The renewal roadmap: Five steps for franchisees before renewing an agreement

Renewing a franchise contract can be a critical decision for franchisees, with many factors to consider before signing on the dotted line. Renewal can come up from every five to 20 years, depending on the franchise brand. So, to avoid confusion and potential conflict with franchisors, it is essential for franchisees to be knowledgeable and strategic in their approach. In this article, David Truby, a former franchisee turned franchisor and MD of Greensleeves lawn care, provides expert advice on what franchisees should do before renewing their franchise agreement. From evaluating franchise performance to seeking professional advice, Truby outlines five key steps to help franchisees make informed decisions and secure long-term success for their business.

1. Evaluate your franchise’s performance and goals

Before renewing a franchise contract, it is important for franchisees to take a step back and evaluate their current situation. This includes reviewing the franchise’s performance against their expectations and goals. Franchisees should look at the franchise’s financial performance, customer satisfaction ratings and overall growth and ask themselves if they are achieving the results they expected when they first signed on as a franchisee. If they are not, they need to understand why and determine whether renewing the contract will help them achieve their objectives or whether now is the time to exit.

2. Ensure your goals still align with your franchisor’s

Making sure that you are pulling in the same direction as your franchisor is vital when operating a franchise business. So, before making any decision, assess whether your business goals and values still align with your franchisor. I suggest reviewing the franchisor’s mission statement, long-term objectives and any recent changes to its business model or product offerings. Then consider whether these still match your own goals and values as a business owner and whether you feel confident in your ability to continue representing the brand in a way that aligns with their vision. If there are any major discrepancies, it may be worth exploring other franchise opportunities or pursuing independent business ownership.

3. Aligning your business plan with your franchisor’s objectives

When deciding to renew your franchise agreement, it is essential to have a business plan that aligns with the franchisor’s objectives. A well-crafted business plan can help you clearly define your goals, strategies, and tactics for achieving success in the franchise system. By aligning your plan with the franchisor’s objectives, you can demonstrate commitment to the system and an understanding of the franchisor’s vision. A strong business plan can also help the franchisee secure financing, attract customers, and retain employees.

4. Examine franchise renewal terms and conditions

When reviewing the current agreement, franchisees should pay particular attention to the renewal terms and conditions to ensure they understand any requirements or restrictions associated with their renewal. For example, franchisees should look at the length of the renewal term, any performance or sales targets required for renewal and any fees associated with re-signing. They should also have reviewed the clauses to ensure they understand their options at the end of the renewal term well in advance of the deadline. If there are any terms that are not clear or that they do not understand, I suggest they seek clarification from the franchisor.

5. Seek expert advice on franchise contract renewal

Renewing a franchise agreement is a complex legal and financial process, and franchisees should seek professional advice from a lawyer or an accountant before deciding to renew. These professionals can help franchisees gain a deeper understanding of the legal and financial implications of renewing their contract. They can review the contract terms and conditions, advise on any potential legal or financial risks and help franchisees weigh up the pros and cons of renewing. With their help, franchisees can reach a decision that is in their best interests.

6. Communication is key

Finally, franchisees should engage in open and honest communication with the franchisor about any concerns and objectives. In 2022, 95% of Greensleeves franchisees said they planned to renew their franchise agreement when it came up. This is largely down to the support, communication and dedication they receive from the team in head office. So, for a franchise to be successful, it is essential to ensure that franchisees are getting the support they need and that their objectives are aligned with those of the franchisor. Franchisees should be transparent about their concerns and objectives and should ask the franchisor for feedback on how they are performing. By working collaboratively with the franchisor, franchisees can help ensure a successful renewal process and build a positive ongoing relationship.

Renewing a franchising contract is an important decision that requires careful consideration. By keeping these key factors in mind, franchisees can make an informed decision that will set them up for long-term success. As always, be sure to communicate openly and honestly with your franchisor to ensure a successful renewal process.