Agreements & law

Minimum performance criteria

Sales or performance targets a franchisee must meet under the agreement, which can affect renewal, territory rights or even termination.

What it means

Some agreements set minimum performance criteria, for example a minimum annual sales figure. Failing them can carry consequences: loss of an exclusive territory, non-renewal, or, in serious cases, a ground for termination.

These clauses protect the franchisor's interest in every territory performing, but they transfer risk to the franchisee, especially where targets are set without regard to local conditions.

In practice

Scrutinise any performance targets before signing: are they realistic for the territory, how are they measured, and what exactly happens if you miss them? Negotiate ramp-up allowances for the early period.

A real example

A cleaning franchise agreement requires $200,000 in annual sales to keep an exclusive territory. A franchisee negotiates a lower target for year one to reflect the ramp-up period.

Minimum performance criteria, FAQs

What happens if I miss my franchise sales targets?

It depends on the agreement. Minimum performance criteria can trigger loss of an exclusive territory, non-renewal, or in serious cases grounds for termination. Understand the consequences before signing.

Can I negotiate performance targets?

Sometimes, especially a lower target for the ramp-up year. Whether a franchisor will move depends on the system, but it is always worth raising.

See the full franchise glossary, the Fee Index or our buyer guides.