Should franchise resale buyer try to renegotiate franchise agreement?
Are costs such as transfer fees written in stone, or should buyer of resale attempt to negotiate with franchisor?
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Question:
I'm interested in buying an existing transmission franchise. My attorney says it is usually difficult to make any modifications to the franchise agreement. That doesn't mean I shouldn't try anyways. I was wondering if there's anything that I will have greater success negotiating with the franchisor on like transfer fee $6,000, training fee $3,000, etc. My perspective is this: the franchisor is in need of a good franchise candidate so should be somewhat accommodating. I would appreciate your opinion on this.
Answer:
I agree with both you and your attorney (rare when that happens). While most national or well known franchisors will not alter their agreements (or at least say so publicly) it absolutely behooves you to try. This is especially true in cases where your situation may be unique or you can provide them with an opportunity such as improving the location you are buying. As for the transfer fee, this is a perfect example of what can be negotiated in a franchise agreement. These are NOT set in stone, no matter what any franchisor tells you. Moreover, it is something that you can clearly negotiate with the seller and let them pay all or part of it.
So, while I understand what your attorney has said, I am in full agreement with you that not only should you consider negotiating, you MUST do so. The franchisor does not want to deal with failed locations or having too many resales on the market. If you can demonstrate that you will be a good franchisee for their network, and you are prepared to move fairly quickly in closing the sale, you will get some concessions.
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Richard Parker author of: How To Buy A Good Business At A Great Price(TM), the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center. Richard Parker is also the author of BizQuest's Business for Sale Blog |