, competition can be categorized into two main types: vertical competition and horizontal competition. Understanding the differences between these two types of competition is important for franchise companies to effectively navigate the competitive landscape and make strategic decisions.