When buying a franchise, prospective franchisees are faced with the necessity of making numerous decisions that will have long standing implications to their personal and financial well being for many years to come. Chances are that if you are purchasing a franchise you have spent significant time researching various "opportunities", evaluating "franchise fees", "start-up costs" and, quite possibly, you may have identified a franchise that you want to invest in. So what is the next step? Are franchise agreements negotiable? Do you just sign the franchise agreement and hope for the best? In far too many "franchise sales settings" prospective franchisees are (incorrectly) led to believe that the franchise agreement is a "standard agreement" (signed by everyone) and that, legally, the franchisor is not allowed to make any changes. The erronous implication: Since "we can't change the franchise agreement even if we wanted to" why bother reviewing the agreement or hiring a franchise lawyer to evaluate the agreement. Sadly this misstatement leads to a false sense of security for many "prospective franchisees" and, sometimes, leads to some big mistakes. So lets set the record straight: Franchise agreements "are" negotiable and it is extremely common and advisable for prospective franchisees to consult with a qualified lawyer to evaluate the franchise agreement and to negotiate the terms of the franchise agreement. While not every aspect of the franchise agreement is negotiable, as a prospective franchisee you can obtain material modifications to your franchise agreement that to extend your "rights" as a franchisee and mitigate your exposure to future liabilities and expenses. Some of the critically important franchise agreement terms that you should be evaluating and potentially negotiating, include: (i) Your protected territory, including how your protected territory is defined and the methods that will be used to protect your franchise from "encroachment" and competition from other franchisees; (ii) Limitations to your royalty obligations and the possible deferral of royalty obligations during the "start-up" phase of your operations; (iii) Liquidated damages and your liability for early termination of your franchise; (iv) Rights of First refusal; and (v) Cure periods for any alleged franchise agreement default. Depending on the nature of the franchised business (including the services that you will be providing or the goods that you will be selling) there are many other factors that you should be evaluating and potentially negotiating. As a prospective franchisee, you must recognize that you have the "right" to negotiate the terms of your franchise agreement. This "right" must be taken seriously. Copyright (c) 2009 Charles Internicola
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