How to Legally Negotiate a Franchise Agreement

Legally negotiating a franchise agreement is fairly straightforward for those with some business acumen. Knowing your rights and wishes in advance is the cornerstone of any negotiation process. Sit down and make an extensive list of your requirements, points you are willing to compromise on and those you are not, in advance of negotiating your Franchise Agreement.

Things You'll Need

• Computer with Internet access
• Business attorney

Instructions

1. Be aware that most franchisors require personal liability from all members of the entity or group entering into the franchisee arrangement. Limited liability is rare in franchising. Negotiate accordingly.

2. Make a note of state laws forbidding franchisors from offering new franchisees better terms than existing Franchise Agreements in that state. Your contract may be bound to the terms of previous subscribers to the franchise and non-negotiable.

3. Adjust any items in contention with local zoning and signage laws to reflect your area.

4. Realize that more established and well-known franchises are less likely to flex on monetary points, but may offer you additional training support for employees and other business development programs unavailable in smaller franchises.

5. Document all negotiations in writing, as oral arrangements are not binding in court.

6. Verify that the Franchise Agreement makes sufficient concessions for equipment upgrades, supply streams and other operational issues before you sign. Negotiate favorable enough terms to ensure a comfortable and profitable business arrangement.

7. Ensure your exclusive territory rights are broad enough to prevent another franchisee to open a branch of the franchise within competing distance of your outlet. Franchisors receive payment from all franchisees, and are frequently unconcerned about competition among their franchisees.

8. Stipulate the termination terms for both parties, ensuring sufficient protection from being trapped or pushed out in the event of a falling out. Protect your investment and personal assets by stating monetary loss maximums, minimums and obligations of each party to the other in the event of termination.

9. Note carefully and negotiate sales quota requirements that may negate contractual obligations of the other party based on failure to perform.

Tips & Warnings

• Check with your state and local government regarding additional franchise regulations that may apply exclusively to your location.

• Call other franchisees before buying into any franchise. Knowing their satisfaction and success levels in advance will give you an accurate idea of what to expect.