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Franchising is a complex business and it is often difficult to know where to turn for reliable advice. Well, you can ask me to begin with! If there is any question you may have relating to the franchise industry- from understanding a particular franchise industry, to legal or financial terminology and much more- I will research the question for you and write back with a comprehensive answer to your query.

View the following franchisee question and reply…

Q. “Room for Negotiation?”
Is there any room for negotiation when it comes to the franchise asking price?

Josie Mellanby

A:
Hey Josie thanks for your question and it’s an interesting one too!

There is no reason why you should not feel free to raise the issue, but I believe you will find that franchisors generally tend to decline to bargain with regard to setting up costs, which will usually include the initial franchise fee.

Their argument is that if some franchisees were to pay less than others within the system, word would spread quickly throughout the franchise network and ill feeling would inevitably result.

However, sometimes there can be room for negotiation depending on individual circumstances and so on. For instance, if you were to consider becoming the first “pilot” franchisee of a newly-established network, you might find the franchisor willing to agree to a reduction in price. Alternatively, you may be able to negotiate deferred terms instead of being required to pay in full at the outset.

In regards to franchise re-sales, the opportunity to purchase an established business from an out-going franchisee is continuing to grow within the US. This means the supply of franchise re-sales is outweighing the demand to take over existing businesses, therefore if you were to buy an established business you could have room to haggle with the franchisor in question.

Whichever route you might consider taking in becoming a franchisee, do keep in mind that price should not be viewed in isolation. More important is the comprehensiveness of the franchise package/Agreement, which should provide for everything you need to operate the business efficiently.

Franchise Reporter