Zors, Zees and other Franchising Lingo

All communities, industries, and companies have their own lingo made up of unique words, terms, acronyms and expressions which are generally understood only by those belonging or related to these organizations. Understanding the language makes us part of the team; and from this perspective jargon can have powerful uniting qualities, but it also can separate us from the rest of the world and make it difficult for newcomers.

Franchising isn’t an industry; it’s a community made up of many businesses in different industries choosing a common method of distribution for expansion.  As a community, franchising has its own terminology and thus new franchisees and franchisors have to learn the meaning of these terms in addition to the language of the particular industry of the business. Franchising vernacular can add to the confusion of those people considering joining the franchise community as franchisors, franchisees or even as suppliers.

To help newcomers I’ll share here the meaning of some of the most common terms and acronyms used in franchising. These are short definitions; later posts will take a few of these terms at a time and expand on them.

Zor(s) = Franchisor(s)

A Zor is the business that has chosen to expand via franchising; it means the franchisor; that is, the company that has created this unique opportunity. The word “franchisor” is sometimes spelled “franchiser” following the British spelling.

Zee(s) = Franchisee (s)

Zees are the people who choose to invest in a franchise to become business owners. They enter a business relationship with a franchising company that entitles them to use the intellectual property of the franchisor for the term of the agreement in exchange for their investment.

FDD

FDD is an acronym for Franchise Disclosure Document. It’s the legal document required by the FTC (Federal Trade Commission) of every franchise company. Its objective is to provide potential franchisees with sufficient data about the company and the opportunity to enable them to make an informed decision. Each portion of the FDD that speaks to a different aspect of the opportunity is called an Item.

Most commonly discussed items are:

Item 5 = Initial Franchise Fee

Item 7 = Initial Investment

Item 12 = Territory

Item 19 = Earnings claims

 

UFOC (Uniform Franchise Offering Circular)

UFOC is an acronym for Uniform Franchise Offering Circular. It is simply the predecessor of the FDD and is no longer in use.

Franchise Agreement

The franchise agreement is the foundation document of the franchise relationship. It’s legally binding on both parties, and it describes the rights and obligations of franchisor and of the franchisee.

Territory

Territory is the area which franchisors assign to franchisees and within which they grant the right to franchisees to operate and market the business. Territories can be exclusive and non-exclusive.

Intellectual Property

In franchising intellectual property refers to the trademarks, trade dress, copyright, know-how, trade secrets, business concept, processes and methodologies, as well as, if relevant, designs and patents that franchisors license to franchisees through the franchise agreement.

Regional Developer

Regional Developers are franchisees who make a larger investment giving them greater rights and responsibilities over a particular region. A region generally refers to a state or multiple states; some larger states like for example, California, may be divided into two or more regions. In exchange for the larger investment Regional Developers normally share a percentage of the initial franchise fee and royalties generated from franchisees in their region.

Area Developer

Area Developers are also franchisees with agreements similar to those of Regional Developers but with smaller territories and sometimes lesser responsibility. The territory of Area Developers is limited to an area such as a city or a county instead of a region which normally implies an entire or multiple states.

Multi-Units Franchisees

As the name implies, Multi-Units Franchisees are franchisees who invest in more than one location. They can acquire the additional locations either initially or over time.

Master Franchisees

Master Franchisees have been replaced by Regional Developers in the US. This type of franchise is nowadays used solely when a company wants to expand overseas. A Master Franchisee takes on all of the responsibilities of the original franchisor in the country for which the rights have been acquired.

Franchise Operations Manual

The Franchise Operations Manual is an extension of the franchise agreement. It includes all the information a franchisee needs to operate the business according to the franchisor’s system.

 

—->>> Have you encountered a term that you don’t know? Share it with us and we’ll add it to this list…

Comments

  1. Great post – we use jargon all the time and it has no place with candidates or outside customers. Might be good to add the FDD since the UFOC is not really in use these days. We refer to it lovingly as the fudd.

  2. Yes, FDD is right above UFOC 🙂 Thanks Scott! Appreciate your comment! I had not read the term Fudd… I love it!