Franchise negotiations: how to record what has been agreed

Before selling their first franchise, business owners need to prepare not just an offer, but a process for negotiations. A manager promises deferred payment, the founder discusses territory, and a lawyer sends out a standard contract — leaving the prospective franchisee with three different versions of the terms. In the franchising community, this inconsistency undermines trust. Here is how to record the outcome of discussions without turning every meeting into a binding commitment.

1. Set negotiation rules within your team

Appoint one person to oversee the franchisor’s overall position. They do not have to discuss every issue personally, but they must know which terms have already been offered to the prospective franchisee and who has authority to change them. Otherwise, a potential partner may mistake a preliminary idea for the company’s final decision.

Before the first meetings, divide the terms into three groups:

• Standard: terms that managers may communicate without further approval.
• Negotiable: matters where alternatives are possible, but a decision from an authorised employee is required.
• Unacceptable: promises the company is not prepared to fulfil, such as guaranteed income regardless of the partner’s actions.

For negotiable terms, specify who must approve them: the head of development, finance director or lawyer. Do not simply say ‘the founder decides’: establish a procedure for when they are unavailable.

Check that presentations, commercial proposals and managers’ responses use consistent definitions. If one employee uses ‘support’ to mean advice, while another means ongoing management of the outlet, the seeds of a dispute have been sown before the contract is even signed.

It is worth running practice negotiations within the team. Have an employee play the prospective franchisee and request an exception to every standard term. This will reveal questions that sales staff are still answering on guesswork, along with promises the company lacks the resources to fulfil.

2. Keep a record of agreed points after each meeting

A useful tool is a single working document for each prospective franchisee. This is neither a substitute for the contract nor a universal legal template. Its purpose is to distinguish agreed points from those still under discussion and preserve the context behind decisions.

For each issue, record:

• the prospective franchisee’s proposal and the franchisor’s response;
• its current status: under discussion, agreed for inclusion in the contract, or rejected;
• any conditions and exceptions;
• the employee who confirmed the position;
• the document in which the final term should appear.

For example, ‘royalties after opening’ is too vague. Clarify what the parties mean by opening, how trial operations will be treated, and which event triggers the accrual of royalties. The amount payable is secondary here: the aim of negotiations is to eliminate different interpretations of the same phrase.

After a substantive meeting, send the prospective franchisee a brief summary and ask them to confirm it or list any corrections. Do not state that a failure to reply automatically constitutes agreement unless that procedure has been properly established. Silence can easily be mistaken for confirmation when none has actually been given.

Keep dated versions of proposals. If a term changes, identify which earlier wording the new version replaces. It is particularly important to retain qualifications: a discount conditional on payment by a particular deadline must not become an unconditional discount when the wording is transferred into the contract.

3. Distinguish discussions from legal commitments

In Russia, commercial concession agreements — the legal framework used for franchising — are specifically governed by Chapter 54 of the Civil Code of the Russian Federation. General provisions also matter during negotiations, particularly Article 434.1 on negotiating in good faith. As a general rule, parties are free to discuss terms, bear their own associated costs and are not liable merely because no contract was concluded.

However, freedom to negotiate does not permit either party to mislead the other. Bad-faith conduct may give rise to liability for damages. You must therefore not continue discussions solely to obtain information if you have no intention of entering into a contract, or conceal circumstances that must be disclosed to the other party given the nature of the contract.

A document’s title does not, by itself, determine its legal effect. ‘Meeting minutes’ or a ‘letter of intent’ may contain legally significant commitments. If the parties undertake to enter into a main contract in the future, check whether they are creating a preliminary contract under Article 429 of the Russian Civil Code.

Where necessary, a separate agreement can set out the negotiation procedure, confidentiality requirements and allocation of costs. A lawyer should check which provisions are binding immediately and which merely reflect current intentions. A ‘not an offer’ disclaimer is no substitute for analysing the document’s substance and the parties’ conduct.

Do not confuse agreeing terms with granting rights. Under Article 1028 of the Russian Civil Code, a commercial concession agreement must be made in writing, and the grant of the right to use the package of exclusive rights must be registered with Rospatent, Russia’s intellectual property office. Without registration, the grant of rights is deemed not to have taken effect. Correspondence expressing a willingness to work together does not replace this procedure.

4. Check promises against the contract before signing

Arrange a final review covering not just the legal wording, but also the negotiation history. The person responsible should compare the contract with the record of agreed points, the latest commercial proposal and any material promises made in correspondence.

Every disputed point must have one of three outcomes: it is included in the contract, replaced with an agreed alternative, or explicitly withdrawn from the discussions with notice to the prospective franchisee. Do not leave a promise outside the contract on the assumption that it can be sorted out after payment.

Explain any changes from the previous version separately to the prospective franchisee. Saying ‘we are sending our standard contract’ does not communicate that a previously discussed payment deferral is no longer available. Allow time to review the final terms and ask questions.

Practical takeaway: before launching franchise sales, appoint someone to oversee negotiations, create a record of agreed points and make it mandatory to check promises against the contract. This helps new partners join the franchising community with clear expectations, while preventing business owners from selling commitments their teams cannot fulfil.