If you’re a new franchisee of a physical location based franchise, you may be

experiencing some anxiety over the selection and lease negotiation you will be soon encountering. It’s especially disconcerting if this is your first time doing a lease negotiation, and/or if your franchisor does not offer the proper support in this area.

When choosing a franchise, be sure to ask about the support offered to new franchisees during this process, as this can vary widely.

When finding a property and negotiating a lease, there are several people who will be involved in this process. You, the franchisor, to whichever degree they have specified, a local commercial real estate agent and a recommended lease attorney.

Choosing a location is more involved than simply finding a building that looks like a good place to set up shop. Many things need to be taken into consideration, so that your choice is the best for your particular franchise. Most franchisors will equip you with a list of specific criteria to look for when trying to find a location. This list should include information about the demographic and population requirements, appropriate building/tenant information, traffic and parking, and even the best side of a busy street to be located on, for optimum exposure.

Although most franchisors assume you will do the legwork of the actual location choosing, they will require you to gain approval of your site before you sign a lease. Some will require this proof in the form of pictures or video, but others will actually send someone to the location with you, to inspect it and offer consent or disapproval.

After you have one or 2 locations that will fit the criteria you are looking for, and have gained approval from your franchisor, lease negotiations begin. This is the process that will determine the financial and situational specifics to meet the needs of your particular franchise.

For the most part, this will be found primarily in the rent price, although there are certain clauses you should also be aware of: Clauses which increase your rent based on the growth of your business, clauses that require payment to maintain common spaces, landlord insurance, property taxes and etc. It is important to carefully read all documents, and work with the local real estate agent, and your franchisor to be sure these fees are reasonable for the area in which you wish to do business.

The real estate broker and the franchisor can also help you negotiate financial assistance found in the form of free rent allowances and tenant improvement allowances. At times, these numbers can be quite substantial, so it’s very important not to overlook them!

After the basic terms of the lease have been drawn-up, it’s very important to have it reviewed by a lease attorney. This area of the law is highly specialized, so be sure that your attorney is qualified in this arena.

While some Franchisors will give you a suggested lease contract, remember that the landlord has more bargaining power than the franchisor in this instance, and you may still need to start from scratch. Be sure, however, to obtain from your franchisor, a list of phrase recommendations for your lease contract. Many franchisors suggest non-compete clauses for businesses, which are located in a multi-business building. (Such as a mall) There are also specific language recommendations for “use” clauses, and other important matters. These “clauses” may seem minor, but if overlooked, they could cause you major headaches later.

When reviewing a franchise, be sure not to overlook this aspect of the review process. Speak with other franchisees about their experiences in this area, and ask specifically what type of support they received. Ask how long the process took them from start to finish, and about the factors mentioned above. This type of research does take time, but it is important to be sure you are well prepared for the challenges ahead!

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