Negotiating A Franchise Lease

January 01, 2004

When negotiating a space lease for a franchise business, there are many issues and concerns unique to franchise businesses which should be addressed. The following checklist is intended to identify some of the more significant issues in connection with the review of a typical landlord form of lease. This checklist is not intended to be a complete list of issues to be raised by franchise tenants, but is a list (top 10) of their more substantive issues and concerns.

FRANCHISE CHECKLIST OF LEASE ISSUES

1. Alterations
Rights to prototype leasehold improvements unique to the particular franchise operation without landlord consent. Tenant must also maintain flexibility for remodeling or changing merchandising programs during the term of the lease.

2. Assignment and Subletting
Maintain right to transfer lease to franchisor or subsequent franchisee without Landlord’s consent.

3. Signage
Permit standard franchise signage (logos, colors, etc.) without landlord’s consent.

4. Premises
Identify any exclusive and non-exclusive areas for franchise use, such as parking spaces, dumpster areas, HVAC systems, freestanding signs, etc.

5. Use
Permitted uses should include sale of merchandise and services customarily sold at other franchise or corporate locations for particular franchise operation.

6. Trade and Other Fixtures
Provide for lien rights for lien holders and landlord waiver of any rights to trade and other fixtures.

7. Conditions Precedent
Clearly set forth all of the conditions precedent to the effectiveness of the Lease, such as (i) franchisor approval, (ii) receipt of all permits and approvals; (iii) engineering, environmental or other due diligence/inspections.

8. End of Term
Provide for right of removal of all trademark items at end of term.

9. Exclusives
Set forth any exclusive uses that landlord will grant to tenant during the term of the lease.

10. Franchise Addendum
The lease should provide for any franchisor rights set forth in a standard form of Franchisor Addendum to be attached to the lease.

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