Are franchise fees negotiable?

Franchise fees are usually not negotiable. If a company negotiates a different franchise fee with one person, they will then have to stop the sales process with everyone else they are talking to, file an amendment to their current franchise disclosure document (FDD), re-disclose everyone in their pipeline with the new FDD and then they […]


Franchise fees are usually not negotiable.

If a company negotiates a different franchise fee with one person, they will then have to stop the sales process with everyone else they are talking to, file an amendment to their current franchise disclosure document (FDD), re-disclose everyone in their pipeline with the new FDD and then they can begin the sales process anew with all these other folks.

As you can imagine, this would be a real pain and quite expensive to go through, so franchise companies usually just refuse to negotiate their fees in order to avoid the hassle.

The most common area that is negotiable in franchise agreements with strong opportunities is the territory definition. Most franchises grant an exclusive territory for the franchisee to operate in. In any case, you will often find that there is a certain amount of flexibility in defining the territory that leads to at least some degree of negotiation. You can also sometimes bargain the amount of services that will be provided for the fees you are paying. As an example, if the franchise fee covers the cost to train two people and you want to bring three people through the training class, it is fairly common to receive consideration for such a request. Another example might be related to the amount of in-market visits you receive from real estate assistance staff. Perhaps you can get two visits instead of one if you ask.

In any case, be sure to ask the franchisor what types of things they will typically negotiate on. They would rather steer you toward the points where they can give a bit than have you focused on ones that they cannot compromise.

Franchise Zone
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Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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