Franchise Tenants are Leasing Opportunities

When it comes to leasing commercial and retail property today, franchise tenants are a special opportunity for property agents.  These franchise tenants already have a proven business model, established business brand, and good track record.  On a regular basis those franchise tenants are going to be looking for new premises as part of the expansion of their network of operations.

Landlords and Commercial property agents should work closely with these tenant types.  To get that process underway, visit surrounding suburbs and towns.  Look at the established franchise brands in all property types.  See if those brands are already located in your territory or if they would consider a move or an expansion in that way.

So we need to set some rules here:

  • Franchise tenants know what they want by way of premises given that they understand their customer profiles and ideal premises configuration and location.
  • The leases used in these circumstances are likely to be a variation of the standard lease used by the franchise tenant.
  • The lease term will need to match the duration of the franchise agreement.
  • The branding and signage of the tenancy will require consistency that suits the property but also attracts customers.  Brand consistency is really important when it comes to premises choices and occupancy with franchise tenants

Commercial and retail real estate agents can do very well in working with this segment of the market.  Get to know the franchise groups and what they are looking for in property type and location.

Here are some questions to ask and issues to work with that can help you with this type of tenant:

  1. What type of property best suits their operations now and in the future?  Pay particular attention to expansion and contraction needs.  The tenancy may have specific challenges when it comes to ongoing occupancy within their franchise agreement.
  2. What locations are best suited to growth of trade and business?  In can be that main roads or highways have something to do with property choice.  Property and business exposure can help the franchise group within its branding.
  3. Where will their customer be coming from and why?  You will need some local population and business demographics to help you here.
  4. Check out the competitors for the franchise tenant.  Whilst the tenant you are working with will already have a good idea about their competitors, you also should seek to understand those market factors.
  5. The rental structure for the tenancy will be a balance between the requirements of the landlord and the cash flow structures of the franchise group.  The franchise fee will be an added cost in the viability considerations of the business in occupancy.  The landlord will still want a market rental for the premises based on prevailing market conditions.  Most franchise groups will take between 5% and 10% from the gross trading figures of the tenant.  It is wise to ask the tenant for their cash flow projections based on occupancy costs, expected levels of trade, and local business conditions.
Man holding globe
Work with more franchise tenants today in leasing

You can do very well as a commercial or retail property agent when it comes to working with these tenancy types.  It is simply a matter of understanding and specializing with franchise brands.  You can then identify the right properties that suit their business activities and projections.

Author: John Highman

Commercial Real Estate Broker, Coach, Speaker, Author, Broadcaster.