Is the Franchise Agreement Negotiable?

A prospective franchisee raises a concern regarding a specific provision in the franchise agreement. Can the franchisee modify the franchise agreement base on the prospective franchisee’s concern?  e

The franchise agreement is an exhibit included in the franchise disclosure document (FDD).  The franchisor must offer prospective franchisees the franchise agreement as it appears in the FDD.  The franchisor may not offer franchise agreements different than it appears in the FDD.  However, a prospective franchisee requests a change to the franchise agreement, the franchisor may agree to the requested change. This is referred to as franchise agreement negotiated changes.

The prospective franchisee is a great candidate.  The prospective franchisee would be a great franchisee. Can the franchise agreement be modified to entice the prospective franchisee? 

There are several best practices to follow:

  • Always offer the franchise agreement as it appears in the Franchise Disclosure Document (FDD).
  • Ask the prospective franchisees to put a requested change in writing (it can an email).
  • Any changes to the franchise agreement should be made in an addendum. The franchise agreement should not be changed. 

If the franchisor agrees to waive the initial franchise fee or other fees charged by the Franchisor, a notation of fee non-uniformity must be made in the FDD. 

And for franchisees sold to California residents or business operating in California, a negotiated form must be filed.