How to Negotiate a Franchise Agreement as a Franchisee

Negotiating a franchise agreement can feel overwhelming. But with the right approach, you can ensure the deal works for you. Here are key tips to help you navigate the process confidently.

Ensure the Agreement Reflects the Commercial Deal

The franchise agreement should match the deal you and the franchisor agreed on. Most of the key terms, like fees, renewal periods, and territory, are in the agreement schedule. Carefully review this section. Make sure every detail aligns with what was promised. If something seems unclear or missing, raise it before signing. A franchise lawyer can help you double-check that everything is in order.

Identify Key Risks

Franchise agreements often contain clauses that carry risks. Personal guarantees, liability waivers, and indemnity caps are common examples. Consider these clauses carefully. Can you accept the risk, or should you try to negotiate changes? A franchise lawyer can explain the implications and help you assess whether the risks are reasonable. Remember, every franchise comes with some level of risk, but understanding what you’re signing up for is crucial.

Consider if the Franchisor is Open to Negotiating

Not all franchisors will negotiate. Larger franchisors often present their agreements as “take it or leave it.” These franchisors rely on their brand’s reputation and consistency to attract franchisees. On the other hand, emerging franchise networks might be more flexible. They may be open to changes to attract the right franchisee. Before diving into negotiations, consider how likely the franchisor is to budge. A franchise lawyer can help gauge the franchisor’s openness based on industry experience.

Limit Negotiation Points

Keep negotiations focused on the most important issues. Long and drawn-out negotiations can frustrate a franchisor. In some cases, it might even dissuade them from proceeding with you. This is especially true if other candidates are waiting in line. Identify the critical points you need adjusted and stick to those. A clear, concise approach shows you are serious and reasonable.

Set Out What Changes You Want

Clearly state the amendments you want and why they are necessary. A good way to do this is by using a negotiation schedule or departures table. This document lists the changes you seek alongside your reasons. It helps both sides stay organized and ensures nothing is overlooked. A franchise lawyer can draft or review your negotiation schedule to make it as effective as possible.

Consider Timing

Time is often a factor in franchise deals. If a lease is about to start or the franchisor wants to move quickly, prolonged negotiations can jeopardize the opportunity. Keep these deadlines in mind when negotiating. Act promptly and efficiently to avoid delays. A franchise lawyer can help you prioritize key points and keep the process on track.

Get Legal Advice

Negotiating a franchise agreement without legal advice is risky. A franchise lawyer can spot potential pitfalls, explain complex clauses, and help you protect your interests. They’ll guide you through the process, ensuring you understand what you’re agreeing to. The investment in legal advice upfront can save you significant time, money, and stress down the track.

Conclusion

Negotiating a franchise agreement requires preparation and focus. Scrutinize the agreement, understand the risks, and decide what’s worth negotiating. Keep things simple, stick to deadlines, and seek expert advice. A franchise lawyer can be your best ally, helping you secure a deal that works for you and your future business.

Negotiating doesn’t have to be daunting. With these steps, you’ll approach it with confidence. And if you need help, don’t hesitate to reach out to a trusted franchise lawyer.

Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply