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How to Negotiate Your Franchise Agreement

Written by: Ed Teixeira

Article Overview: Learn how to negotiate a franchise agreement and avoid signing a contract that can obligate you to some provisions that may be difficult to meet. Follow these steps and you’ll protect yourself from potential problems and disputes.

How to Negotiate Your Franchise Agreement

An individual who signs a franchise agreement is executing a valid legal contract. It requires the franchisee to fulfill certain obligations and follow guidelines for operating their franchise. Before you sign the franchise agreement you need to be comfortable with all of its provisions. In order to achieve this comfort level you and your franchise attorney may feel it necessary for the franchisor to make changes to the agreement. Some franchisors will negotiate terms of their franchise agreement while others will not. Quite often, the decision to negotiate is based upon the size and maturity of the franchisor. The larger franchisors find it much easier to say "no". Although franchisors are guided by franchise regulations, state statutes and sound business practice, certain provisions can be negotiated and changed.

Before you arrive at the point of negotiating your franchise agreement there is a process you'll need to follow.

• Engage An Experienced Franchise Attorney To Review The Agreement

• Confirm That The Franchisor Will Negotiate Terms Of The Agreement. Some franchisors will not make any changes to their agreement. On the other hand some franchisors may have unreasonable or onerous terms in their franchise agreement. In order to protect yourself make sure your attorney reviews the agreement to identify any possible issues even though you can't negotiate the agreement.

• Recognize That Certain Terms Are Non-Negotiable

Royalty fees, territory size, termination provisions, length of the agreement, non-competes and legal venue are examples of what are considered the "untouchable" provisions. Few if any franchisors will negotiate or change these provisions.

• Focus On The Important Points In The Agreement. Restrictions on products and services that you wish to sell

• Indemnification Provisions. Be careful that you're not held liable for loses or damages that are not caused directly by the acts of you or your employees. You may request language, which does not require you to indemnify the franchisor if you follow the procedures and policies of the franchisor.

• Advertising. Provisions that require you to spend a set dollar amount or per-cent of sales on advertising may be lowered during your first few years of operation.

• The Transfer and Assignment Section. Be sure your attorney carefully reviews this section and that you understand your responsibilities and rights.

These represent some of the more noteworthy examples of sections in a franchise agreement, which you and your attorney may wish to negotiate. A franchise agreement is a complicated document and by design is favors the franchisor.

Make sure that before you sign on the "dotted line" you fully understand your obligations and are comfortable with the final agreement.

Related Articles
  "Untouchables" and "Discussables"
  Negotiating the Terms of Your Franchise Agreement
  Make the Most of the Franchise Agreement
  Hiring a Franchise Lawyer
  Franchise Agreements The Basics

Article Tags: franchise agreement, franchise attorney, franchisor negotiate, operating franchise



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