Negotiating the Franchise Agreement

One of the key elements of branding a product or service and offering franchises is that each franchisee must adhere to the terms and conditions that the franchise puts forth in the franchise agreement. Uniformity of products or services from franchise to franchise is key to replicating the successful business experience of the franchisor. Franchise lawyers may, however, advise their franchisee clients that certain elements of the franchise agreement are not written in stone and can be negotiated. Without knowledge and experience, a franchise attorney could be spinning their wheels and be met with a stone wall of rejection when attempting to negotiate on behalf of the franchisee. That said, there are certain items in the franchise agreement that are open to negotiation and there are those that are off limits.

The essential concept to understand when a franchise attorney attempts to negotiate a franchise agreement with the franchisor is that all negotiations consist of a give and take process. In order to get something, you will have to give something. For example, if you wish to reduce the initial cost of the franchise fee, you should consider offering to pay a higher interest rate on the capital that they are offering you to borrow to start up. If you feel that the territory being offered is too restrictive or doesn’t include an area that you know will soon grow, you might offer a slightly higher monthly royalty. Also, you might wish to purchase additional franchises in specific territories and at a specific franchise fee within a certain period of years and for this option, you would be willing to pay a specific sum of money.

The number of deals you can offer a franchisor is limited only to your creativity and imagination. Even the most stodgy and established franchisors are willing to negotiate certain items contained in the franchise agreement if the deal is professionally and legally presented to them and your franchise attorney makes it clear how they might benefit from the deal. However, one item that is off limits to most franchisors is the modifying of terms that would compromise the uniformity of their brand.