# Glossary

Words on franchise calls drift. This glossary pins the ones that change money, time or legal posture. When the FDD defines a term, the FDD wins. When [16 CFR 436.5](https://www.law.cornell.edu/cfr/text/16/436.5) defines a disclosure, the Rule wins. These entries are for reading speed.

**Additional funds.** The Item 7 row for operating cash at the start — payroll, rent, utilities — for a stated period, often three months. It is not a full working-capital plan and usually excludes owner salary and debt service unless the footnote says otherwise. GDK's 2024 FDD: $15,000–$20,000 for about three months. Great Greek's 2023 FDD: $35,000–$75,000 for zero to six months. Mad for Chicken's 2024 FDD: $51,375–$162,000 for three months.

**Affiliate.** An entity under common control with the franchisor, named in Item 1. Company stores, Item 19 samples, and required suppliers are often affiliates. Great Greek's 2023 Item 19 uses affiliate restaurants; 375° Chicken 'n Fries's 2024 Item 19 uses an affiliate income statement.

**Area development agreement.** A contract to open more than one unit on a schedule. Distinct from the unit franchise agreement. Listed in Item 22. GDK's 2024 FDD discloses a five-outlet minimum rather than a standalone single-store purchase.

**Area representative (area rep).** A different offering: recruiting and supporting franchisees, not operating the restaurant. An area-rep Item 7 is office and travel, not a kitchen. Do not read it as a restaurant build-out.

**As of.** The year on a figure. This set mixes 2023, 2024 and 2026 sources. A 6% royalty in a 2023 filing is not automatically the 2026 rate.

**Binding agreement.** For the fourteen-day rule, a contract with the franchisor or an affiliate in connection with the proposed sale — not only the franchise agreement. Deposits kept by the franchisor count as payments. See [16 CFR 436.2](https://www.law.cornell.edu/cfr/text/16/436.2).

**Brand fund (advertising fund, marketing fund).** A recurring contribution, usually a percentage of gross sales, disclosed in Item 6 and described in Item 11. GDK 2024: 3%. Shah's 2024: 1%. Capriotti's 2024 comparative record: 2%, rising to as much as 4%.

**Captive venue / non-traditional.** Airport, campus, stadium, hospital, travel plaza, military, food court. Often carved out of Item 12. A food-court hatch is not the inline Item 7 table.

**Company-owned (affiliate-operated) outlet.** Counted in Item 20 separately from franchised. May dominate Item 19. Mad for Chicken 2024: 14 company, 5 franchised of 19.

**Conversion.** Building into an existing restaurant shell rather than ground-up. Item 7 ranges may assume one or the other; the footnote decides.

**Development schedule.** Dates by which additional units must open under an area agreement. Missing a date can forfeit area or default the deal.

**Disclosure document / FDD.** The Franchise Disclosure Document, twenty-three Items, prescribed by the FTC Franchise Rule. Not the franchise agreement.

**Discovery day.** A hosted sales visit. Not training, not Item 19, not a substitute for Item 20 calls.

**Em dash / blank.** On this site's worksheets, a missing disclosure. Never fill with a peer average or a portal number.

**Encroachment.** Another outlet of the same brand, or a reserved channel, trading in or into your area. Possible even with a "protected" territory if Item 12 reserves delivery, grocery or venues. Capriotti's 2024 comparative record: no protected area, so the issue is not named encroachment of a grant that does not exist.

**Exclusive territory.** Other branded outlets (sometimes including company stores) are barred from a defined area, subject to carve-outs. Stronger than "protected," and still not a monopoly on the cuisine.

**Express format.** A smaller box with its own Item 7. Mad for Chicken 2024: express $242,500–$466,700 versus full restaurant $320,125–$687,700.

**FDD vs franchise agreement.** Disclosure versus contract. Item 17 summarizes; Item 22 attaches; the signed paper controls.

**Fee stack.** A field term, not an FTC heading: royalty plus brand fund plus required local advertising, when all are disclosed as percentages of the same base. Brands missing a royalty or a fund are left unranked here. bluTaco's 2024 comparative record discloses no royalty; it has no stack. Capriotti's 0.65% technology fee is extra and is not stuffed into the stack to make a prettier number.

**Fourteen-day rule.** Furnish the current FDD at least fourteen calendar days before a binding agreement with or payment to the franchisor or an affiliate. [FTC Franchise Rule](https://www.ftc.gov/legal-library/browse/rules/franchise-rule).

**FPR (financial performance representation).** Any oral, written or visual representation of actual or potential sales, income or profit. If the seller makes one, it generally belongs in Item 19, with a reasonable basis. A marketing chart of "sales per labor hour" with no sample is a claim, not an FPR you can use.

**Franchised vs licensed.** Different contracts. Shah's 2024 FDD: 0 franchised, 44 licensed of 58 outlets. A locator pin does not tell you which.

