4 Franchising Terms You Need to Know Before Opening Your Own Business
March 07, 2019
If you want to invest in a franchise, there are a lot of terms you need to know in order to choose the best one for you. No two franchise opportunities are the same, and the best way to find the right one is to do some research and learn about the terms that franchisors use. Here are some of the most important terms to look for as you research franchise opportunities.
Every franchise opportunity is different – a lawn care franchise won’t run the same way as a fast food franchise. There are three different types of franchise ownership that are utilized by franchise concepts. Those include the executive model, the owner-operator model, and the semi-absentee model.
Here at U.S. Lawns, we use an owner-operator model for our franchisees. This means that you are responsible for the day-to-day operations and hiring a team. You are the boss and the owner of your U.S. Lawns location and the front and center of everything. Being an owner-operator is very different than an absentee owner. With a U.S. Lawns franchise, you are part of the business. That doesn’t mean you will be riding a mower and servicing properties, but you will control who you hire, all of the operations, marketing, and more. Absentee owners do not get to be their own boss – they invest in something, rely on someone else to run things, and hope for its success.
This is an important term to understand because the initial investment is the amount you pay for your franchise. Every franchise has a different investment that comes with different things to help you get started with your business. One thing every franchise investment does have in common is a franchise fee. Although this fee varies from franchise to franchise, each brand needs to have one. The franchise fee often covers training, support, rights to use the brand name, the business model, and other resources that help you get started. Other items that make up the initial costs when you invest in a franchise include equipment, starting capital, tools, systems, and resources.
Franchise Disclosure Document
Once you find the right franchise for you, the next step is usually to read through the franchise disclosure document (FDD). The FDD is a 23-item legal document that every franchisor is required to have. It explains everything, in detail, about the franchise opportunity, and it even breaks down the initial investment so you know exactly where your money will go. The FDD is designed so that no one is left in the dark when it comes to an important decision like a new career.
The FDD also has an optional section that many franchisors choose to include, which is Item 19. This item breaks down how much a franchisee, on average, could make with a franchise. We are proud to include ours because of the transparency it provides between us and a prospective investor and because it shows exactly how much you could make with our lawn care franchise.
A territory is the specific area you operate within. We put a lot of research into our territories to make sure our franchisees are in the best position to market toward commercial businesses. We use CoStar, which is a leading commercial property data software, to research what properties are in a specific area. We run multiple demographic tests, and if the results are favorable for a lawn care franchise, it becomes a territory for a potential franchisee. We have found a number of territories all across the country that are still available to invest in!
If you are looking to invest in a franchise but need more information, check out this article on how to open a franchise.