Q: What kind of a negotiator does a prospective franchisee need to be when discussing the franchise agreement with the franchisor?
Anyone preparing to negotiate a franchise agreement—or any other contract—should first figure out his/her style of communication. Are you a direct communicator or more of a storyteller who likes to engage with all of the details? Maybe you don’t like to negotiate and will take whatever deal is offered to you.
You must also identify who you are negotiating with and their style. Do they use bullying tactics or do they take a more co-operative approach?
Check with other franchisees about their experiences in dealing with the franchisor. If you can get
specific details about concessions the franchisor made during their discussions, that will be a great help.
At a minimum, you should find out about the exchanges and whether or not the franchisor was open to negotiation.
What issues were they unwilling to budge on? Finding out those details early on will help you save time and frustration during the process. You could suggest some of the ‘non-negotiables,’ for example, and then use them as concessions on your side of the negotiation.
Q: What common pitfalls should prospective franchisees know about and avoid during t
Do not be unprepared! You must do your research and outline a strategy for what you want to walk away with. Your preparations should also include a mock negotiation with a trusted associate to test your skills before meeting with the franchisor.
Being unprepared can cause the other side to lose respect for you. Showing confidence in a well-prepared position, on the other hand, will not only enable you to get a good deal, but also set up a strong, co-operative, win-win business relationship for the future.
Understand your desired outcome and define your bottom and top line boundaries in advance. Going in without a boundary in either direction will leave you open to making emotional decisions that could severely cut into your profit margins and put your business in jeopardy before you even open the doors. You have to know your limits and be willing to walk away if they are exceeded.
Finally, lead the negotiation. This means either going first or letting the franchisor go first, depending on the information you want to discuss. Letting the franchisor go first is a great strategy to gain more insights into any unanswered questions, so you can make adjustments to your position on the spot.
Q: How do you measure the success of negotiating the terms of the franchise agreement?
Achieving win-win results is the key to success. Both you and the franchisor will give up something in the negotiation, so in your preparations, you have to determine what you are willing to give up and what you are firm on.
At the end of the deal, when you’ve both shaken hands, inked the deal on paper and been satisfied with the outcome, that is a win-win result. That is the outcome you want to strive for. A win-lose proposition, on the other hand, does nothing but put strain on the long-term business relationship.
Win-win results, which leave both sides feeling like the deal they agreed on is fair and reasonable, convert into long-term success for both sides over the entire continuum of the business relationship.
Eldonna Lewis Fernandez is CEO of Dynamic Vision International, a consulting and training firm, and author of Think Like A Negotiator. For more information, visit www.thinklikeanegotiator.com.