7 Tips for Renewing Your Franchise Agreement

September 16, 2023by Brian Walsh

Is your franchise agreement due for renewal soon? If you aren’t sure, now is the time to review the terms of your agreement. Franchise contracts can last for as many as 20 years,[1] but your contract should also include specific terms about when you are required to start the renewal process. Waiting until the last minute to notify the franchisor of your intent to renew or to meet other renewal terms in your agreement could mean missing crucial deadlines.

If renewal is in your near future, here are seven tips for a successful and smooth process.

#1 – Mark Your Calendar

Franchise agreements often include strict deadlines and provisions surrounding renewal. Failure to meet these due dates may ruin your chances of renewing with the franchisor. Even if the renewal date is years away, marking the date on your calendar while it’s fresh in your mind is an important step to ensure you don’t miss it. Plus, there are many things you will likely need to do prior to that date to get the process started. It’s also a good idea to include deadlines like renewal notification on your calendar and reminders to gather the necessary documents, pay renewal fees, and complete any other steps required by your franchise contract.

#2 – Don’t Assume Renewal

Deciding to renew or not renew your franchise contract is a major decision with many factors to consider. You have choices when it comes to renewing your contract, and so does the franchisor. Franchisors are not required to renew agreements with their franchisees.[1] Your franchise agreement grants you certain rights and privileges for a set period of time, and when that period is over, there are no guarantees that the franchisor will choose to continue the franchise relationship. Assuming that renewal is automatic or certain is a mistake, as this kind of mindset can prevent you from taking the process as seriously as you should. It is important to note that a small percentage of franchise agreements do include terms about automatic renewal, which is another reason to review your contract carefully.

#3 – Keep Performance High

Because there are no guarantees that a franchisor will renew your contract, keeping your performance and quality high is a great way to increase your chances of renewal. You can make your franchise location desirable by performing successfully, having a good business relationship with the franchisor, and fulfilling your contractual obligations. Being reliable and easy to work with will not guarantee renewal, but it can increase your chances that the franchisor won’t want to let you go.

#4 – Be Willing to Negotiate

If the franchisor agrees to renew your contract, you will want to review the new contract carefully as if this is the first time you’re entering into an agreement with this franchisor. Are the terms the same? Have your responsibilities changed? Do the stipulations still meet your current needs? If not, you can suggest alternatives or variations to the terms in the franchise agreement. Negotiations can, and often should, begin early in the renewal process. This gives you time to consider counteroffers and present a compelling case for yourself to the franchisor.

#5 – Be Prepared for No Negotiations

Negotiations are a possibility, but they are not guaranteed. When the renewal period approaches or when you suggest negotiations, the franchisor may decide not to negotiate the terms with you. This is often due to the preference to keep the franchise agreements the same or similar for all franchisees. Negotiating the terms of one contract can create confusion and inconsistency and even foster resentment among other franchisees. Don’t be surprised if your request for negotiations is declined.

#6 – Consult with a Franchise Attorney

Once you have the final version of the proposed renewal contract, you are allowed to have an attorney review it prior to signing. While being given the option to renew by the franchisor can be an exciting opportunity that you don’t want to miss, you shouldn’t rush into such a significant commitment by hastily signing the agreement. In fact, in some circumstances, the franchisor is required to provide the franchisee with a certain number of days to review the contract.[1]

The new contract will likely not be the same as your previous one. This is especially true if the last agreement was signed ten or 20 years ago. Working with a franchise lawyer ensures that an objective third party with extensive knowledge and relevant experience can advise you on the best course of action. An attorney can also help you with negotiations, when possible, and identify how the previous and new contracts compare.

#7 – Think About Your Future

Again, franchise agreement renewal is not automatic or assured. Do you know what you’ll do if your contract isn’t renewed? It can be complicated for former franchisees to move onto new business ventures for a number of reasons. First, running a business is a significant commitment and requires hard work and long hours. The effort franchisees put into their franchise businesses is hard to move on from, so there is an emotional and psychological barrier for many franchisees.

Other potential barriers can be found in your franchise agreement, including non-compete clauses and lease takeovers. If you operated a gym franchise and discovered your passion for the fitness industry, your contract may prevent you from owning or even working for a different gym franchise. Further complications can arise if the franchisor is contractually allowed to continue operating in the retail space that you leased, meaning you would have to find a new location for your next business venture.

Final Thoughts

Franchisees who are approaching a renewal period should already be at least somewhat familiar with the terms of their franchise agreement, but reviewing the contract is never a bad idea. Specifically, you will want to understand how the renewal process works, what is required for you to initiate or request renewal, what renewal fees are due, and what deadlines there are throughout the process. These requirements can vary drastically from franchise to franchise and even between agreements within the same franchise. If you still have questions about your franchise agreement and renewal terms after reviewing your contract, you should reach out to a franchise attorney for

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