• Purchasing a franchise is one way that an entrepreneur can start her own business. A franchise offers a predetermined business method that has been refined over the years, administrative help from the corporate office, and name recognition to help get your business off the ground. Before you get involved in a franchise agreement, you should become familiar with the terminology used when discussing franchising arrangements.
  
  

Approved Products

• Part of a franchise agreement is an approved products list. This part of the contract will outline what products the franchisee must purchase from the franchise company, which products must be purchased from preapproved vendors, and products that the franchisee can purchase on his own without approval from the franchise company.
  
  

Advertising Fund

• A franchising agreement includes schedules of payments including royalties to the franchise company for use of the company trademarks. Another payment that may be part of a franchise contract is an advertising fund payment. This is either a set monthly fee or comes out as a percentage of the franchisee's revenue. The type of payment varies depending on the franchise company.
  
  

Conversion Franchise

• If you own a business that you would like to convert to a franchise, then you would want to purchase a conversion franchise rather than a full franchise agreement. For example, if you own a restaurant but would like to take advantage of the name brand offered by a national franchise, you would purchase a conversion franchise for your restaurant.
  
  

Company-Owned Location

• A franchise company may own locations as well as offer franchise opportunities. The company-owned locations look and operate the same as a franchise; the difference is that they are not owned by an independent franchisee.
  
  

Master Franchisee

• Some franchise companies sell master franchisee agreements within designated territories. A master franchisee develops his territory by selling franchises just as the franchise company would. The master franchisee would offer the same support and administrative services as a franchise company, such as employee training and bookkeeping assistance. Each franchisee would pay fees to the master franchisee as opposed to the franchise company.