Franchise Leases

pen-signature-21182892Most franchise operations involve either the franchisor holding a lease and subletting to a franchisee (for obvious control purposes) or the franchisee itself directly leasing space with direct liability to a Landlord.
Either way, the franchisor always seeks control over the location in the event the franchisor seeks to enforce its rights following a franchisee default.

So, for franchisees, here are your issues:

1. Who controls the location?
2. Can you operate any other business on the site in the event the franchise agreement is revoked or discontinued or the franchisor ceases to operate?
3. If the franchisor controls the lease, who controls the renewals if any?
4. What about personal liabilities either of the franchisor in its capacity as both the holder of the intellectual property of the franchise as well as the holder of the real estate?
5. Who owns the improvements located in the premises? (machinery, equipment)

It’s not easy to differentiate the relationships, but if you are a pending franchisee, don’t lose sight of the fact that the lease is as important and sometimes even more important than the franchise agreement.

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