Master franchisee businesses have been on the increase. This has made franchisees make huge profits, but to some, it has been an uphill battle of losses. In any master franchise, franchisees get to enjoy many of the benefits granted by the franchisor.
These include the already established brand, training, and support, among others. With this, franchisors have been able to expand their business and at the same time protect their own interest. Therefore, master franchisees should also ensure that the franchisor don’t use their powers to meet their own interests while taking advantage of them. They can negotiate their terms.
Negotiating a Master Franchise
The international franchise business is highly subject to negotiations. It’s a way to build consensus between parties. Master franchisees choose to expand their businesses beyond a domestic border. This makes it tough when it comes to negotiate terms of the agreement. Negotiating a master franchise requires some guidance from the best law firms for franchise law to understand the best way to handle the process.
In any master franchise, there may be a change as a franchisor gets to deal with different franchisees. This means that one may negotiate their terms. And since the bargaining power is different, the method of negotiation would be efficient given the circumstances.
An experience international franchise lawyer will spend some time reviewing the master franchise agreement, to pinpoint what terms need to be changed. But often, you find franchisors being reluctant to adjust the franchise agreements. In such a case, the help of a lawyer is most needed. Most of the negotiations don’t go far because of a lack of legal counsel. The fact is that it’s possible to have a change in your master franchise agreement. But, the process is complex.
Before you negotiate your master franchise, it would be vital to consider the final outcome of such negotiations. For instance, you may think about how such negotiations will affect the existence of restrictive covenants or your performance requirements.
For your master franchise, you can choose to negotiate related to:
Extensions of the business – You can consider extensions to have a deeper understanding of your master franchise agreement timing.
Selection of unit franchisees or locations – Most of the franchisors do the job of selecting unit franchisees. Often master franchisees want this left on their hands. You can negotiate to have final approval of the unit franchisees.
Division of royalty fees to unit franchisees – In most cases, the franchisor may not be concerned with how the master franchisee finances the support service to the unit franchisees. This may affect the performance of the master franchise.
Fees and royalties – You may negotiate to pay such from your net sales if your royalties are based on gross sales.
Termination process – A franchisor has the power to terminate the master franchisee. You may also negotiate to have all rights to terminate the agreement in case of breach of the contract.
If you want to negotiate your master franchise, make sure you talk to those who have been in such a situation. This can help you avoid pitfalls. The best way would be to have a master franchise lawyer guide you on what to do.
Your Lawyer Can Assess the Terms of Negotiations
One of the greatest difficulties associate with master franchising is the issue of negotiations. While one may be concerned with negotiations, it is worth noting that franchisors have to reserve uniformity among master franchisees. Meaning any negotiation must be handled approached professionally and strategically.
There are many benefits for anyone who chooses a lawyer to handle their negotiations. However, the involvement of a lawyer will highly be influenced by whether you are willing to involve legal counsel.
Your lawyer will help you understand what you are negotiating. You don’t start negotiating without understanding what is needed. You will understand what you are getting into. For instance, you may negotiate your terms of performance, and your franchisor will reduce your performance requirement. This will affect your returns.
Master franchising has been there for years and some lawyers have a great level of international franchise experience. Thus, they understand the issues encountered by master franchisees. They advise on what could be a trap for inexperienced master franchisees. In some cases, this would reveal legal hurdles that would make no sense to negotiate.
The Take Away
You should not accept any agreement without requesting some changes because you want to benefit from the business relationship. Note that your franchisor will not agree to change anything that will affect their consistency. To avoid wasting time and money, having a master franchisee lawyer handle your negotiation process is recommended.
A master franchise demands strategic negotiations. If you want guidance that can assist in your international negotiations, you can consider having an international franchise lawyer provide vital information for your negotiation process.