How to Lease Property for Your Franchise

September 4, 2011 | Author: | Posted in Franchising | 192 views
Leasing Commercial Property

Leasing Commercial Property

When you want to open a franchise you’ll need to consider whether or not you can purchase existing property, build a new storefront or lease a retail/commercial space. In some cases you’ll be forced to build a new location based on the franchise requirements but for many franchises it’s as simple as leasing. There are however some points to consider when you want to lease.

Rent: While some rent might look ideal you should also do a comparison between the various locations that holds your interest. Likewise, compare your ideal franchise location with the spaces in the immediate vicinity to make sure that you’re not going to pay too much.

Term: Does the property owner require a long-term lease or will you be able to start with a short-term property lease for your franchise?

Floor Area: As you look for franchise opportunities, most will have information on the ideal amount of square footage needed to successfully house the business. Consider this info when you’re looking at ideal locations and comparing the amount of square footage available vs the overall cost.

Rental Increases: When comparing the locations you like you need to pay attention to whether the locations work on a fixed rent lease of if there is a consumer price index. If rent includes CPI then you need to negotiate a percentage cap in the lease agreement.

Percentage Lease: There are some property owners that may ask for a percentage of your sales on top of charging a fixed rate for your monthly rent. If this comes up in an agreement it needs to be negotiated and removed if possible

Tenant Improvements: It should always be in writing as the responsibilities of the property owner and the franchise owner’s responsibilities to prep the commercial space to be open for business. This way there’s no confusion on electrical or plumbing, HVAC, windows, doors, flooring, etc.

Provision for Expansion: If you think that your franchise may need to grow in space to accommodate a growing customer base or employees then make provisions in your lease to anticipate for these future changes. If you do plan to grow, make sure that the space offers the ability to do so.

Conflicting Business: Negotiate a provision of exclusivity that no other businesses that are similar to yours be allowed within the property – especially important in a commercial plaza setting where competitors can easily lose business to one another.

There are a number of points within a lease that can affect how you do business and how well your franchise does in the local area. Take the time to review it carefully and work the details out in your favor. Remember, the landlord needs you a lot more than you need to be in that specific location.

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