Pre-COVID, food franchises looked like a very...
Dale Willerton collaborated with his colleague Jeff Grandfield on this article.
As a franchisee and tenant, you may already have some preconceived notions about commercial leasing. Here are some things that no one (except The Lease Coach) tells a franchise tenant:
It's a Business, not a Marriage: Opening a franchise business and leasing space from a landlord may seem like a marriage, but it's not, and franchise tenants need to understand this. A typical landlord may have several hundred or even several thousand tenants, but the typical tenant has just one landlord. Furthermore, the landlord owns their property as an investment. The franchise tenant is leasing the space as a means to an end. The landlord wants to own the property. The franchise tenant doesn't really want to lease space - the franchise tenant wants to operate a successful business. A franchise tenant is not in business with the landlord; they are doing business with the landlord. The moral is that the landlord and tenant don't have the same goals or interests.
Shabby Property Maintenance: Look around the property. What do you see? Nicely groomed landscaping or weeds? When you tour a property for lease and see graffiti or broken signage, dirty sidewalks and potholed parking lots, you can pretty much expect that it will stay the same way during your tenancy. Warning signs are everywhere when you tour a property; this is why we like to inspect properties for our franchise clients whenever possible, before they become a tenant. What you see is what you get when you look at commercial real estate.
Absentee or Distant Landlords: The Lease Coach worked with a tenant who was planning to sign a 10-year lease on a nice property that was turned into condominiums. The property was divided into units and been sold to various small local investors. To visitors, it looked like a nice, normal plaza under one management, but underneath each tenant dealt with a different landlord/investor - each with different levels of interest with their condo property.
Once we had a deal essentially negotiated with the landlord's listing agent, we wanted the tenant to meet the landlord personally. When the landlord (a local investor) refused to meet her, it sent out all kinds of negative signals. The landlord, in fact, should have been insisting on meeting the tenant. Because of this, and a few other reasons, we passed on the location and took her tenancy elsewhere. If the landlord isn't visible and transparent during the offer-to-lease negotiation stage, don't expect anything more once you become the tenant. If the landlord is absentee or lives in a different city or province, try to find out how often they come to visit their property and their tenants.
It's All Negotiable if You Know What You're Doing: If there is one statement we hear most frequently from tenants, it's this: The landlord is not negotiable. The tenant has come to this conclusion either by trial and error and poor negotiating skills or by using the wrong professional to help them. Perhaps the tenant is simply repeating what the landlord's real estate agent has told him. If you're a casual golfer, you know how hard it is to come close to scoring par. Yet professional golfers not only par, they birdie hole after hole. Don't be surprised if you can't get what you want for yourself, but a professional lease consultant can - because it is their business and their job. Remember, it's all negotiable if you know what you are doing.
For a copy of our free CD, Leasing Do’s & Don’ts for Franchise Tenants, please e-mail your request to DaleWillerton@TheLeaseCoach.com.