Let’s say you want to open a store as part of a larger franchise. That franchise is going to require you to sign a franchise agreement. This will be a long document with many complex terms that you may not understand. The question you want to know is: Do I have to accept the terms proposed by the franchisor or are they negotiable? The answer depends on the leverage you have as a franchisee and the specific provisions you wish to negotiate. For instance, provisions relating to the trademarks or other intellectual property are probably not negotiable, as the franchisor must protect its intellectual property in a specific way. However, provisions relating to geography and right to renew may be negotiable.

For instance, let’s say you are opening a Subway restaurant on a block in West Los Angeles. You may want Subway to promise that you will have the only Subway in West Los Angeles, and that they will not open another one in the neighborhood. Well this demand is unlikely to be met because that is too much to ask. However, you may be able to carve out a radius of 4 or 5 blocks around your store as your exclusive area, and make Subway agree that they will not franchise a restaurant in that area. Or in the alternative, you may be given the “right of first refusal” on any proposed new franchise in your exclusive area. Likewise, the right to renew may be negotiable, whereby the franchisor, such as Subway, agrees to grant you automatic renewal so long as you meet certain conditions such as remaining profitable, operating a clean restaurant in accordance with local health and safety codes, and otherwise staying within the parameters of the agreement.

In sum, certain provisions of a franchise agreement may be negotiable, and some are not. If possible, it is best to contact an experienced business lawyer to aid you in your negotiations.

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