Franchise agreements: negotiating terms and obligations
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Think about these questions before reading. Share your ideas with a partner.
- Think about a time you had to negotiate for something important, like a salary, a price, or a major decision with someone. What was the situation and what was the outcome?
- When two parties are negotiating a business deal, what do you think are the most important elements to consider to ensure both sides feel they have a fair agreement?
- Imagine you are starting a new business partnership with a friend. What kind of rules or obligations would you insist on putting into a formal agreement to protect both of you?
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Negotiating a Deadline
Listen to the dialogue. Notice how the vocabulary and grammar from the lesson are used.
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Answer these questions in your own words based on your understanding of the article.
01What are the two main types of payments a franchisee might have to make, according to the article?
Sample answerThe article mentions an 'initial investment', which is the money you pay at the beginning, and ongoing 'royalty fees' that are paid to the main company, the franchisor.
02According to the article, what is the key difference between using 'must' and 'have to' when discussing contractual rules?
Sample answerIt explains that while both express strong obligation, 'have to' is more common for external rules, like the specific terms written in a contract that you are required to follow.
03In what way does the article suggest a negotiation should be a two-way conversation?
Sample answerIt implies that you shouldn't just accept the terms. It suggests you need to actively participate by asking for more information, voicing your concerns, and proposing different options to reach a better agreement.
04Why might it be important for a franchisee to clearly understand all their obligations before signing a franchise agreement?
Sample answerBased on the text, understanding obligations is crucial because a contract involves external rules you 'have to' follow. If you don't understand things like royalty fees or other requirements, you could get into financial or legal trouble later on.
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Key vocabulary for negotiation
Vocabulary
These expressions will help you discuss negotiations and contracts more effectively.
Examples
to meet someone halfway — to compromise with someone by agreeing to some of their demands.
Usage note: This is a common and positive-sounding idiom used in both formal and informal negotiations. It suggests you are willing to find a fair solution together.
a sticking point — a specific issue or problem that is preventing an agreement from being reached.
Usage note: A useful phrase to identify the main obstacle in a negotiation. You can say, 'The main sticking point for us is the initial investment fee.'
to iron out the details — to resolve the final, often minor, problems or specifics of a plan or agreement.
Usage note: This phrase is typically used when the main principles of a deal are agreed, but smaller issues still need to be settled before signing the contract.
room for manoeuvre — the flexibility or opportunity to change your position or decisions during a negotiation.
Usage note: A semi-formal phrase. You might ask, 'Is there any room for manoeuvre on the delivery schedule?' If there is no room for manoeuvre, a point is non-negotiable.
to drive a hard bargain — to negotiate in a very determined way to get the most favourable deal for yourself.
Usage note: This can describe a skilled negotiator, but it can also imply they are difficult to deal with. For example, 'She drives a hard bargain, but she's always fair.'
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Negotiation collocations
In negotiations, certain words often go together. These are called collocations.
Match the beginning of each phrase on the left with its ending on the right.
Drag or click to match
Definitions
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Grammar: Modal verbs of obligation and necessity
Grammar
We use modal verbs like 'must', 'have to', and 'should' to talk about obligations, rules, and advice. In business negotiations and contracts, these words are crucial for defining what is required, what is prohibited, and what is recommended. Understanding the subtle differences between them is key to successful agreements.
Examples
According to the contract, the franchisee has to pay a 5% royalty fee each month.
Use 'have to' for obligations that come from an external source, like a law, a rule, or a contract.
You mustn't share confidential information with competitors, but you don't have to attend the optional weekly meetings.
'Mustn't' means something is prohibited or forbidden. 'Don't have to' means something is not necessary or not required.
We think you should consult a lawyer before signing the final franchise agreement.
Use 'should' or 'ought to' to give strong advice or recommend a sensible course of action.
Key points
- 'Have to' is common for external rules (contracts, laws); 'must' often expresses a strong personal or internal obligation.
- 'Mustn't' means it is forbidden to do something.
- A common mistake is confusing 'mustn't' and 'don't have to'. 'Don't have to' simply means there is no obligation.
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Correct the mistake
Read the sentences below about business negotiations. Each one has a single error.
Find the error in each sentence and write the corrected version.
01You shouldn't to sign the contract until your lawyer has reviewed it carefully.
Corrected version
You shouldn't to sign the contract until your lawyer has reviewed it carefully.
02The main sticking point was the high initial invest, which we couldn't afford.
Corrected version
The main sticking point was the high initial invest, investment, which we couldn't afford.
03According to the contract, the franchisee don't have to pay royalty fees for the first six months.
Corrected version
According to the contract, the franchisee don't doesn't have to pay royalty fees for the first six months.
04We spent most of the meeting trying to iron up the final details of the agreement.
