Always ask a franchisor this question before signing a contract

Always ask a franchisor this question before signing a contract

On Behalf of | Apr 1, 2020 | Business & Corporate Law |

For some, franchise ownership presents just the right amount of freedom and security as to be an ideal middle ground between corporate America and entrepreneurship. While admittedly weighted heavily to the side of entrepreneurship, franchise ownership has the advantage of providing a model to follow and having a brand already in place. The terms between the franchisor and the franchisee, outlined in the franchise agreement, are specific and binding. But are they negotiable at the outset?

Negotiable or non-negotiable? That is the question.

If the franchisor is well-established, the terms of your contract will likely not be negotiable. However, that is not necessarily a bad thing. This business has clearly established a model that works; therefore, they keep all their contracts are the same. Every owner begins on the same footing and has the same potential for success.

On the contrary, if the franchisor is willing to negotiate, it may be a red flag. It could be a sign that this business hasn’t found the right stride in their current program or that they are desperately in need of franchisees. Consider the terms you are negotiating. Would an established business accept them? Do you remain confident in this franchise?

Even if you have no desire to negotiate the terms of your contract, this question is a relatively easy way to gain more information about the franchisor you are getting into business with. Their answer may tell you what you need to know to make a more informed decision about signing on as a franchisee.

Starting a franchise can be a significant expense and can have legal implications that may go unnoticed. Any prospective franchisee should strongly consider meeting with attorney to discuss the terms of their new venture before signing any binding agreement.