GLOSSARY OF TERMS

Business Broker - A person who, for a fee, acts as the agent of another, assisting in negotiating the sale for a client's business.

Cash Flow - the measure of actual cash flowing in and out of a business.

Disclosure Document - is the document that discloses information about a franchise system and the franchisor that a franchisor should supply to a prospective franchisee.

Franchise - is an arrangement whereby a franchisor gives to a franchisee a right or licence to use the franchisor's intellectual property (trade marks, brands, business name) and business system to conduct an independently owned business.  Subway is a popular franchise, as are McDonalds.

Franchise Agreement - is the agreement that governs the relationship between the Franchisor and the Franchisee.

Franchisee - is the person who buys the franchise and operates an independent business using the relevant brands and business system with the permission of the franchisor.

Franchisor - is the person who generally owns the relevant brands and business system and who traditionally "sells" the franchise to a franchisee.

Inland Revenue Department (IRD) - New Zealand taxation department.

Intellectual Property - laws that protect the property rights in creative and inventive endeavours including art, literature, music, films, sound recording, broadcasts and computer programs.

Goods and Services Tax (GST) - a broad-based tax of 12.5% on the sale of most goods and services in New Zealand.

Licence - a legal document that grants a business or person with official permission to conduct a certain activity e.g. serving food

Manual - means the manuals, documents and written directives usually produced by a Franchisor specifying, in greater detail, aspects of a franchise system, a franchisor's standards and policies with respect to the operation of a franchised business.

Marketing (or Advertising) Fund - means a fund usually maintained by a franchisor, the proceeds of which are used to market and promote a franchise system.  Contributions to such fund are made by franchisees and sometimes by the franchisor and suppliers of the franchise system.

Occupancy Licence Agreement - is the document pursuant to which a franchisor (who leases the premises from which a franchised business is conducted) grants to the franchisee a licence to use and occupy the premises. Normally only larger, well established franchise systems use OLA's.

Pay As You Earn (PAYE) - a legal requirement to hold back a portion of payments made to employees which is then paid to the Inland Revenue Department.

Sublease - is an agreement between a lessee and a sub-lessee pursuant to which the lessee subleases premises.

Tax Invoice - an invoice for the supply of goods or services which must specify that it is a taxed invoice and must include a GST No.

Withholding Tax - tax deducted at the source on interest, dividend and royalty payments made to non-residents, and certain investments or payments to residents where the recipient has not provided their IRD Number to the payer.