3.04 – Signing Your Lease
After finding the perfect location, the real work begins: convincing the landlord to give you a lease you can live with. Many landlords may be unfamiliar with your business or have a negative perception of it based on past experiences. Your job is to explain why your business is different, who your customers are, and the benefits your business will bring to the other tenants. If your concept is national, emphasize the prestige their center will gain by having you as a tenant.
When looking for sites, think of yourself as the seller, not the buyer. Your job is to sell the potential landlord on the merits of your business. Your franchisor should provide you with marketing materials to present to landlords. Give landlords a reason to pick you over other businesses.
By the time you’re about to sign a lease, you’ve already decided on a location. You should be in the process of contacting the real estate or mall management company that manages the property to determine space availability, specific occupancy costs, and lease terms. Complete your site review package for your franchisor, who may want to see a letter of intent with your landlord in the site review package.
Be financially realistic when signing a lease. A great location is no good if you can’t afford it. Based on the experiences of other franchisee- and company-owned stores, a reputable franchisor is often in a good position to tell you what rent and lease conditions are reasonable.
Does the center have adequate space for your business? Although you don’t want to squeeze into a space that’s too small, you also don’t want to pay for space you’ll never need. Square-foot costs can vary with overall size – often, the larger the space, the lower the square-foot cost. But even with a lower per-foot cost on a larger space, the maintenance and development costs will be higher. Evaluate size based on your needs.
Confer with your franchisor regarding your proposed lease. Although most franchisors won’t negotiate your lease for you, many insist on reviewing and approving any lease before you sign it. Keep in mind that this review generally is not for your benefit and doesn’t reflect the franchisor’s judgment of whether the lease is fair or a good deal. Instead, a franchisor’s review is aimed at confirming that the lease contains certain terms required by the franchisor. For example, many franchisors insist that landlords agree to assign the lease to the franchisor, at the franchisor’s request, if the franchise agreement is terminated. Check your franchise agreement for any terms your franchisor requires to be included in your lease and always work with an experienced real estate lawyer when negotiating any lease.
