Question: Are Any Terms of the Franchise Agreement Negotiable?
Answer:
Franchise agreements are typically non-negotiable. Since franchisors are required to register their UFOCs within certain registration states, the state may not allow the signing of a franchise agreement if it differs from the one they have on file. Therefore, franchisors will not jeopardize their legal standing simply to satisfy a motivated franchisee.
On another level, the altering of a franchise agreements can upset the balance of the franchise system. Well-established franchisors are more stringent to negotiate because they have established a set of operating standards that have proven successful. To change any terms would instantly set off existing franchisees who did not receive your suggested incentives.
Altering a franchise agreement also means additional costs to the franchisor and a delay in the execution of the agreement. You also have to consider the integrity of the franchisor should it decide to agree to any of your terms. This may be an indication that the system is having some financial trouble. As a result, the value of the brand and the strength of the system as a whole may not be on steady ground.
On the other hand, if you are buying in a young franchise system, there is a greater possibility that some of the terms can be negotiated. Your lawyer or franchise consultant can assist in selecting the terms that will have the least negative impact on the franchise concept. Further, if you feel that your franchise may be negatively impacted by a franchisor initiative, such as site selection, you have a right to negotiate certain terms.
Here are some changes to the franchise agreement that you may be able to negotiate:- Deferred payment of franchise fee
- Waiver or reduction in additional costs for training
- The length of the franchise agreement
- Extension of your territory limits
- Grace period for the commencement of royalty payments
- The amount of the transfer fee should you decide to sell your franchise
- Signage standards
- Interior design specifications that reflect local heritage or cultural uniqueness
- Your approval of the franchisor’s site location decision
