Negotiating with Franchisors: What You Need to Know

Negotiating a franchise agreement can be difficult and time consuming. One must go through the entire Franchise Agreement and understand the different clauses, items and how they interact with each other. The Franchise Agreement consists of several provisions which can be altered or negotiated, while some are set in stone. For those who are new to the process of negotiating franchise agreements, here are a couple of tips for not wasting time on trying to negotiate items that franchisors do not alter and concentrating on the change-able clauses in the Franchise Agreement. 

Ask Your Franchisors If Negotiation is Possible 

Before going into the negotiating aspect, one must always ask the franchisor whether they are willing to negotiate. Usually, franchisors state that they have a rigid Franchise Agreement and that it is not open to negotiating. However, there may be some instances where the franchisor may allow some flexibility. Stated below are a few tried and tested tips for negotiating franchise agreements and which areas to concentrate one’s efforts on. 

Focus on Changeable Clauses 

Franchise Agreements typically include provisions related to royalties, territorial restrictions, marketing funds, transferability (selling your franchise), disclosure requirements, advertising fees etc., all of which can often be negotiated by an experienced negotiator or franchise brokers. These negotiations should focus on getting more favorable terms from the franchisor such as:

1. lower royalty payments
2. longer term contracts
3. Altering geographic territory
4. Business opening schedule 

 However, one must keep in mind that whatever changes you get will also apply to all existing franchisees as well so you don’t have an unfair advantage over existing franchisees.  It is important for both parties—the franchisor and potential franchisee—to come out ahead in these negotiations so that all parties benefit from it in some way or another.                              

Understanding What Is Non-Negotiable   

In addition to understanding what clauses can be changed during the negotiation process, it is also important to understand what clauses cannot be changed or negotiated at all. For example, most franchises require that their products or services meet certain standards; this clause cannot usually be altered during negotiation due to its legal nature as these standards protect consumers from substandard services or products being provided by franchises operating under their brand name. Other non-negotiable clauses include:

1.  trademark rights
2.  liability insurance requirements 
3. Termination restrictions
4. Changes to shareholders and directors

 which are mandated by law and cannot be altered even if both parties agree otherwise during negotiations. 

Conclusion: 

Negotiating with Franchisors requires knowledge about what is negotiable and what isn’t negotiable within Franchise Agreements as well as experience in reading between the lines of contractual language used when drafting contracts between Franchisors and Franchisees. By taking the time to really understand what you can negotiate for with Franchisors before signing any documents you will save yourself time and money down the line by ensuring that you have gotten everything you need out of your contract without sacrificing too much ground in return for those concessions made by your Franchisor partner(s). With these tips in mind, entrepreneurs looking into opening a new business through Franchising can rest assured knowing they have taken all necessary steps needed when negotiating their own individualized Franchise Agreement with any given Franchising Company they choose!

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