Franchise Definitions

Acknowledgement of Receipt
The last page of a Disclosure Document. It is signed by prospective franchisees and returned to the franchisor as proof that the franchisor delivered the Disclosure Document on a certain date.
Advertising Fee/Marketing Fund levy
A periodic fee charged by some franchisors to fund advertising and other marketing programs for the franchise group. Typically, this fee is paid into a central marketing fund and used by the franchisor for group promotional and advertising expenses.  The fee may be based on a percentage of the franchisee’s turnover (typically less than 3%) or a flat fee. It may be due weekly, monthly, quarterly or annually.
Associate
An entity that is controlled or related to the franchisor, or is a shareholder or director of the franchisor or a business partner of the franchisor.
Approved Supplier
A supplier of products or services that has been approved by the franchisor to provide products or services to franchisees. A franchisor may designate itself as an approved supplier. Franchisees may be required to purchase certain products or services only from approved suppliers.
Company-Owned Store or Unit
A business that is owned and operated by the franchisor or its associates and which is similar to the franchised is business.
Breach or Default
The failure of the franchisor or franchisee to perform according to its obligations under the franchise agreement.
Designated Supplier
See “Approved Supplier”
Disclosure Document
The document that includes information about the franchisor, the franchised business, and the franchise agreement prepared under the requirements of the Franchising Code of Conduct.
Exclusive Territory
A specified geographic area in which the franchisee is given the right to operate, and in which the franchisor is restricted from establishing any other franchisees.
Expiration
The time when a franchise agreement ends by the natural expiration of its term.
Franchise
A franchise is a business arrangement which permits an individual, partnership or company to operate under the name of a business that has already been estabished. The franchisee obtains the legal rights from the franchisor under a franchise agreement, for example the rights to produce, sell, or use. Royalties based on turnover are usually paid by the franchisee.
Franchise Agreement
A contract containing legally enforceable obligations in which the franchisor grants the franchisee certain rights to use the franchisor’s marks and system in connection with a business to be independently owned and operated by the franchisee.
Franchisee
The party to a franchise agreement who pays the franchisor for the right to own and operate a business using the franchisor’s marks and system.
Franchise Fee
The initial fee paid to the franchisor for the grant of the franchise.
Franchisor
The party to a franchise agreement who grants to franchisees the right to use the franchisor’s marks and system.
Franchise Code of Conduct
A prescribed mandatory industry code of conduct made under Competition and Consumer Act 2010 (renamed from Trade Practices Act 1974).
Franchise System
A business system in which a number of franchises are granted by a franchisor to franchisees, all of which are substantially associated with a trade name, trade mark or commercial symbol of, and operate under a system determined by, the franchisor.
Goodwill
The attractive force that brings in custom and adds to the value of a business (e.g. site, personality, service, or price).  Goodwill is an intangible asset which arises from the reputation and relations formed with customers of the business and the nature of its location.
Indeminty
An obligation to protect a person against loss suffered through a third party.
Initial Training
The initial instruction the franchisor offers to franchisees about how to set up and run the franchised business.
Marketing Fee
See “Advertising Fee”
Master Franchisee
The person to whom the franchisor grants exclusive rights to offer and sell franchises within a particular territory using the franchisor’s marks and system. Sometimes called a “master franchisor”.
Opening
The time when a franchised business first opens for trade.
Operations Manual
The information a franchisor provides to its franchisees in printed or electronic form about the operation of the franchised business.
Renewal
The extension of the term of an expiring franchise, or the granting of a new franchise upon the expiration of the old one.
Royalty Fee
An ongoing fee that the franchisee pays to the franchisor for ongoing services, typically based on a percentage of the franchisee’s revenues, and paid weekly or monthly.
Trade Mark
A distinction name or symbol used to identify the franchisor’s services and to distinguish them from the services of others.
Term
The period during which the franchise agreement will be in effect.
Termination
The premature ending of the term of a franchise agreement by one of the parties to the agreement.
Transfer
The sale or other transfer of the ownership of the franchise agreement, the franchised business, or assets of the franchised business from the franchisee to another person.