Franchise premises lease.
Review before you're locked in.
A franchise lease binds you to premises for the life of your business. Lease term misalignment, locked-in assignment provisions, and make-good surprises are common issues. Kontractually reviews franchise premises leases against your standard playbook.
No credit card required. First 3 reviews free.
What changes when you review franchise leases systematically.
You sign a 10-year franchise lease without checking the franchise agreement term. The franchise agreement is only 5 years with no guaranteed renewal. When the franchisor declines to renew, you are stuck paying rent on premises you can no longer operate from.
Kontractually cross-references lease and franchise agreement terms and flags the 5-year mismatch. You negotiate aligned terms or secure a break clause before signing the lease.
You want to sell your franchise business. The lease requires landlord consent for assignment, and the landlord demands $15K in legal fees plus a new bank guarantee. The sale almost falls through because nobody reviewed the assignment provisions upfront.
Kontractually flags assignment consent requirements, associated costs, and bank guarantee reset provisions before you sign the original lease. You negotiate reasonable assignment terms while you still have leverage.
Your shopping centre lease includes a demolition clause allowing the landlord to terminate with 6 months notice for redevelopment. Three years into a 7-year lease, the centre is redeveloped and your franchise is relocated to a low-traffic area.
Kontractually flags demolition and relocation clauses and checks for compensation provisions, relocation conditions, and your right to terminate if the new premises are unsuitable. You negotiate protections before signing.
6 provisions specific to franchise premises leases.
Ideally yes. A mismatch creates risk at both ends: if the franchise term expires before the lease, you may be stuck paying rent for a business you no longer operate. If the lease expires before the franchise term, the franchisor may not renew the franchise without secured premises. Request that the franchise agreement and lease terms are aligned, including renewal options. Check whether the franchise agreement conditions renewal on having secure premises.
This depends on the structure. If the franchisor is the head tenant and you are the sub-tenant, termination of the franchise agreement typically terminates your right to occupy the premises. If you hold the lease directly, the landlord's rights are unaffected by franchise termination - you remain bound by the lease. Either way, review the interaction between the franchise agreement and the lease carefully. Kontractually flags provisions in franchise documents that affect lease rights.
A make-good clause requires you to return the premises to its original condition (or an agreed condition) at the end of the lease. For franchise fit-outs, this can mean removing all branding, fixtures, flooring, and internal walls - costs typically range from $30,000 to $150,000 depending on the premises size and fit-out scope. Some leases allow you to negotiate a make-good cap or agree to leave certain improvements in place. Kontractually flags make-good obligations and checks whether a cap or agreed condition is specified.
A ratchet clause means rent can only increase at review - it can never decrease, even if market rents fall. For franchise tenants locked into long leases (7-10 years), a ratchet clause combined with market rent reviews means you bear full upside risk on rent but get no benefit from market downturns. Fixed percentage increases (e.g. 3-4% annually) or CPI-linked reviews are more predictable. Kontractually flags ratchet clauses and uncapped market rent reviews so you can negotiate before signing.
In many franchise structures, the franchisor must approve the incoming franchisee before the lease can be assigned. This creates a dual-consent requirement: both the landlord and the franchisor must agree. If the franchisor has unreasonable approval rights (or takes too long to approve), it can delay or kill a sale. Kontractually flags lease provisions that require franchisor consent for assignment and checks whether consent timelines and conditions are specified.
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