What terms should I expect my franchisee to want to negotiate?

On Behalf of | Feb 1, 2019 | Business Contracts and Leases

If you’re looking to franchise your business, then you may expect to be able to have your attorney draft a single contract that you can have all of your prospective franchisees sign. There’s a strong likelihood that they’ll each have their own unique demands and that they’ll want to sit down to negotiate some kind of concessions, though. There are common requests that franchisees make. Franchisees will often try to identify what they deem to be restrictive or unreasonable covenants and seek to have them eliminated from their contracts. If a contract mentions that the franchise agreement should remain valid for a decade or that your franchisee can’t own another food establishment, then they may walk away from it. A right to a specified territory is one of the most valuable assets to a franchisee. If a contract fails to clearly define the protected area that’s been set aside for their exclusive use, then it may also be rejected by them. Cincinnati franchisors often set a date to open to the public that is far sooner than the franchisee feels comfortable with. Procuring financing, development schedules and training may motivate them to want to open later than you may want for them to. If you try to rush them into opening sooner than they want, then they may walk away from your agreement. It’s common for a franchisee who has one location that is doing poorly to let it affect their other location. It’s important that you have provisions in your contract to address this. You should be aware, though, that your franchisees may be leery of any clause in the contract that allows you as the franchisor to reacquire failed units cheaply, as they’re unlikely to accept such terms. The more experienced that your franchisee is, the more likely that they are to have experience in combing through their franchise agreement with a fine-tooth comb and to negotiate its terms. A business contracts and leases attorney who reviews any contract before you sign it can help you avoid having to resolve your differences via costly litigation on down the road.