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You and Sally agreed to develop a negotiation plan, mapping out a strategy to purchase the Boca Raton property to establish the restaurant. After reviewing the market plan and the terms of the proposed agreement, you suggest to Sally that it would be great if the two of you could map out the areas you believe could be negotiated with the owner. The plan would provide you with a prioritized list of issues to facilitate an agreement with the owner. Sally tells you that she has a perfect tool for plan development. Sally has emailed you a copy of the mapping tools and asks if you would take a shot at filling it out. Compare your term sheet information and the owner’s positions listed in the Marketing Study for the property in Boca Raton (PDF). Download Marketing Study for the property in Boca Raton (PDF). In the negotiation matrix, map out the issues that you and the owner expressed in the marketing study.
You told Sally that you were going for a win-win in the negotiations. She recommended that you review the article below to learn the language needed to make winning arguments.
Read the following:
5 Win-Win Negotiation Strategies (Harvard).Links to an external site.
Please proceed to theAssignment Detailssection.
Review the marketing information and the seller’s position concerning the property and priorities.
Complete and upload the Term Sheet (DOCX) Download Term Sheet (DOCX)answering the issues presented and include your principle objectives in the forms.
Read the Contract Negotiation Process (PDF).Download Contract Negotiation Process (PDF).
Review this video:
Orange Example/Negotiation by Design (YouTube/7:46)Links to an external site.
To establish your and Sally’s positions, make appropriate assumptions to complete the Learning Canvas Matrix (DOCX). Download Learning Canvas Matrix (DOCX).The information you used to complete your term sheet contains the significant issues in your matrix. Short non-descriptive responses will not be graded. Assume the matrix will be shared with other individuals assisting you in the negotiation. Therefore, your information must include both the term sheet issues and responses. The matrix must be descriptive enough that others can comprehend your negotiation points listed in each matrix box. When establishing responses to the matrix questions, write them clearly and sufficiently to allow a third party to understand your perspective of the negotiations.
Caution: Since the matrix is a planning tool, please note that “yes” or “no” answers, personal keywords without explanation, one-sentence or incomplete sentences are not acceptable as a response. Solutions should be fully developed and analyzed. The entries into the matrix must demonstrate negotiable items that are more than your personal opinion. Entries must contain achievable or negotiable issues based on the facts of the entire case study. Entries are required to be single-spaced, with no white space or empty boxes.
THE NEGOTIATION CANVAS
Learning Version: New to the Negotiation Canvas? Start here!
MY DESIRED
OUTCOME
MY KEY
INTERESTS
THEIR DESIRED
OUTCOME
MY
BARGAINING
CHIPS
THEIR
BARGAINING
CHIPS
THEIR KEY
INTERESTS
POSSIBLE
SOLUTIONS
MY
WALKAWAY
ALTERNATIVE
AGREEMENT
THEIR
WALKAWAY
ALTERNATIVE
The Negotiation Canvas was created by Pablo Restrepo and Stephanie Wolcott, founders of Negotiation by Design.
Learn more at negotiationbydesign.com
NEGOTIATION
by
Learn more about the
canvas watching our
introductory video.
NEGOTIATION CANVAS
Title:
Date:
1) MY DESIRED OUTCOME
2) THEIR DESIRED OUTCOME
What do I want? learn more
learn more
3) MY KEY INTERESTS
Why? learn more
7) MY BARGAINING CHIPS
8) THEIR BARGAINING CHIPS
What do I have that they value?
What do they have that I value?
learn more
learn more
5) MY WALKAWAY ALTERNATIVE
9) POSSIBLE SOLUTIONS
What will I do if we do not reach a deal?
What solutions could work for both of us? learn more
learn more
Version:
PS 1
PS 2
What do they want?
4) THEIR KEY INTERESTS
Why?
learn more
6) THEIR WALKAWAY ALTERNATIVE
What will they do if we do not reach a deal?
learn more
PS 3
10) AGREEMENT
What did we agree to? learn more
The Negotiation Canvas was created by Pablo Restrepo and Stephanie Wolcott, founders of Negotiation by Design.
This work is licensed under the Creative Commons Attribution-NoDerivates 4.0 International License.
NEGOTIATION
To view a copy please visit: https://creativecommons.org/licenses/by-nd/4.0/
by
Learn more at negotiationbydesign.com
THE NEGOTIATION CANVAS
The Negotiation Canvas is a one-page easy-to-use tool that helps
you reach better deals on all your negotiations. Pablo Restrepo
and Stephanie Wolcott created the Negotiation Canvas to
provide you with the most efficient and effective way to prepare and
conduct a negotiation. No time to prepare? This tool makes it simple
and fast.
