Are Franchise Agreements Negotiable?

February 14, 2013, 8:30 AM

Franchisors sometimes tell franchise prospects that their franchise agreements are totally non-negotiable. However, in practice, franchisors frequently agree to an addendum to clarify any material ambiguities found in their franchise agreement, and to memorialize certain concessions granted to the prospective franchisee to incentivize that prospective franchisee to sign the franchise agreement. A franchisor is highly unlikely to ever negotiate core issues related to how the franchise system operates, but many other issues, including issues related to timing of unit openings under area development agreements, territory issues, initial support issues, transfer provisions, and guarantees, among other provisions, may more routinely be negotiated.

As a generalization, start-up franchisors and small franchisors are more likely to negotiate than well-established, mature franchisors.

The Virginia Retail Franchise Act makes it grounds for a franchisee to declare a franchise void if the franchisee was not afforded the opportunity to negotiate with the franchisor on all provisions within the franchise [agreement], except that such negotiations shall not result in the impairment of the uniform image and quality standards of the franchise, provided that the franchisee send such written declaration within 30 days after execution of the franchise [agreement]. Va. Code 13.1-565.

For further information on this topic, please contact Stephen E. Story at (757) 624.3257 or sestory@kaufcan.com. --Stephen E. Story