It would seem natural that some franchisees, when reviewing the Franchise Disclosure Document, may be interested in changing certain terms that must be agreed upon prior to operating their new franchise. What is negotiation all about and how can franchisees maximize the value of their investment if negotiating terms becomes important when making an investment decision?
Consistency is the lifeblood of successful franchise systems, though at times this consistency could be considered flexible consistency. This is at times the case because specific brands may be willing to alter certain key parts of the franchise agreement when a franchisee seeks terms that best respect their interests.
It is important to note, nonetheless, that requests to alter certain terms of the franchise agreement are absolutely best made through the experienced support and assistance of legal franchise experts. Franchisees seeking to alter key terms without an experienced background in how to approach franchisors and without a clear understanding of the ramifications of their requests may very well unnecessarily complicate their plans to enter franchising on the right foot.
Negotiation is usually not part of the franchise agreement process because it can stand in the way of franchise system uniformity, one of the most important aspects of franchising as a global industry in the world of business. Many turn to franchise brands for the very consistency that negotiation softens, and the training and support provided by franchisors to franchisees is very much a part of the uniformity of the brand.
Having considered these things, franchisees may wish to explore negotiating a term where some reasonable interest on their part is impeded and professional assistance makes clear that attempting negotiation of certain terms may improve the value of the brand for the franchisee while still respecting the franchisors need to maintain uniformity. Working closely with professionals who are experienced with franchise agreement negotiation is wise and the right support can be an incredible asset to new franchise partners joining a franchise system.
Some terms that may be negotiable include whether or not the franchisee receives a protected territory where certain types of competition will be set to a minimum or eradicated altogether. The degree to which the franchisee’s location or business territory is protected will vary from franchise to franchise and is also dependent on the type of business concept. Limits on competition can include other franchises opening up in the area, online vs. in-store business channels competing for customers, and the demarcation of a specific geographic zone. Franchisees may also find leeway when examining royalty fee schedules which, although perhaps not necessarily diminishing the amount of fees, may allow for a more agreeable gradation of fees over time when the franchise first starts.