There's two types of franchise tags.
Exclusive: Player cannot negotiate with other teams and his salary is the greater of 1) 120% of previous year's salary or 2) average salary of the top 5 players playing the same position from the current year.
Non-exclusive: Salary terms are the same except it's the average of the top 5 players from the previous year. Player can negotiate with other teams but current team reserves the right to match the offer. If it doesn't match the offer, it receives two first-round draft picks.