How to Negotiate Franchise Fees and Royalties: A Franchise Lawyer's Guide
A while back I was interviewed on my good friend Kwame Christian's Podcast, Negotiate Anything (Kwame is also the Founder and CEO of the American Negotiation Institute). On that episode, I talked about how dualistic thinking helps in negotiation, and how incorporating this mindset leads to more understanding and empathy. I firmly believe that lawyers (good ones at least) should help their clients with solutions, paths to meeting their goals, and tools that facilitate relationship building in any negotiation or discussion.
If you are considering buying a franchise, you may be wondering how to negotiate franchise fees and royalties. These fees can be significant, and they can impact your bottom line. As a franchise lawyer, I have helped many clients negotiate franchise agreements, and I've learned a few things about what works and what doesn't (as well as have found a few ways to facilitate that discussion).
In this guide, I'll share my top tips for negotiating franchise fees and royalties. Whether you are a first-time franchisee or a seasoned veteran, these tips can help you get the best possible deal.
Do Your Research
Before you start negotiating, it's important to do your research. This means understanding the industry, the competition, and the franchise model. You should also research the franchisor's financials, their track record, and their reputation. This information can give you a better idea of what to expect and what you can reasonably negotiate.
Understand the Franchise Fees
Franchise fees can include an initial fee, ongoing royalties, and advertising fees. It's important to understand what each of these fees covers and how they are calculated. You should also understand any additional fees or costs that may be associated with the franchise.
Know Your Value
As a franchisee, you bring value to the franchisor's business. You should be prepared to articulate that value and demonstrate how you can contribute to the success of the franchise. This can include your experience, your skills, your knowledge of the local market, and your willingness to invest in the franchise.
Be Prepared to Negotiate
Remember my point at the beginning of this article (about taking a dualistic approach), and consider that before entering into any negotiations. Negotiation is a two-way street, and both parties should be willing to compromise. You should be prepared to negotiate on fees, royalties, and other terms of the franchise agreement. This can include things like territory, marketing support, and training.
Hire a Franchise Lawyer
Finally, it's important to hire a franchise lawyer to help you negotiate the franchise agreement. A good franchise lawyer can help you understand the terms of the agreement, identify any areas that may be negotiable, and advocate on your behalf. They can also help you avoid common pitfalls and ensure that your interests are protected.
Negotiating franchise fees and royalties can be a complex process, but it's an important part of buying a franchise. By doing your research, understanding the fees, knowing your value, being prepared to negotiate, and hiring a franchise lawyer, you can get the best possible deal and set yourself up for success.
If you need help negotiating a franchise agreement, don't hesitate to contact us at Lopes Law. Our experienced franchise lawyers can guide you through the process and help you get the best possible outcome.