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Leasing Property To Franchise Tenants Today

It is a common occurrence for commercial or retail leasing agents to be approached by franchise operators and groups looking for new premises from which to operate their next new business.  Franchise groups are a good source of new leasing business and over many sites.  On that basis you can build a great leasing market share from these people.

In saying that, there are some common challenges that franchises present you as the real estate agent acting on behalf of a landlord.

Here are some of those challenges:

  1. The term of lease that they require will have to match the term of their franchise agreement.  Given that most franchise agreements go for a period of 10 years, a lease of that length may not suit the landlord of the property.
  2. At the expiry of the lease term, the franchise agreement will also expire and on that basis the tenant may totally leave the site.  The issuing of a new franchise agreement is at the discretion of the franchise group.
  3. Their business model will require unique factors of operation or business branding.  They must be able to supply their customers with the expected business experience and outcomes.
  4. The lease for the premises will likely be the standard lease for the franchise group.  These leases are written from a tenant perspective and may not suit your landlord.  In such cases it is wise to get your landlord to send the lease to his solicitor for review and negotiation.
  5. The franchise group may demand exclusivity for the product or service that they provide.  In a complex property such as a retail shopping centre, this can be an issue.

Taken in balance the opportunities that come with this type of tenant are many but they take some understanding.  They like to deal with leasing experts; is this you?

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