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Franchise Fee Negotiation: Is It Possible?

Franchise deal

Franchise deal

Did you know that you can actually negotiate a franchise fee with your franchisor?

While what a franchise offer you is typically a well-set system, including the standard operational procedure, territory-plotting and franchise-related fees, you can actually negotiate on certain things, depending o the franchisor’s policy. This may include your franchise unit’s territory exclusive area and franchise fee.

An article I read from Franchise Business Review, written by Eric Stites, explains that you can negotiate franchise fees with a franchisor. This may include royalties and other fees and terms laid out in the franchise agreement.

As the recession put up much pressure in every business model, including franchising, many franchise companies are becoming more flexible in their growth, offering “incentives” in the form of lower (and negotiable) franchise fees, royalties and other fees to new franchisees in order to attract more candidates.

Of course, not all franchises are created equal – Some bigger franchises will not allow you to negotiate for any other thing than territory negotiation that may include the size, area exclusivity, and franchise developmental-related issues. Fees negotiation with McDonald’s is rather impossible thing to do.

In the other hands, newer and smaller franchises are more flexible as they are in a heavy development phase, putting much emphasis on recruiting new franchisees. Due to this, they are more negotiation-friendly than their more established, bigger counterparts.

Along with the fact that some franchise companies offer financing programs to new franchisees, this is great news for us who are looking to buy a franchise in the midst of economic turmoil.

This is also another example of why, as entrepreneurs and investors, we should start looking for and investing in opportunities right this moment – No more wait-for-the-right-time excuse. With all the flexibilities offered, we should be (getting) ready to ride the wave of economic recovery.

Here is one very useful advice from the article author:

shop around and find the best deal you can. That (being) said, your primary focus should still be on franchise companies with a proven record of success and high franchisee satisfaction… (as) getting a “deal” on a mediocre franchise is no deal at all!

Well said, Eric.

Ivan Widjaya
Franchise fee negotiation
Image by mikecco.

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