Many entrepreneurs opt to franchise rather than start a business from scratch. There are many reasons for doing so. Perhaps they do not possess the full knowledge required to enter the market and make a profit. In other cases, they may want to take advantage of the parent company brand name and awareness, using it to increase the odds of success.
Regardless of why someone chooses to go the franchise route, he or she will have to sign a contractual agreement with the parent company. But are these terms negotiable or set in stone?
Breaking Down Franchise Agreements
It’s pretty easy — your franchise agreement will either be negotiable or non-negotiable. If you have a negotiable contract, the expectation is that the parties will negotiate the most important details of the partnership. In contrast, if you have a non-negotiable franchise agreement, then the terms are, in general, set beforehand. The expectation is that you will agree to the basic arrangement in full.
Non-negotiable contracts are most common with companies that want to ensure a level playing field for all franchisees. Also, since any special incentives offered to one franchisee must be disclosed to all others, many parent companies stick with a standardized agreement form, saving themselves time and money.
Negotiation is Always Possible
Truthfully, though, any party can negotiate changes to specific details, even in a non-negotiable contract. Always remember that special circumstances may necessitate adjusting the contractual terms. For example, perhaps you are opening up a fast food franchise and find that the standard territory exclusion is set to a two-mile radius. In your case, there is a sports facility three miles away. You may face the threat of someone opening another franchise near the popular sports facility and thus stealing potential customers on a regular basis. The parent company could offer an expectation, as an addendum to the contract, in this sort of instance.
It’s also possible for those who have unquestioned years of experience and success in an industry to request a larger share of the profits than others. Some brands may accept this change; others won’t. It’s always worth giving negotiation a chance.
Advice for Negotiating
If negotiating a franchise agreement, be sure to speak with other area franchisees. They may be willing to provide you and your franchise lawyer with copies of their contract addendums to help establish that the company allows a particular exception. Speaking of lawyers, make sure you ask your lawyer for advice on how beneficial a potential change in terms may be. There is no reason to go through the trouble of negotiating a change if it will only make matters more complicated overall.
Speak to an Attorney Today
Shelton Law & Associates is a firm experienced in creating, interpreting and negotiating franchise agreements. Contact the firm today to get started.