So you’ve finally found a franchise you want to invest in. Maybe it’s a fast-selling food chain like Momo Nation Cafe, or a retail hit like U.S. Dollar Store 99. You’re excited. You see potential. But now comes the tricky part — money talk.
Franchise fees and royalty terms can be negotiated, but most first-time investors either hesitate or simply don’t know how. This article will guide you, step-by-step, on how to negotiate franchise fees and royalties smartly and ethically — using simple language, real-life examples, and expert tips.
🔍 Understanding the Basics First
Before we jump into negotiation, let’s quickly understand the two key charges:
1. Franchise Fee
This is the one-time cost you pay to use the brand name, training, setup, and rights to operate.
2. Royalty Fee
This is a recurring payment (monthly/quarterly), usually a % of your revenue. It’s like a rental for using the brand continuously.
Some brands charge additional marketing fees, which are pooled for national promotions.
🤝 Can These Be Negotiated?
Yes — to a reasonable extent.
But you need to understand that:
- Large brands (like Shree or Pepperfry) are usually firm on their fee structures.
- Mid-size and new franchises (like Big Bash House) may be more flexible to attract good partners, especially in Tier 2 or 3 cities.
So, it’s not about “bargaining” — it’s about presenting a strong business case for why the brand should offer better terms.
✅ When Is the Right Time to Negotiate?
Timing matters. Try to discuss fees before signing the agreement, ideally after:
- You’ve received the full franchise kit
- You’ve had at least one call/meeting with the brand
- You understand their model thoroughly
Don’t delay too much — good opportunities get picked fast.
💬 How to Prepare for the Negotiation
Like in any good negotiation, preparation is key. Here’s what to do:
1. Research Competing Franchises
Check what similar brands charge. For example:
- Momo Nation Cafe may charge ₹5–10 lakh franchise fees.
- U.S. Dollar Store 99 might start around ₹3–6 lakh.
If the brand you’re considering is higher without justification, that’s a point to bring up respectfully.
2. Understand Your Strength
If you’re offering:
- A prime location
- Retail experience
- Bulk investment or plan to open multiple units
…you have more leverage. Mention that upfront.
3. Review the FDD (Franchise Disclosure Document)
Look at:
- Royalty % terms
- Lock-in period
- Refund policy
- Marketing support
Sometimes, brands quietly include hidden charges. Flag anything unclear.
🗣️ How to Start the Conversation
Start with respect, but confidence. Here’s an example:
“I’ve reviewed your proposal and I really see potential. I’m ready to move ahead, but would like to discuss a few commercial points, particularly franchise fee flexibility and ongoing royalty.”
Avoid saying:
- “Can you give me discount?”
- “I’m just trying to save money.”
Instead, focus on value exchange.
💡 What You Can Negotiate
Here are areas where negotiation is usually possible:
1. Lower Franchise Fee or Installment Option
Some brands may reduce the fee slightly or allow split payments.
💬 Example:
“If I sign up this week, would you be open to reducing the fee or offering a payment milestone?”
2. Reduced Royalty for First 6 Months
New businesses take time. Ask if the royalty can be lowered initially or made flat instead of a %.
💬 Example:
“For the initial launch phase, can we agree to a reduced royalty or cap it till break-even?”
3. Performance-Based Incentives
Propose a model like:
- Full fee after hitting ₹X revenue
- Royalty waivers if opening a second store within 1 year
This is attractive for both sides.
🧠 Case Study: How One Investor Saved ₹2.5 Lakhs
A franchisee from Jaipur planning to open a Big Bash House private theatre negotiated:
- A ₹2 lakh waiver on franchise fee
- 3 months royalty-free period
- Marketing assistance for local influencer tie-ups
He was able to justify this because:
- His location was near a premium school
- He had prior event management experience
- He committed to open a second unit within 18 months
The result? A win-win deal — and a great example of smart negotiation with trust.
🧑💼 What Do Experts Say?
Rohit Sharma, a franchise consultant with 12+ years of experience, says:
“Franchisors appreciate clarity and commitment. If you’re prepared and serious, they’ll often match your effort by being flexible on terms — especially newer or expanding brands.”
⚠️ What Not to Do
While negotiating, avoid these mistakes:
❌ Being too aggressive or rude
❌ Using threats (“I’ll go to your competitor”)
❌ Demanding things not supported by logic
❌ Hiding your finances or experience
Instead, focus on how you can grow the brand — because franchises want partners, not just buyers.
🧾 Sample Script (For WhatsApp or Email)
Hi, I’ve carefully reviewed your franchise model and I’m genuinely interested in moving forward. Before we finalize, I’d like to explore if there’s room to adjust the franchise fee slightly or offer a royalty break in the first few months as I’ll be handling local marketing and setup personally. Let’s explore a model that works for both of us. Looking forward!
📦 What If They Say No?
If the brand says “No”, don’t walk away immediately. Ask:
- Can they offer extra marketing help?
- Can they give a longer royalty-free training period?
- Can they help you with interiors or staff hiring?
Not all help is financial. Sometimes, extra support can save you more than ₹2–3 lakhs.
🔚 Nutshell: Negotiate with Confidence, Not Fear
Franchise deals are two-way partnerships. You’re not just buying a shop — you’re bringing your skills, your location, and your energy to the brand.
So be polite, but don’t hesitate to negotiate:
- Prepare well
- Justify your ask
- Offer value
- Be professional
If done right, you’ll save money, gain respect, and start your business journey on strong and equal terms.