Words are used in so many different ways in the franchise industry. Some are legally defined and others just in general use. Before beginning it is useful to clarify the way we use terms and why.

Legal definitions

Legally, through the Franchise Code of Conduct and Franchise Agreement Template, the
following terms are set.

Franchise System includes a business system in which a franchisor grants a franchise to a franchisee

Franchised Business is one franchise outlet

The Manual or Operations Manual is the franchisee operations manual and includes everything operational needed to run the franchised business, however crafted (audiovisual, graphic, text, software etc.)

Franchise Documentation includes the Operations Manual and all the legal documents and anything else needed to conduct the Franchised Business

A more extensive list of more commonly used terms is included in the appendices.

Franchise Simply definitions

I have extended these terms, however, because I consider it essential that you deal with both sides of a Franchise System, the franchised business operated by your franchisees and your franchisor business.

So…

The Franchise System is the whole franchise group consisting of the franchisor business and the franchised businesses operated by your franchisees.

The franchisee outlet or franchised business will have:

a. Franchisee Documentation which includes:

i. The legal documents (Franchise Agreement and Disclosure Document
and any associated legal docs)

ii. The Franchisee Operations Manual which includes everything operational needed to run the franchised business, however crafted (audiovisual, graphic, text, software etc.)

b. The Franchised Business (goodwill etc.)

The franchisor business will have:

a. Franchisor Documentation which includes:

i. The legal documents (the franchisor is party to the franchise agreement)
and any other legal documents which make up the brand etc.

b. The Franchisor Operations Manual which includes everything operational
needed to run the franchised business, however crafted (audio-visual, graphic,
text, software etc.)The Franchisor Business (goodwill etc.)

Build the elements that make up your franchise structure

This Module is all about developing the detail that underlies your Franchise System. In Module One you put together the big picture of your franchise group in place so you know:

• What your ideal customer will look like
• The way they want your product delivered to meet their fears and desires
• The broad characteristics your ideal franchisee needs so they can deliver your
  product to your ideal customer
• The broad business structure of your franchise group and Franchise System

This next step in Module Two is to work out the details of the elements that will make that franchise big picture work. So you will need to look at:

• The details of how the money will work in all sides of the group
• The budgets for both franchisor and franchisee and any intermediate layers
• How these budgets will determine the fee structure
• Whether you will use territories and if so how these will be apportioned
• How your Intellectual Property will be protected
• Your franchise corporate structure
• Your communication values and principles for the franchise group as a whole and a Communication and Support Plan
• How you will deal with training
• Anything else you might need to address in detail

Once you have these details, it will pay to develop a brief Business Plan for your Franchisor Business to set the goals and parameters for the development of the franchise group over the next three to five years.

And the details you are developing here will go into the Franchise Documentation you
prepare in Module Three.