Negotiating Your Franchise Agreement or Letter of Intent

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Although franchise agreements are often not negotiable, there are times when it's possible, according to this article. It offers guidelines on what those circumstances might be and what to look for.

One critical way to engage in smart growth, for both new comers to the industry and for more experienced players looking to build out their portfolios, is to pay close attention to the terms of your typically long-term franchise agreements.

...A few key provisions of the franchise agreement that can and should be negotiated include:

    •    Territory size and exclusivity; and a right of first refusal for additional development

    •    Decreased royalty fees or a “ramp up” of royalty fees over the first several years

Letters of intent are more flexible.

Key terms to address in your letter of intent include:

    •    Purchase price and payment terms. As a buyer, consider whether to include a financing contingency or request seller financing.

    •    Transaction structure, such as an asset or equity acquisition. Include a list of key assets to be acquired. —Kendall Rawls,

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