Corrected version
We spent most of the meeting trying to iron up out the final details of the agreement.
05There wasn't much room of manoeuvre on price, but we managed to get better payment terms.
Corrected version
There wasn't much room of for manoeuvre on price, but we managed to get better payment terms.
06After a long discussion, we finally agreed for the terms of the new franchise agreement.
Corrected version
After a long discussion, we finally agreed for on the terms of the new franchise agreement.
07The franchisor is known for driving a hard bargain, so be prepared for tough negociations.
Corrected version
The franchisor is known for driving a hard bargain, so be prepared for tough negociations. negotiations.
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Useful phrases: Making a counter-proposal
Vocabulary
In a negotiation, you rarely accept the first offer. It's essential to be able to politely reject a term and suggest an alternative. Use these phrases to make a counter-proposal without sounding too aggressive.
Examples
“We were thinking more along the lines of...” — a soft and collaborative way to introduce your alternative idea.
Register: Neutral/Formal. Use this when you want to present your idea as a suggestion, not a demand. For example: 'We were thinking more along the lines of a five-year contract instead of three.'
“I understand your position, but would you be open to considering...?” — a polite way to acknowledge their offer before presenting your own.
Register: Formal. This shows you have listened to their point of view, which can make them more receptive to your counter-proposal. Example: '...would you be open to considering a lower initial investment?'
“If you can be flexible on [X], then we can commit to [Y].” — used to propose a direct trade-off or concession.
Register: Neutral/Formal. This is a classic negotiation tactic. You offer something they want in exchange for something you want. Example: 'If you can be flexible on the royalty fees, then we can commit to a larger marketing budget.'
*“That's not going to work for us, but what we could propose is...”* — a firm but constructive way to reject an offer and immediately provide an alternative.
Register: Neutral. This is more direct than other phrases. The emphasis on 'could' softens the statement and shows you're still willing to find a solution.
“My only hesitation with [the proposed term] is... How about we...?” — used to state a specific objection and quickly pivot to a solution.
Register: Neutral. This is great for pinpointing a specific problem and showing you've already thought about a way to fix it. It sounds proactive and collaborative.
“Could we explore a different approach to...?” — an open-ended question to suggest that the current proposal isn't working and a new one is needed.
Register: Formal. Use this when you don't have a specific counter-proposal yet, but you want to signal that the current term is a 'sticking point' and you need to brainstorm other options together.
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Negotiation strategies
Read the passage about the negotiation process.
Fill in each blank with the correct phrase from the word bank.
Word bank
Successful negotiation often requires both parties to be flexible. If you want to reach a deal, you must be willing to the other side. Sometimes, a single issue can become a major , preventing any progress. Before signing anything, it's crucial to and ensure everything is clear. A good negotiator knows when to to get the best terms, but also understands that there isn't always much on certain clauses. It's a delicate balance of persistence and compromise.
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Beyond the bottom line in negotiations
Negotiating a business deal is more than just arguing about price. The relationship you build can be just as valuable as the contract you sign.
Read the passage below, then answer the comprehension questions.
Many negotiators believe they must drive a hard bargain on every single point to succeed. This approach, however, often overlooks the value of the long-term relationship. When you're discussing a franchise, for example, the initial investment can easily become a sticking point. While you don't have to accept the first offer, you should show a willingness to meet someone halfway. This simple act of compromise builds trust and creates more room for manoeuvre when you later need to iron out the details of the agreement. A truly skilled negotiator understands that you have to balance getting a good deal with building a strong partnership. The other party must see you as a reasonable partner, not just an opponent to be beaten.
01According to the article, what common mistake do some negotiators make?
Sample answerThey focus too much on winning every single point (driving a hard bargain) and forget about the importance of the long-term relationship.
02What is mentioned as a potential 'sticking point' in a franchise negotiation?
Sample answerThe initial investment is mentioned as a potential sticking point.
03What positive outcome can result from a willingness to compromise?
Sample answerIt builds trust and creates more flexibility (room for manoeuvre) for later stages of the negotiation.
04What can you infer about the author's definition of a 'skilled negotiator'?
Sample answerThe author believes a skilled negotiator is someone who can find a balance between securing a favourable deal and building a positive, lasting business partnership.
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Discuss these questions with a partner. Try to use vocabulary from the lesson.
- Is it always the best strategy to drive a hard bargain in a business negotiation, or can this approach sometimes damage long-term relationships and future opportunities?
- Considering the business culture in your country, how much room for manoeuvre is typically expected when negotiating a contract? Is it more common for parties to meet someone halfway, or for one side to hold a much stronger position?
- Imagine a negotiation where the ongoing royalty fees are a major sticking point for a potential franchisee. What creative solutions could both sides propose to iron out the details and reach a fair agreement?