Once the big-ticket items are agreed with the franchisor, they’ll provide your draft franchise agreement. Don’t wait until this point to start negotiating. Some key things to focus on when beginning your discussions with the franchisor include:

1. There’ll be an initial franchise fee payable to the franchisor for the grant of the franchise, initial training, opening support and sometimes provision of equipment/stock. Start by asking exactly what you get from this fee. If you don’t think you’re getting the best value, then push for more to be included. For example, a franchisor-representative attending your business for a few days during your first days of operations to give assistance in starting up the business.
2. It’s standard to pay the franchisor’s legal costs of preparing the franchise agreement. You’ll save an additional expense if you can get the franchisor to waive these, or for the costs to be covered by your initial franchise fee.
3. Sometimes there’ll be no ongoing royalties or franchise fees for your first few months of operations, or a reduction during this time. This gives you the opportunity to establish your business and customer base before paying fees at full rates. If this concession is offered, try to increase its duration. If it’s not offered, push for one.
4. Generally, you’ll either have an exclusive or non-exclusive territory (or a mix) where you operate/market your business. Exclusivity means the franchisor won’t grant another franchisee the right to, or won’t themselves, operate within your territory. Always aim for the largest territory and as much exclusivity as possible. This reduces the risk of competition from within the franchise system itself. However, be mindful how a larger territory may interplay with minimum performance criteria under the franchise agreement (criteria may be based on territory size or population).
5. If you want the option to expand in the future, you can ask for a right of first refusal. If the franchisor wishes to franchise a neighbouring area, they’ll then need to offer it for sale to you first.
6. Franchisors often have minimum performance criteria to be met. Work with your accountant to ensure these are achievable – consider the time it will take to establish your business. If not reasonable, then negotiate. Ensure that the consequences for failing to achieve the criteria are reasonable and constructive. If the franchisor can force you to sell your business, change it to say you must develop and adhere to a special business plan.
7. Ensure the length of the franchise is suitable with a reasonable number of options to renew. A franchise that’s too short may not give you enough time to recoup your initial investment costs (before you’re faced with having to pay a renewal fee), but one that’s too long may leave you locked into a contractual relationship (not ideal if your business isn’t unsuccessful). When it comes to renewal options, ensure the criteria for renewal are reasonable and achievable.

These are just a few examples of common things a franchisee can negotiate. There can be many others depending on the franchise. Get a written commitment about anything you negotiate.

When you receive your franchise agreement, nothing prevents you from requesting further changes. However, be mindful that franchisors are generally reluctant to amend their standard agreement. Work with your lawyer to determine what’s worth requesting, and what’s worth accepting. There can be many instances where the franchise agreement will say something, but in fact, the Franchising Code of Conduct or another law override what the agreement says – if you already have that legal right you don’t need to request that change.