Negotiation Canvas Elements
Desired Outcomes: Steps 1-2 Go
Key Interests: Steps 3-4 Go
Walkaway Alternatives: Steps 5-6 Go
Completing the canvas will help you to clarify what you want,
understand your counterpart, identify and capture more value and
improve your confidence in every negotiation.
Bargaining Chips: Steps 7-8 Go
Possible Solutions: Step 9 Go
The Negotiation Canvas is built as an editable PDF to make it easy
to fill out and save your work. You will notice a video icon in the
header of the canvas, watch this video for a quick overview using
the popular orange example. Select the ‘learn more’ option in each
field for a short description on how to fill out that field. Then return
back to the Canvas using the ‘To Canvas’ buttons in the lower left
corner.
Agreement: Step 10 Go
Let’s get started!
Watch our introductory video.
TO CANVAS
NEGOTIATION
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DESIRED OUTCOMES: Steps 1-2
What do you want?
The Desired Outcome is the beginning position of each side of
the negotiation. Begin the canvas by writing down what you
want from the negotiation and if you can, write down what you
think your counterpart wants.
1
2
Typically, people approach negotiation with a preconceived
outcome in mind. They want a certain price, a certain place, a
certain time, etc.
ORANGE EXAMPLE
It is important to identify your Desired Outcome in the beginning,
but as we will see, this initial position is only a starting point. You
might find later on that you can create even better solutions that
are good for both parties.
1) MY DESIRED OUTCOME
– I want the orange.
2) THEIR DESIRED OUTCOME
– She wants the orange.
TO CANVAS
NEGOTIATION
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KEY INTERESTS: Steps 3-4
Why do you want what you want?
Key Interests are the motivations behind each parties’
Desired Outcome. Asking ‘Why?’ will uncover Key Interests.
Why?, is the magical question in negotiation.
3
4
Why do we want what we want?
Why do we want our Desired Outcome?
Why do they want what they want?
Why do they want their Desired Outcome?
ORANGE EXAMPLE
Try to ask yourself ‘Why?’ at least five times. Write down as
many interests as you have related to the negotiation. Do the
same with your counterpart. You can ask them why in person or
if that is not possible, make your best guess based on the
information you have.
Identifying interests will allow you to expand the range of
possible solutions that meet both parties’ needs and can
create more value for each party.
TO CANVAS
3) MY KEY INTERESTS
– Peel
– Orange cake
– Hungry for sweets
4) THEIR KEY INTERESTS
– Pulp
– Orange juice
– Thirsty for orange juice
NEGOTIATION
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WALKAWAY ALTERNATIVES: Steps 5-6
What will you do if an agreement cannot be reached?
Walkaway Alternatives are the options you have if you do not
reach an agreement. Identifying your Walkaway Alternatives
helps you to determine when to stay in the negotiation and when
to walk away.
There are three questions to answer in this section:
1. What will you do if you do not reach an agreement?
2. What are the consequences (both good and bad)?
3. Is there a way to improve your walkaway alternative?
The more you can improve your Walkaway
Alternative, the more power you will have to
negotiate.
Answer the same questions for your counterpart. Only this time,
think of ways to weaken their alternative. Remember, you must do
this legitimately and with care. Your reputation is at stake and
future negotiations with this party need to be considered.
TO CANVAS
5
6
ORANGE EXAMPLE
5-6) WALKAWAY ALTERNATIVES
In this case, both girls have the same
Walkaway Alternative:
– Yield and lose the orange, setting up a bad
precedent.
– Fight, risk losing the orange, get punished
by mom, set a difficult relationship for
future negotiations.
NEGOTIATION
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BARGAINING CHIPS: Steps 7-8
What can each party offer to the other?
Bargaining Chips are the items you can offer to the other party to
get more of what you want. This step helps you to bring more
value to the table for both parties.
7
8
Looking at the other party’s desired outcome and interests,
think of all the things you can offer them to meet their interests.
You will notice each field has stars in it. When you list the
bargaining chips, list them in order of priority. If you know
something is very important to your counterpart, put that issue in
the three-star category. If an issue is not that important, put it in
the one-star category.
Moving to the box on the right, what can your counterpart offer
you that you value? Make sure to prioritize these issues
as well.
We prioritize chips because substantial value can be created if
we can offer the other party something that they value highly but
costs us little, for something we value highly and costs them little.
