Franchise Agreements: Is There Room for Negotiation?

Although typically hard-set, there is some room for debate within a franchise agreement

You may be looking at franchise prices and wondering how much room for negotiation there is in the deal. 

Franchisors will typically offer a Standard Franchise Agreement, based on an outline drawn up by the British Franchising Association and, in practice, potential franchisees often find there is little flexibility on this agreement.

There are several reasons for this rigidity on the part of franchisors.

Firstly, it is argued that all franchisees should be offered the same terms and conditions - for fairness and harmony within the franchise as a whole. 

Also, keeping all franchisees on the same contract significantly cuts down on paperwork and costs. And if a franchisor did consider offering special terms to certain parties, they will have to make sure they were all legal - a hassle at the very least.

So what can you, as a prospective franchisee, do when faced with these documents?

Study the small print and the quality of the brand

First of all, you need to read everything carefully. Make sure you understand the full details and clauses before you accept any contract

Standard Franchisee Agreements can be rather one-sided, favouring the franchisor. What you, as a potential franchisee, need to remember is that you are buying into an existing business with an established reputation, brand awareness and customer base.

This reputation has come about by customers identifying the business with certain trademarks and associating it with minimum standards with regards to quality and service. 

It is vitally important that all franchisees work to the same standards. Individual bad pratice can affect the entire business and the fortunes of other franchisees.

The Standard Franchise Agreement is designed to protect both the franchisor but also all franchisees, and there are basic obligations that franchisees need to meet. 

Make sure you are satisfied with the clauses of the agreement, and that exisiting franchisees are upholding the reputation of the franchise you want to put your name to.

Sweat the small stuff 

A standard agreement doesn’t mean that all negotiation is off the table.

Some points for discussion may be broadly written clauses that leave significant scope for interpretation.

This doesn’t necessarily mean that you want more favourable terms than anyone else, but simply that you want both parties’ obligations written down in plainer detail. 

You could also look for clauses that state you are required to purchase materials from a certain supplier – these may be included for purely financial reasons on the part of the franchisor, rather than any regard to quality standards. You may have wriggle-room in this area - if you don't ask, you don't get. 

Observe franchisor behaviour

How your franchisor acts during these negotiations is also a telling point as to how they may act in the future.

If they’re open to suggestions and queries , this is a good omen, while complete inflexibility can be a warning sign. 

At this point you might also want to consider the franchisees that the franchisor already has. Does the franchisor have a good track record of retaining satisfied franchisees, or do they have a high turnover? If it’s the latter, then you may want to do further research or look elsewhere for opportunities. 



Jo Thornley

About the author

Jo joined Dynamis in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between, and and likeminded companies.