Franchise Glossary

Here are some terms that are commonly used in the franchise business.

Franchise Sales

Potential Franchisee

The attribute of a potential customer to be sold to is called a Potential Franchisee, and leads in marketing activities fall under this category.

Inflow Source

This is the inflow channel for prospective customers = prospective franchisees = leads. These include inbound sales via trade shows/trade shows, websites, and advertising, and outbound sales via calls and faxes from purchased corporate lists.

Franchise Consultant

Business guide with expertise in the franchising industry who provides advice on topics such as franchising operations, companies and relationships.

Inside Sales

It refers to an inside sales person who responds to the contacts acquired through marketing activities, and some organizations position it as synonymous with an appointee for obtaining appointments.

Field Sales

It refers to the sales force and includes activities other than door-to-door sales, such as being a speaker at discovery day and seminars, and manning a booth at exhibitions and trade fairs. Depending on the organization, they may also be involved in store development. Since they are in charge of orders = contracts, they may also be in charge of following up with the owners after the opening.

Franchise Agreement

Franchise Disclosure Document

A document that explains important information before signing a franchise agreement is generally called this. In some countries/regions, the Franchise Law requires notification to a designated agency.


A specific area in which the franchisee has been given the right to conduct or solicit business within by the franchisor.

Agreement Type

There are various agreement types, with different obligations and rights for the contractor, depending on the franchisee's business plan etc.


Form of identification, such as a brand name or logo, legally associated with the franchise. Trademarks are protected by law and are distinguished by the symbol.

Unit Franchise

A franchise agreement that is concluded on a store (branch) basis. Sometimes referred to as a direct franchise or single unit.

Area Representative

This is a type of contract in which the company has the right to develop potential franchisees in a certain area without directly opening the stores itself.

Area Development

This type of contract, sometimes called an area franchise, grants exclusive rights to open stores in a certain area. The franchisor and the franchisee commit to a business plan for the number of years and the number of stores to be opened.

Master Franchise

This is a form of contract that gives you the right to open your own stores or develop sub-franchises as a franchisor in a certain area.

Open Account

In this method, the sales proceeds are once credited to the franchisor, and the actual costs of purchases, royalties, etc. are deducted before being refunded to the owner.


A franchisor's management advisor works closely with the owner to ensure that the franchisee is operating properly, share good practices from other franchisees, and propose new measures and store expansion.

Prevention of competition

This is a contractual clause that restricts you from conducting similar business after the contract ends.


This refers to the renewal of a contract before the expiration of the specified contract period. There are various cases in which the content of the contract is changed upon renewal, and cases in which a contract renewal fee is charged.

Franchise Fees

Franchise Fee

This is the right fee, also known as the unit fee, and is basically non-refundable even if you terminate the contract.

Security Deposit

This is a measure that allows the franchisor to reduce the risk of accounts receivable associated with the purchase and sale of goods, as the operation will be procuring various goods from the franchisor or an entity designated by the franchisor.

Training Fee

This is the price you pay for acquiring the know-how. Some franchisors include these fees in the franchise fee.

Royalty Fee

These fees are paid as compensation for continuous use of the trademark and management guidance. There are various types of fees, including variable fees based on sales and gross profit, and fixed fees regardless of sales.

Advertising Fee

In some cases, the franchisee is responsible for a portion of the franchisor's marketing costs, which may be called a marketing fee or a brand building fund.

System Usage Fee

In addition to royalties, there are cases where the franchisor collects monthly fees for the use of systems and other services developed or mediated by the franchisor.