Before entering into a franchise agreement, you must understand that it is negotiable. Some are universal negotiating points, while others depend on the specific circumstances surrounding your franchise. Continue reading to learn the best practices to negotiate your franchise agreement and how one of the experienced franchise litigation attorneys at FortmanSpann, LLC can advise you throughout.
What are the best practices to negotiate my franchise agreement?
More often than not, franchisors are resistant to negotiating their established franchise agreement. They do not want to make significant edits for you because they need to treat all of their franchisees relatively the same. Nonetheless, you must attempt to negotiate your franchise agreement as you see fit. This is so you can ensure that you are placed in the best position as you follow through with this significant business transaction.
For one, you must ensure that you are guaranteed strong territory protection, which should entail a scope that meets your expectations. With this, you must evaluate the following terms and conditions:
- Evaluate the exceptions to your territory protection.
- Evaluate the size of your territory protection.
- Evaluate whether your territory protection is contingent on your sales quotas or other requirements.
- Evaluate whether you may negotiate an extension of your territory protection as your business progresses.
Secondly, you must ensure that you are offered personal protection. That is, a franchisor may expect you to personally guarantee the terms and conditions of your franchise agreement, but this should come with its limits. So, you must evaluate the following:
- Evaluate whether you may limit your personal liability if your business eventually closes.
- Evaluate whether you may extend the opening of your business.
- Evaluate whether you may receive an extension for curing certain business defaults.
What other tactics should I consider?
While territory protection and personal protection are universal negotiating points that you must look into, you may also negotiate terms and conditions unique to your situation. Without further ado, other negotiations you may consider include the following:
- You may negotiate additional developmental rights: that is, you may want to be granted the first right to establish another business location in an adjoining territory, and therefore request supplement territory protection.
- You may negotiate family transfer rights: that is, you may want to transfer your business ownership to the beneficiaries of your estate plan, and therefore request supplemental transfer rights.
- You may negotiate your renewal rights: that is, you may want to be granted the opportunity to continue your franchise agreement indefinitely so that you do not lose out on these negotiated rights, and therefore request supplemental renewal rights.
One of the skilled franchise law attorneys at FortmanSpann, LLC is here whenever you are ready to kickstart your negotiation process. Simply contact our firm at your earliest possible convenience.