Are Franchise Terms Negotiable?
Sean T. Ngo, MD Vietnam Franchises
It can be very intimidating when a large and established franchisor drops on your lap multiple franchise agreements that may be well be over 100 pages of legal jargon for each agreement. Franchise agreements typically include separate agreements, such as Development Agreement, Franchise Agreement, Sub-Franchise Agreement, Marketing Agreement, and quite possibly more depending on the franchisor.
As expected, established franchisors have spent significant amounts of legal investments to carefully draft franchise agreements and are understandably reluctant to negotiate changes to the franchise system. The quality and standards set by the franchisor allow them to protect the brand and the system’s image, things that the franchisor has invested significant amounts of effort and monies to create. Protecting the franchise system is critical to the franchise’s and franchisee’s success.
But, as the saying goes, everything is negotiable. And in the franchise world, there are key terms and conditions that may be negotiable, depending on the distribution of power between the franchisor and franchisee. To negotiate successfully, you need to be willing to walk away from any opportunity in which you will not be happy. Franchising is like a long-term marriage, so both parties need to have a happy and productive compromise or else it is not worth getting married.
Below are some typical key terms and conditions that may be negotiable, but it obviously depends on multiple factors as discussed above, including the overarching desire of the franchisor and/or franchisee to do business together:
- Franchise fee
- Grand Opening and Field Support
- Transfer Fees
- First Right of Refusal
- Standard Cure Periods
- Personal Guarantees
- Store Renovations
- Sourcing Requirements
As usual, the above list is not exhaustive as it does not cover the entire franchise agreements. This is where an experienced franchise consultant can guide you through this process efficiently and cost-effectively while significantly minimizing your risks as a franchisee.[ Go back ]