How can you best negotiate a franchise deal that gives you what you want? Lawyer Steven Clare has some tips.
Traditionally in a negotiation (for whatever cause it might be) the parties involved consider their own interests and take their own positions. They look at how to gain some advantage over the other and in many instances seek to exploit the other party.
However, the business landscape has changed and with this in mind, potential and existing franchisors and franchisees must now work together in a much more collaborative fashion, in challenging economic times.
Working together they will simply be able to achieve greater outcomes.
To understand how potential franchisees should approach negotiation, let’s flip the situation and look at the franchisor’s stance.
WHAT THE FRANCHISOR WANTS
Franchisors are now in a very different position in the marketplace. Competition is fierce, very fierce and we all understand this. However, it is much more than just competition at play, it is a convergence of many business, technological and social factors that makes today very different.
Franchisors must not only deal with the issues that arise in their business daily, they must also embrace and understand the concept of what really makes a good franchisee for their network. This is fundamentally important for their network business to grow and succeed. A network business is like a team, working to achieve a common goal; it is a community.
Those typical day to day issues that a franchisor faces are ones that are commonly part of most, if not all businesses. They include ensuring the correct implementation of systems and procedures; and ensuring that they are providing the best services and or products throughout their business, so that the end consumer will continue to regard them as a premium and trusted supplier.
However in the current ever-changing marketplace, franchisors and franchisees alike should also consider utilising those old fashioned notions of discernment and business wisdom, as to who they will allow into their team and thus into their network business.
Ultimately, good or bad franchisees will make or break their network business.
This then turns our discussion to the necessary mindset of a franchisor and to the issue of negotiating the deal and by this I mean negotiating the terms of the legal and business relationship, i.e. the franchise agreement and ongoing business dealings.
Assuming that all the suitable due diligence checks have been conducted on a potential franchisee candidate, a good franchisor should always seek to place a prospective franchisee through that filter which goes beyond legal due diligence.
The filter of discernment
This is about determining whether a candidate will make a good or bad franchisee, by not only bringing together all the information before you, it (most significantly) fairly and correctly considers the candidate(s) themselves:
- Their very nature
- Their level of determination
- Their level of courage and their tenacity and willingness to follow the lead of the franchisor – as a franchisor is responsible for good leadership in their network business.
Simply stated, if one finds inherent qualities in the prospective franchisee which are of a high nature, a good and smart franchisor will negotiate a fair deal, such that they will be happy to have them join their network business, in order to achieve mutual commercial outcomes.
So negotiating a good deal can only be a good deal when it is good for all parties involved and this will be more likely the case when a prospective franchisee has the right personal qualities that will make the franchisor see that they must have them as part of their network.
As a franchisee or potential franchisee, your focus, mindset, attitude for success and disposition is what is truly critical in any negotiation with a franchisor.
Steven Clare is the managing partner at THINK Franchise & Commercial Lawyers and CEO and founder of AFSA – the Australian Franchise Support Alliance. See www.thinkfranchise.com.au & www.myafsa.com.au.