Franchise Key:
When you enter the franchising world, there is a jargon… You’ll quickly get used to it, here are some words and expressions that you may read in a franchising contract.
The « affiliation commission » is a franchise system (a know-how and assistance transfer) or a trademark licensing (without know-how and assistance transfer), in which the franchisor stays owner of the stocks that are kept in sales-depot by the franchisee that is paid by this commission that goes from 30 to 40% of the sales price.
In the franchising contract, some « exclusivities » are sometimes envisaged they can cover several domains like:
* the supplying exclusivity imposes the franchisee to be only supplied by his franchisor or referenced suppliers.
* the territorial exclusivity guarantees the franchisee a territorial exclusivity limited by contract. The territorial exclusivity of the products that allows him to be the only one to sell the products of a trademark on his territory.
You can also have to pay royalties but not all the time, these are regular payments from the franchisee to the franchisor, most of the time, it is a percentage of the turnover and it corresponds to the services given to the franchisee by the franchisor as written in the contract.
You will also have to pay an advertising royalty for the national advertising or for the promotion. It can vary and the franchisees can sometimes give their opinion on its use… In any case, this advertising royalty cannot be used for anything else by the franchisor and he must justify the use of this money.
Also read:
Getting To Know What Is Really Franchising… (Part 1)