Why franchise agreements are non-negotiable

If you want to change the franchise agreement, perhaps the franchise isn't for you

Why franchise agreements are non-negotiable

When you take on a franchise, you become part of the franchisor’s ecosystem. Clearly this brings many advantages. But it also means you have to adhere to the same processes, rules and procedures as other franchisees in the network. There needs to be a level playing field for everyone. This is why franchise agreements are so important – and it’s also why they are non-negotiable.

What are franchise agreements?

Franchise agreements are more than a contract. They protect the brand and the franchisee by ensuring clarity and transparency. Key elements set down by franchise agreements include how the franchise should operates the length of the term, royalty payments and the obligations the franchisor has to support the franchisee. The agreement also covers what happens when a franchisee leaves the system – for whatever reason – detailing the conditions placed upon the departing franchisee, such as not competing in the same market for a given length of time.

Franchise agreements should be easy to read and understand – though sometimes lawyers do forget to use normal English. They should also be fair and of course lawful. However, what they can’t be is random or ad-hoc. While terms may be adapted over time, for instance if the nature of the business evolves or growth objectives change, they can’t be personalised to account for each franchisee’s individual nuances and requests. If you want significant changes to the franchise agreement then you probably don’t really want that franchise.

Not all franchise agreements are the same

While a franchisor will not change the agreement for an individual franchisee, this doesn’t mean that franchisees shouldn’t shop around and compare the terms of different franchises. Not all lawyers write the same type of agreement. Each will have areas that are more robust than others. And, of course, the franchisor will have views as to how they want their franchise portrayed.

So when you’re considering which franchise might best suit you, don’t assume that if you’ve read one franchise agreement you’ve read them all. I prefer ten-year agreements but many other franchisors choose to have five-year agreements, while in the past I’ve known franchise agreements as long as 25 years.

Ultimately, before you ask to change the terms of your franchise agreement you should look at the bigger picture. Would it really be fair to existing franchisees if you negotiated different terms to theirs? And how would you feel if a future franchisee adapted the terms to suit their own circumstances? Taking on a franchise is not the same as starting up a business of your own. You’re joining a business ecosystem and to ensure harmony you need to make compromises, as well as draw on the benefits offered.

Nigel Toplis
Nigel Toplis