**Ghost kitchen.** Delivery-only or host-kitchen format. Dog Haus's 2024 comparative record: 6% royalty, or 4% for a ghost kitchen.

**Gross sales (as defined).** The contractual base for royalties. Delivery commissions, discounts, taxes and gift cards may or may not be in it. Copy the definition; do not assume.

**Imbiss.** German for a snack or takeaway stand. In this set, a standing-service döner shop rather than a seated restaurant. Döner Haus's 2026 FDD: 700–1,200 square feet, standing-service imbiss. Not a synonym for "cheap."

**Item 7 high.** The high end of the estimated initial investment table. A planning scenario from the franchisor, not a bid and not a maximum. Shah's 2024 printed high is $405,000 while the lines sum to $410,000; both facts belong in the file. GDK 2024 high: $1,123,000. Pepper Lunch 2024 comparative record high: $1,471,500.

**Item 19 subset.** An FPR that uses fewer outlets than the system, or only affiliates, or only shops open a full year, or only a format. GDK 2024: one full-year franchised mall unit. Using the subset as "the average shop" is the usual error.

**Item 20 movement.** Openings, transfers, terminations, non-renewals, reacquisitions, cessations. The ending count is a snapshot.

**Liquidity.** Cash and near-cash available to fund opening. Not net worth. Not FICO. Not disclosed as brand minimums in this dataset.

**Local advertising (required spend).** An Item 6 obligation to spend locally, sometimes payable to third parties rather than to the franchisor. GDK 2024: 2%, waived if the store joins a cooperative that can levy up to 2%.

**Net worth.** Assets minus liabilities, including illiquid ones. A franchisor screen, not opening cash.

**Non-exclusive protected territory.** Some protection from other franchisees, with reserved rights and no exclusivity against every channel. GDK 2024: non-exclusive, no minimum size, venue and delivery carve-outs.

**Operations manual.** The standards book, usually incorporated by reference and changeable. Item 11 often discloses a table of contents, not the manual.

**Protected area.** A defined geography with some limits on other branded restaurants. Not a synonym for exclusive. Not a map in a deck.

**Registration state.** A state that requires the franchisor to register or file before offering there, on top of the FTC Rule. Wisconsin and Minnesota public files are used as examples in this guide. Filing is not investment approval.

**Royalty.** Recurring fee, usually a percentage of defined gross sales, Item 6. 375° Chicken 'n Fries's 2024 FDD footnote reads "five percent (6%)"; this set uses 6%, matching the Item 6 table. Wienerschnitzel 2024 comparative record: 5%. bluTaco: not disclosed.

**SBA 7(a).** A federal loan-*guarantee* program administered through participating lenders. Public overview: [sba.gov 7(a)](https://www.sba.gov/funding-programs/loans/7a-loans). A consultant does not quote a rate.

**Seven-day rule.** If the franchisor unilaterally and materially changes the attached agreements, the revised agreements must be furnished at least seven calendar days before signing. Prospect-initiated negotiation does not trigger it.

**Source.** The document a figure came from. In this set: a named FDD issue date, a 2026 FDD, or a May 2024 comparative study of published FDDs.

**Then-current agreement.** A renewal or transfer condition that requires signing the form of contract the franchisor is then using, which may differ from the one you signed.

**Transfer.** Item 20: the shop stayed open and changed franchisee. Item 17: the rules for selling. Wienerschnitzel's 2024 comparative record discloses no right to sell.

**Validation.** Calls to current and former franchisees from Item 20 lists, sampled on purpose. Not discovery-day testimonials.

**Working capital.** Field language for cash to operate. Item 7's additional-funds row is the disclosed slice of it, for a stated period only.

| Term | Where it lives | Worked hook in this set |
| --- | --- | --- |
| Fee stack | Field math on Item 6 | Missing royalty → unranked (bluTaco) |
| Item 7 high | Item 7 total column | Shah's $405,000 printed vs $410,000 summed |
| Item 19 subset | Item 19 | GDK one mall unit; Mad for Chicken revenue-only |
| Imbiss | Format | Döner Haus 700–1,200 sq ft standing service |
| Licensed vs franchised | Items 1, 20 | Shah's 44 licensed, 0 franchised |
| Five-outlet minimum | Item 7 note / development agreement | GDK 2024 |
| No protected area | Item 12 | Capriotti's |
| No renewal, no sale | Item 17 | Wienerschnitzel |
| 35-year term | Item 17 | Great Greek |

## Related reading

- [Comparison worksheet](/comparison-worksheet/) — the blanks these words fill
- [How to read an FDD](/how-to-read-an-fdd/) — the twenty-three-item order
- [Ongoing fees](/ongoing-fees/) — fee stack in practice
- [Item 19](/item-19/) — FPR and subsets
- [QSR vs fast casual](/qsr-vs-fast-casual/) — imbiss, inline, captive

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