Are you considering becoming a franchisee?
There is a lot to like about adopting an established business model, where many of the typical challenges of starting a business have already been addressed by the franchisor, such as:
- Which goods and services will I provide?
- Who will supply my equipment?
- What will my logo look like? Should I have a slogan?
- Which insurance policies should I carry? How much coverage?
- Where will my business be located?
The real estate component of your business involves more than just finding a location. It also includes how you can use the space, what days/times you can (or must) use the space, and where you can and cannot place your signs. Perhaps less intuitively, you might ask yourself the following questions while negotiating your lease agreement:
- Can I sell equity in my business (e.g., membership interests in my LLC)?
- Can I sell all of my business’s assets? To another franchisee?
- What security interests have I promised my franchisor, landlord, and lender?
- If I am opening multiple locations, are these provisions consistent across each lease agreement?
- Do key lease dates – delivery date of the premises and the rent commencement date – align with my franchise agreement?
- Can the landlord lease space in the same project to a competing business?
Your franchisor will likely provide a franchise addendum to address some issues; primarily from the perspective of protecting the franchisor’s ability to take over the space to protect the franchise’s brand and reputation. You should carefully consider how their interests may not adequately protect your interests or your plans for the franchise.
If you would like to discuss your plans for entering into a franchise agreement, negotiating a commercial lease, or understanding the terms of your lease – please do not hesitate to contact me by email or phone.