TO CANVAS
ORANGE EXAMPLE
7) MY BARGAINING CHIPS
Pulp
Money
Glass of water
8) THEIR BARGAINING CHIPS
Peel
Money
Chocolate
NEGOTIATION
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POSSIBLE SOLUTIONS: Step 9
What solutions could work for both parties?
Possible Solutions are proposals for an agreement that meet both
parties interests. These are the proposals that you will present to
your counterpart.
Review the previous steps to help you create solutions. Pay
special attention to the Key Interests and Bargaining Chips. Are
there other options for meeting both parties’ interests? What
Bargaining Chips can you exchange to create more value for
both parties?
Try to identify at least three solutions. Three forces you to
be creative and might lead to a solution you would not have
thought of otherwise. Three also shows flexibility and helps to
build trust with your counterpart.
9
ORANGE EXAMPLE
9) POSSIBLE SOLUTIONS
PS1
PS2
PS3
Water x
Orange
Money x
Orange
Pulp x
Peel
Offering three Possible Solutions helps you find out more about
your counterpart’s interests, priorities and preferences.
You can ask which option they prefer and why. This is especially
helpful when negotiating with people from less direct cultures.
Even if you do not reach an agreement after this step, you will
have more information to revise your proposals and try again.
TO CANVAS
NEGOTIATION
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AGREEMENT: Step 10
What did we agree to?
Congratulations! You’ve done it! Once an agreement is made,
write down the important details. You will want a record of what
is agreed to so that you can review past agreements and assess
both success and progress.
Make sure to include all relevant information, such as:
10
– all Bargaining Chips agreed to
– roles and responsibilities for both parties
– timelines
– measurement and quality
– indemnities, contingencies and termination clauses
– confidentiality requirements
– process for settling disputes
– terms of payment
ORANGE EXAMPLE
10) AGREEMENT
Optimal agreement: Emma got 100%
of the peel and Sara got 100% of the
pulp.
Remember, an agreement is only successful if it is:
– Better than your Walkaway Alternative
– Acceptable for both parties
– Implementable
TO CANVAS
NEGOTIATION
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Contract Negotiations
Processes
Strategies
Techniques.
The goal of a contract is that you reach a fair, reasonable, and beneficial written
instrument that both parties have agreed to.
Step 1 of Contract Negotiation Process: Prepare,
Prepare, Prepare.
The Contracting Process
Negotiations
A contract negotiation is not a race to win. Because even the most favorable
agreement (Win – Win) can turn into a loose – win, or worst a loose – loose. The
best negotiator is not the one who talks the fastest or has the most leverage. It’s
the team who has properly prepared for every potential eventuality. Anticipation
and foresight based on your preparation makes you prepared to enter into a win
– win agreement. Negotiation is not a race to the finish line it’s a process that is
aimed at bring both parties to the bottom line signature that mutually assures that
the parties on both sides will receive the bargained for benefit they agreed to.
Imagine having to negotiate a contract with your supplier and you have no clue
about the price of the supplier and how that compares to the market. That means
that you must have conducted a price/cost analysis, and you fairly know what it
costs the supplier to deliver goods/services.
This is just an example of being prepared. Below are some other things that you
need to prepare:
1. Issue Identification
Identify the issues you want to negotiate. For example read the suppliers offer,
highlight important parts and jot down notes about part that you are not clear, or
that you cannot accept.
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All rights are reserved. The material contained herein is the copyright property of Embry-Riddle
Aeronautical University, Daytona Beach, Florida, 32114. No part of this material may be
reproduced, stored in a retrieval system or transmitted in any form, electronic, mechanical,
photocopying, recording or otherwise without the prior written consent of the University.
2. Issue Information
Have good information about each issue that you want to negotiate (after all this
is what preparing is all about).
3. Classify the Issues.
Classify them according to: Negotiable – these are issues that you can negotiate
and be flexible. State your maximum that you can negotiate on these points, so
that at any point in time during negotiations you know your limit. (just in case you
go over your limit and then you get that Donald Trump famous saying: “You’re
Fired”). Non-Negotiable – these are issues that you will not negotiate and not
budge.
4. Prepare the meeting agenda.
When doing this you will outline your issues again, but more importantly you
would want to give the supplier the first turn to highlight any issues they may
have with your contract. When you have a prepared meeting agenda, you will
work according to that, and will not forget any point.
5. Get ready to Negotiate
Understand the most important thing before going to the negotiation table: Most
issues can be negotiated.
