NFL Media Insider Ian Rapoport points out that when a player is tagged, the team sends a letter to the league, but the letter does not officially designate that a player is franchised at a specific position.
A team serves notice to a player that it "has designated you as a Franchise Player subject to a Right of First Refusal and Draft Choice Compensation" specified in the CBA (Collective Bargaining Agreement). It tenders him a one-year contract for the average of the five largest Prior Year Salaries for players at the position at which you participated in the most plays during the prior League Year, which average shall be calculated in accordance with Article 10, Section 2(a)(i)(A) of the CBA."
Here's the section regarding nonexclusive franchise tenders:
(i) Nonexclusive Franchise Tender. The Nonexclusive Franchise Tender shall be a one year NFL Player Contract for:
(A) the average of the five largest Prior Year Salaries for players at the position (within the categories set forth in Section 7(a) below) at which the Franchise Player participated in the most plays during the prior League Year, which average shall be calculated by:
(1) summing the amounts of the Franchise Tags for players at that position for the five preceding League Years;
(2) dividing the resulting amount by the sum of the Salary Caps for the five preceding League Years (using the average of the amounts of the 2009 and 2011 Salary Caps as the Salary Cap amount for the 2010 League Year); and
(3) multiplying the resulting percentage by the Salary Cap for the upcoming League Year (e.g., when calculating the Tender for the 2012 League Year, dividing the aggregate sum of the Franchise Tags for players at that position for the 2007-2011 League Years by the aggregate sum of the Salary Caps for the 2007-2011 League Years and multiplying the result by the amount of the Salary Cap for the 2012 League Year) (the "Cap Percentage Average") (See Appendix E for an illustrative example); or
(B) 120% of his Prior Year Salary, whichever is greater; if the Club extends the Tender pursuant to this Subsection (a)(i), the player shall be permitted to negotiate a Player Contract with any Club as if he were a player subject to Section 5 below, except that Draft Choice Compensation of two first round draft selections shall be made with respect to such player in the event he signs with the New Club, and the Signing Period for such player shall be determined under Section 14 below. For purposes of this Subsection, the "Franchise Tag" is the average of the five largest Prior Year Salaries (e.g., the Franchise Tag for the 2010 League Year equals the average of the five largest Salaries for the 2009 League Year for players at that position).
March 3 is the deadline for NFL teams to designate franchise players. Free agency begins on March 11.