The relationship between franchisees, franchisors and landlords can sometimes be a complicated one for landlord representatives if the control is not quickly established at the outset of the relationship.
The Landlord should know from the outset who will be their tenant and therefore signing the lease document. It is unfortunately often the case that a franchisor will negotiate on behalf of a franchisee setting the rents, location and lease term often without serious impute from the franchisee. When the franchisee finally sees the lease documents there is usually push back on the actual deal, because the franchisee can be the one responsible for the rent, terms, covenant, etc.
If you are a franchisor offering corporate covenants to the landlord, the deal will go a lot smoother for you. On the other hand if the franchisee is directly responsible for signing the lease, then this should be made clear from the outset. The landlord representative will then know who is responsible for the lease and therefore with whom they should be communicating.
There is nothing worse than negotiating an entire deal with a party that is not responsible and not the actual decision maker. Many franchisees also make the mistake of going on their own, securing a location and then bringing it to their franchisor. In many cases the franchisor may have his own real estate people securing sites and they could have already communicated to the same landlord. Also, the franchisee could be in a territory protected by another franchisee or working in another franchisee’s territory. When this comes to light after the paperwork is done, the deal will stall as the franchisor might have final approval on the site. Another issue occurs when the franchisor negotiates an entire deal “subject to identifying a franchisee” and cannot deliver a franchisee. In a competitive retail real estate environment, many Landlords will refuse to do a deal subject to the franchisor securing a franchisee.
Avoiding these situations is not that difficult. Establish from the outset who is responsible for site selection and lease negotiations. A franchisee should employ their own professional retail real estate representatives working on their behalf. They should know the territory, competitive rents in the area and what competitors are in the trade. Any professional retail real estate site selector would have this information by having relationships and “go to” people with the major landlords. Don’t be afraid to ask real estate professionals for their qualifications and retail experience.
A few simple rules from the outset can make this process easy to follow and can ensure success in securing the best deal for you.
Next time we’ll talk about the relationship between the real estate rep. and his client/customer.