Yes, some “negotiation gurus” mention that ‘everything is negotiable’, but in real
life it is not so. There are things that you or your supplier will not budge no matter
what. With that in mind be positive and believe that it will go well. Most of the
time it will.
Step 2 of Contract Negotiation Process:
Negotiation Meeting
This is the meeting proper where you (and your team if there’s one) will sit down
with the supplier. Important here is that this meeting most of the time is not called
negotiation meeting – but any time you meet with a supplier to discuss their offer
it means you are negotiating.
Your negotiation outcome however is most likely achieved before the meeting ie
during the preparation stage, so again do not set foot in a meeting without being
prepared.
If at any point during the negotiating meeting you find that you did not prepare for
a certain issue, then simply mention that you would need to get back to the
supplier on that issue. Then work out the other issues.
Some meeting tips:
•
•
•
Be friendly but professional e.g. I’m glad we have a chance to sit down and
discuss how we can work together.
Be positive e.g. It’s good that I hear you have the same viewpoint on this.
Do Not Get Angry or Emotional. Keep your cool & calm. It’s just business
after all. How do you do that? First, pause for a few seconds before saying
something Second, if you are thinking whether something that you may
say would offend the supplier, then don’t say it. However, if you really
thought about it coolly, and then you still want to say it, then just go ahead
and do it. For example during a meeting that we had with a client he was
discussing about the need of getting a lower price without committing to a
long term contract or bigger volume. When probing he revealed that it was
their policy that even after a contract was concluded, they would still be
looking for other suppliers who may offer lower prices. We simply said: “It
looks like your philosophy towards your suppliers is – I’ll screw the supplier
at the moment that I get the chance. It is difficult to then offer you what you
are asking.” The client kept his cool and then said that it was the direction
from HQ. Thirdly, breath deeply. It relaxes you. You may even joke with
the supplier that you are practicing your breathing so that you don’t get
angry or upset with what he said.
Step 3 of Contract Negotiation Process:
Summarize all points
This is very important, as you need to get the other party’s agreement to all the
points that you discussed. You can simply divide this into 2 categories:
a) Points that you have already agreed; and
b) Points that you or the other side would need to get back to each other.
Some of the points to summarise are:
•
•
•
•
Payment terms
Contract volume
When the contract/work will start
Price for the Contract
Once you have written this down, simply shoot a quick email to the other party
and ask for their acknowledgement/agreement to this. Mention that if they have
anything to add, they can add it during their reply to your email.
To write about the contract negotiation process, it may actually take much more
that what is written here, but we trust that this simplifies you contract negotiation
process to simply 3 steps. And that is key – simple.
Term Sheet
The Importance of Developing a Term Sheet
A Term Sheet usually is an unenforceable expression of intent but a valuable tool in
negotiating a favorable property sales agreement or lease. A Term Sheet emphasizes critical
elements in negotiating a sales agreement or lease. Once the landlord submits the sales
agreement or lease offer in writing, compare all offers you receive. In negotiating term sheets,
it is essential to set limits. If you need expansion or renewal options, be sure your prospective
landlord or property owner addresses your concerns in their term sheet. Although not binding,
the Term Sheet request may result in the owner retracting the offer. However, the Term Sheet
is a valuable negotiating tool because it clarifies the deal. A Property owner can face a
dilemma if there is a missed opportunity to close because of their resistance to negotiate. The
owner’s ability to turn over space can be adversely affected by the long-term closing prospects
if the owner gains a reputation for retracting or renegotiating term sheets.
Time Investment in Negotiating a Real Estate or Lease
Agreement
There is a mistaken belief that the deal is done after negotiating an agreed-upon Term Sheet. A
well-negotiated term sheet can certainly streamline the process, but a term sheet cannot
address all of the legal issues that arise under a purchase agreement or a lease. The Term
Sheet lacks specificity and often results in ambiguities that only a negotiated purchase
agreement or a lease agreement can determine.
The below forms include questions that must be answered in completing your Term Sheet.
Detailed responses provide critical information required for several assignments that employ this
Term Sheet. Incomplete sentences, short responses, or forms containing white space will not be
graded.
FORM 1
Term Sheet
ISSUES
DESIRED OUTCOME:
What’s the want?
Do you need to learn
more? Why? What do the
parties value?
KEY INTERESTS:
What do the parties want?
What alternatives are available if no
deal is reached?
WHAT ARE THE WALKAWAY
ALTERNATIVES:
What do you or the other side lose if
no deal is struck? Why?
What options do you have, if they
disagree with your terms?
BARGAINING CHIPS:
What do you have to offer that
the other party values?
