When entering the world of franchising, you’re not just starting a business — you’re joining a system governed by specific terms, roles, and responsibilities.
To navigate this world confidently, it’s essential to understand its unique language. Here are the key terms every prospective UK franchisee should know before signing on the dotted line.
The 10 Key terms
1. Franchisee and Franchisor
The franchisee is the individual who invests in and operates a franchise business. The franchisor is the company that owns the brand, business model, and intellectual property, and grants licences to franchisees to operate under its name. The relationship is built on mutual trust and defined by the franchise agreement.
2. Franchise Agreement (FA)
This legally binding contract outlines the obligations and rights of both parties. It governs everything from territory and duration to fees, performance expectations, and termination clauses. It’s crucial to review this document with a solicitor who specialises in franchising. The agreement may also include non-compete clauses, dispute resolution mechanisms, intellectual property rights, and details regarding renewal or resale terms.
3. Franchise Fee and MSF/Royalty
The franchise fee is the upfront cost paid to join a franchise. It may cover initial training, branding, equipment, software, and onboarding support. Ongoing royalties — known as Management Service Fees (MSF) — are typically paid monthly and can be a fixed sum or a percentage of your turnover. These fees ensure continued support and use of the franchisor’s systems.
4. Marketing Levy
Many franchisors charge a separate fee for marketing, either as a percentage of revenue or a flat monthly amount. This supports regional, national or digital campaigns to build brand recognition, attract customers, and support franchisee growth. Some networks will have pooled funds with guidelines on how contributions are used.
5. Term and Renewal
The term is the length of the franchise agreement — usually five to ten years. Renewal is your right to extend the agreement, often dependent on performance, compliance, and mutual consent.
These terms also define your ability to resell the franchise or exit the network under certain conditions.
6. Exclusive Franchise Territory
Some agreements grant franchisees exclusive rights to operate in a defined area, meaning no other franchisee (or even the franchisor) can open a competing unit there. This helps protect your investment by preventing internal competition.
7. Initial Training and Ongoing Support
Franchisors typically provide initial training to help franchisees understand the business model and operational standards.
Ongoing support may include access to field consultants, centralised marketing, technology updates, and peer networks. These services are essential to maintaining consistent quality across the brand.
8. Disclosure and Resale
In the UK, pre-contractual disclosure is not mandatory — unlike in countries such as France or the US — but ethical franchisors are expected to share performance data and terms transparently. A resale involves purchasing an already operating franchise unit, which may include goodwill, staff, and customer base. These tend to be more expensive but come with an existing infrastructure.
9. Working Capital and Personal Investment
Beyond upfront fees, you’ll need working capital to manage day-to-day operations until the business becomes self-sustaining. Most franchisors require a personal investment, which shows commitment and reduces risk. You may also need to present a business plan and financial projections to lenders or investors.
10. Trademark and QFP
The franchisor’s trademark should be registered to ensure legal protection and brand consistency. QFP stands for Qualified Franchise Professional — a designation awarded to individuals who have demonstrated expertise in ethical franchising. It’s especially relevant for franchisors or consultants, but franchisees benefit from understanding the standards it represents.
Expert Insight from the BFA
As the British Franchise Association (BFA) told L’Express Franchise UK: “Franchising is unique, quite unlike anything else in the business sector and as such some of the words we use might not be familiar, but as you’ll likely be investing a large amount of money into your new business, it is crucial you fully understand exactly who everyone is, what you are buying, your rights and obligations.” The BFA encourages all future franchisees to complete their free online “Prospect Franchisee Certificate”, and consult their website for glossaries, articles, case studies, and a list of accredited legal advisers.
They also note: “We strongly advise you retain a franchise specialist solicitor prior to signing any contracts. We hold a list on our website. If you still aren’t sure of something, please give us a call… we’re here to help and to make sure you have a safe and successful franchise purchase.”
Final Tips
• Don’t assume every term means the same thing across brands. Always ask for clarification.
• Read every clause carefully and seek professional legal advice.
• Take advantage of educational resources provided by organisations like the BFA.
• Ask about training, financial obligations, and long-term support before committing.
Understanding the language of franchising not only empowers you to make informed decisions — it also helps build trust with franchisors, advisers, and financial partners. It’s your first step toward becoming a confident and successful franchisee in the UK.
