Understanding the "Franchisee Bind"

Franchise buyers come to us and ask “Is this franchise agreement fair?” They worry about all the detailed obligations of the franchisee and the drastic remedies in the franchisor’s hands. They wonder why the franchisor assumes so few obligations itself under the franchise agreement.

Franchise buyers need to work with a counselor versed in franchise industry practice and in franchise law and regulation. Franchise agreements are unique among business contracts, and lawyers not steeped in franchise practices may not understand the agreement.

The unique community of interest that exists between franchisee and franchisor and among all franchisees in a franchise system creates what we call the “franchisee bind.” The individual franchisee relies on the franchisor to make sure that all franchisees perform in the best interest of the brand as a whole. Therefore the franchisee actually wants the franchisor to have extraordinary rights and powers. Otherwise poor performing franchisees could drag the system down.

So, being intimately familiar with franchising is necessary to negotiate a good deal for the franchisee.

Although franchisors will tell you that the agreement is not negotiable, it is rare for us at the Franchise Law Source not to find certain things in a franchise agreement that need to be changed. Rarely have we represented a franchise buyer for whom we did not negotiate some changes in the franchise agreement. Knowing what is negotiable and what is not is the key to successful negotiation and efficient use of your legal fees.

Contact us to help you understand what you don’t need to negotiate and help you secure the contract modifications that will make your franchise a good deal for you.

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