Negotiating a Franchise Agreement

Buying a franchise can be intimidating. Franchisors often claim that they will not negotiate the terms of the franchise agreement and the acquisition can feel like a take it or leave it proposition. However, the reality is that whether a franchisor will negotiate and to what extent, depends on many factors. At Lusthaus Law, we have a long history helping franchisors and franchisees protect their best interests in negotiation. Our goal is to ensure clients understand the terms of the agreement and how they impact the transaction and their business. If revisions are warranted, we advocate for our clients’ position and make a strong case for modification.

There are many reasons why a franchisor may be willing to compromise. The size and financial strength of the franchisee or franchisor may lead a franchisor to be more flexible with the contract terms. In addition, the unique circumstances of the arrangement or local market conditions may also be factors. Sometimes, there are terms that have little importance to the franchisor but are significant to a franchisee. That’s where negotiating a franchise agreement comes in.

Franchisees should request changes on matters that are important to them especially in light of their long-term plans. For example, a franchisee who envisions owning the business for many years will be more interested in renewal terms and territorial protections. One who is planning to build the business and sell it relatively quickly, may be interested in favorable transfer provisions. A new franchisee may want additional support services. The fact is that if you do not ask for changes, you will not get any. Franchisors will not offer to negotiate. It is up to franchisees to request revisions and make a strong case for why it is essential and how it will not adversely impact the franchisor. Franchisees should always have an attorney review the franchise agreement and help evaluate whether negotiation is warranted. If you are considering buying a franchise, Lusthaus Law can advise you on the best way to move forward. Contact us today.