Special Commercial Lease Considerations for Franchisees

by Jaburg Wilk

Engaging in preliminary discussions and negotiations with prospective landlords for your new franchised business can be overwhelming.  There are a multitude of business and legal issues to consider.  It may also be intimidating, as this may be your first lease and the landlord probably has significant experience.

Your franchisor may provide assistance or training in lease terms or lease negotiations.  Alternatively, your franchisor may refer you to real estate brokers or agents experienced in commercial leases generally or experienced in its real estate and lease requirements.  If your franchisor does not provide you with the necessary assistance, seek out a commercial real estate broker or agent with experience in the type of space you seek in the geographic area you seek.[1]

In addition to the business and legal issues that all commercial tenants face, as a franchisee there are several additional considerations:

  1. Your lease must dovetail the franchised business.  For example, if the franchised business entails the sale of gadgets, the lease must permit you to sell them.  Further, since the franchise agreement provides the franchisor latitude to modify the franchised business, you will need some latitude in your lease to do so.
  1. Your lease must dovetail the franchise agreement.  For example, if the franchisor requires your business to be operational during certain hours, the lease should permit you to operate during those hours, other tenants should be operational during those hours and the landlord should provide lighting, security and other services to the premises and the common areas, without additional charge, during those hours.
  1. Your lease and applicable zoning ordinances must permit you to use the franchisor’s standard signage and exterior décor.  It is advisable to submit the franchisor’s standard signage and exterior décor for landlord approval prior to lease signing, rather than leaving the matter to the landlord’s discretion after the lease is signed.
  1. You should submit the franchisor’s lease addendum or rider to the landlord as part of your initial discussions.  The landlord would be displeased to learn of these requirements at the last minute and lease negotiations may be jeopardized.  In addition, if the landlord is not amenable to certain of the provisions required by the franchisor (such as the franchisor’s first lien on certain of your assets and the franchisor’s right to control the premises upon your breach), you may be wasting your time with that landlord.
  1. Your lease term, with renewal options, should track the term of the franchise agreement.  If you lose possession of your premises, your franchise agreement may be terminated.  At a minimum, you will have to comply with your franchisor’s relocation requirements.[2]
  1. If the lease provides for percentage rent and includes a prohibition against the operation of branded units within a stated distance, make sure that the prohibition does not extend to the franchisor or other franchisees.

Involve your franchisor in the site selection and lease process sooner rather than later.  The franchisor should have expertise in what sites would be preferable for your franchised business’s layout, build out and operations and probably has the right to approve or disapprove your site and your lease.  If you sign the lease, or get too far down the road in your negotiations before getting the franchisor’s approval, or at least input, you may be stuck with a lease that you cannot use for the franchised business.  Optimally, your franchisor will provide invaluable assistance and leverage with respect to your lease negotiations and level the playing field with your landlord.

[1]   You may be tempted to rely upon the landlord’s leasing agent, due to naiveté or your belief that you’ll get a better deal because the landlord will pay lesser brokerage commissions.  You should either get your own broker or agent who will represent your interests.  At a minimum, you should understand that the landlord’s agent is not representing your interests.

[2]   If the lease permits the landlord to relocate you into other space, you should make sure that your franchise agreement provides you that flexibility and that such relocation would not be a breach of the franchise agreement, or make the landlord’s relocation right contingent upon obtaining the franchisor’s approval.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jaburg Wilk | Attorney Advertising

Written by:

Jaburg Wilk

Jaburg Wilk on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.