Business Franchise Australia & New Zealand — July-August 2017

60 Business Franchise Australia and New Zealand

LEASING THE

FrANCHISE

prEMISES:

WHAT A fRANcHISEE

NEEDS To KNoW

unless a franchisee is

operating a mobile franchise

or working from home,

chances are the franchise

will require a lease on a

physical premises. Although

there is no ‘one size fits all’

approach to franchising

and leasing, franchisees

typically use either of the

following methods to lease

the premises:

Method 1: the franchisee locates the

premises, negotiates the lease with the

landlord directly and holds the lease in its

name;

Method 2: the franchisor locates the

premises, negotiates and enters into the

lease, and then licenses occupation to the

franchisee.

The following factors will ultimately drive

the leasing method (which the franchisor

often decides unilaterally):

• nature of the franchise system and the
  policies and procedures of the franchisor;


• risks that each party is prepared to take;
  and


• the level of control that a franchisor wishes
  to retain over the premises/site of the
  business.
  Following, we set out some of the advantages
  and disadvantages of each method.

1

the franchisee locates the

premises, negotiates the

lease and holds the lease.

If a franchisee enters into the lease directly

with a landlord, the franchisee will have

direct obligations to the landlord under the

lease. The franchisor will not be involved

in this aspect of the franchise business

operations.

Key termS to looK For iN

the leASe

use of the premises

Ensure the terms of the lease permit the

operation of the franchised business from the

premises and complies with any aspect of the

franchise agreement in this regard.

ExpERT ADvIcE

fEATURE:

F ixed v

’S m

oBile Fr

AN

chi

SeS