POSSIBLE SOLUTIONS:
What solutions could work for both
parties? List solutions that will
overcome any disagreement
during the negotiations.
AGREEMENT:
List the items that both sides should
have no difficulty agreeing with.
YOU
OWNER
FORM 2
Key Objectives and Considerations in the Real Estate Purchase or Lease Agreement
Key Objectives:
Property Owner:
Restaurant owners:
Considerations:
Identify the advantages
and disadvantages of
buying the Property
Advantages:
Advantages:
Disadvantages:
Disadvantages:
Purchase less risky than
Leasing because?
High purchase costs?
Is buying a property the
best option for you?
Outright sale – buying a
property in full. Ownership
is transferred immediately.
Payment is expected right
away
Identify the advantages
and disadvantages of
Leasing the Property
Advantages:
Advantages:
Disadvantages:
Disadvantages:
Identify the advantages
and disadvantages of
Leasing the Property
under the various Leasing
Terms offered
(Term Lease, N, NN,
NNN)
Advantages:
Advantages:
Disadvantages:
Disadvantages:
Identify the resources
available to assist in
buying the Property
What are the:
1. Reduced startup
costs?
2. Immediate cash
flow?
3. Added inventory
cost?
Existing problems:
Which deal (Sale or
lease) do you think the
owner prefers? Why?
Is there a potential for a
Gradual Sale through
Leasing? What would be
the terms?
Are there flexible options
for transferring Property
that benefit an individual
who cannot afford to
purchase outright but can
finance a long-term
payment plan? Explain.
Lease Agreement –
requires a commitment to
a contract that details the
conditions and payments
you will make for
temporary rights to the
business.
Estimate the timeframe
and costs required before
the Restaurant generates
a cash flow.
If the transition starts
before
the
deal
is
complete, what financial
impact will it have on your
cost structure? List the
items impacted.
Table 1
Benefits of a Term Sheet Agreed to by Landlord and Tenant
Loss opportunity Cost
Cost of Loss money
1. Unpaid or late rent
1. Security deposit forfeited
2. Search for better replacement Tenant
2. Damaged or bad credit
3. Paying Tenant’s delinquent utility bills
3. Unable to find a new business location
4. Unexpected shared costs
Unexpected repairs to the Property
4. Permanent damage
5. Unnecessary replacements
Unclear maintenance obligations
5. Losing customers because common areas not
maintained
Expensive lawyer fees to
6. Help with an eviction notice
7. Seek remedies for unlawful use of the premises
8. Clean up hazardous materials
9. Remove unpermitted liens on the Property
Property damage caused by
6. Unsecured premises
7. Poor security of entryways
8. Other tenants businesses
9. Landlord’s failure to repair
10. Improper janitorial services
11. Burst pipes during the winter
Mental anguish of
10. Illegal business activities taking place on your
Property
11. Responding to complaints from neighboring tenants
12. Not being a “named insured” on tenant’s insurance
policy
Mental anguish of
12. Being unexpectedly evicted
13. Not placing an advertising sign of your choice
outside
14. Unfair competition from other businesses despite
promises to be the exclusive store
Table 2
Purchase Lease Agreement Issues
Adjusted Purchase Price: Includes prorated items such as rent, utilities, and inventory up to the time of
closing.
Review of required Documents: The documents you need to review include a corporate resolution
approving the sale, evidence that the corporation is in good standing, or any tax release that the seller may
have promised. You may check with your local department of corporations, state corporation commission,
or Secretary of State for more information.
Signing Promissory Note: In cases where the seller has back-financing, have an attorney review any
Note documentation.
Security Agreements: The SA lists the assets used for security, such as a promise to pay the loan.
UCC Financing Statements (UCC): Uniform Commercial Code documents are recorded with the
Secretary of State in the state in which you will be purchasing your business.
Lease: if you agree to take over the lease, ensure that you have the owner’s concurrence. If you are
negotiating a new lease with the owner, make sure both parties agree to the new lease terms.
Bill of Sale: the bill of sale proves the sale of the business. It also explicitly transfers ownership of tangible
business assets.
Closing or Settlement Sheet: The closing or settlement sheet will include the financial aspects of the
transaction.
Everything listed on the settlement should have been negotiated before the closing
Bulk Sale Laws: Make sure that you comply with sale laws, which govern the sale of business inventory
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All rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical
University, Daytona Beach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval
system, or transmitted in any form, electronic, mechanical, photocopying, recording or otherwise without the
prior written consent of the University.
