Franchise Agreements are Negotiable: What Franchisees Need to Know

In certain “franchise sales settings” franchisees are sometimes led to believe that modifications cannot be legally made to their franchise agreement. That is, to induce a franchisee to sign the franchise agreement – without the benefit of any negotiations or an in depth review by a franchise attorney – some prospective franchisees are led to believe that the franchise agreement is a “standard agreement” (signed by everyone) and that, legally, the franchisor is not permitted to make any changes. The implication by the franchisor’s sales agent being “you might as well just sign the agreement and not waste time or money since we can’t change the franchise agreement even if we wanted to”. Sadly, this misstatement may lead to a false sense of security for prospective franchisees. To be clear:

  • Franchise agreements are negotiable;
  • It is not illegal for a franchisor to modify its franchise agreement;
  • It is extremely common for franchisees to negotiate certain aspects of the franchise agreement; and
  • Even if the franchisor were unwilling to negotiate the terms of the franchise agreement, it is nevertheless critical that you understand the legal obligations that you will be undertaking and obligating yourself to in the franchise agreement.

Keep in mind that the extent to which a franchisor may be willing to negotiate the terms of its franchise agreement will vary depending on the negotiating power of the parties and the negotiation strategy that you adopt. Sometimes, minor changes will make a substantive impact on your long-term rights and obligations as a franchisee. Franchise agreements are serious legal documents – treat them as such.




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