Out-of-contract at season's end, Franklin is a restricted free agent and the hottest property in the game.
Hawthorn is reportedly stunned at the 26-year-old's decision, believing it had tabled an outstanding offer in its bid to keep the star.
The offer is reported to be in the vicinity of $1 million a season over four years.
Hawthorn CEO Stuart Fox took to Hawthorn's website on Saturday to address members and supporters, saying the club understood Franklin's decision.
"Lance has indicated he would like to delay discussion on his contract to the end of the 2013 season," Fox told hawthornfc.com.au.
"The club accepts Lance is within his rights to proceed this way and we will continue to work towards retaining him within the structure of our talented playing list by keeping an open dialogue with Lance and his manager.
"Both the club and its members must be prepared to acknowledge this situation is part of a new football landscape under free agency."
Fox promised the club was focused on retaining Franklin despite the delay.
Franklin's manager Liam Pickering, who also managers Hawthorn coach Alastair Clarkson, told News Limited the Hawks were unhappy with the news.
"He [Franklin] said he didn't want the distraction of a contract and he has advised me talks are off until the end of the season," Pickering told News Limited.
"He doesn't want to entertain discussions and, whilst Hawthorn aren't happy, that's how it is, unfortunately."
Hawthorn football manager Mark Evans expressed the club's frustration, saying the decision was not ideal for the Hawks, Franklin or the club's supporters.
"We've been having a number of discussions over the past 5 1/2 months, and we've put together what we think is a very good offer, and Pickers [Pickering] is on record as saying it is respectable," Evans told News Limited.
"Obviously, we had a few things to sort out. We know our offer is a strong offer, but at the moment it's not that the offer hasn't been accepted or rejected, it's only the discussions have been put off until the end of the season."
As a restricted free agent Franklin can look at offers from other clubs.
In October, AFL.com.au reported Fremantle had made enormous space in its salary cap in a bid to entice Franklin west.
Freo has since distanced itself from any such move.
Whatever the case with Fremantle, Franklin can expect to receive huge offers from clubs across the competition.
The Hawks lost players to free agency in 2012, after Clinton Young left to join Collingwood and Tom Murphy joined Gold Coast in October.
Pickering oversaw Gary Ablett's big money move from Geelong to Gold Coast at the end of 2010.
Free agency dominated headlines in 2012 and promises to do the same this season.
Contract negotiations between Collingwood and Travis Cloke played out throughout much of 2012, before Cloke eventually re-signed with the Pies.
Cloke's Collingwood teammate, out-of-contract midfielder Dale Thomas, admitted to AFL.com.au he hoped his contract status could be resolved so he could avoid the "circus" Cloke faced last season.
