Wiley GAAP 2008

Definitions of Terms

Area franchise	An agreement that transfers franchise rights within a geographical area permitting the opening of a number of franchised outlets. The number of outlets, specific locations, and so forth are decisions usually made by the franchisee.
Bargain purchase	A transaction in which the franchisee is allowed to purchase equipment or supplies for a price that is significantly lower than their fair value.
Continuing franchise fee	Consideration for the continuing rights granted by the franchise agreement and for general or specific services during its term.
Franchise agreement	A written business agreement that meets the following principal criteria: The relation between the franchisor and franchisee is contractual, and an agreement, confirming the rights and responsibilities of each party, is in force for a specified period. The continuing relation has as its purpose the distribution of a product or service, or an entire business concept, within a particular market area. Both the franchisor and the franchisee contribute resources for establishing and maintaining the franchise. The franchisor's contribution may be a trademark, a company reputation, products, procedures, labor, equipment, or a process. The franchisee usually contributes operating capital as well as the managerial and operational resources required for opening and continuing the franchised outlet. The franchise agreement outlines and describes the specific marketing practices to be followed, specifies ...