Franchise Glossary

Definitions of common franchise and FDD terms. Each entry cites the FTC Franchise Rule, NASAA, or other public regulator sources.

Ad Fund Contribution
A recurring fee franchisees pay into a brand-wide marketing pool, separate from the royalty and from any local advertising obligation.
Initial Franchise Fee
A one-time payment to the franchisor for the right to operate a single franchised unit — usually due before the unit opens, and typically non-refundable.
Royalty Fee
An ongoing percentage fee a franchisee pays the franchisor on gross sales — the core economic engine of most franchise systems.