Provide Negotiating Guidelines
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How can I provide assistance in negotiating leases?
One of your obligations to the franchisee is to provide site lease negotiation guidelines. It's to your benefit to help the franchisee obtain the best possible lease. The lower the lease payments, the better the revenue opportunities. It may be the first time the franchisee has ever negotiated a lease. There's a large intimidation factor in dealing with commercial brokers and it's your job to prepare the franchisee ahead of time.
Items to consider in lease negotiations include:
- Verify owner and restrictions. Ask to see the owner's title insurance policy and copies of existing mortgages, restrictions, easements, etc. Not only does this verify that you're working with the proper owner, it also highlights any restrictions on the property that may be adverse to you.
- Review the entire lease. There is no such thing as a standard lease and you should have your attorney review it as you negotiate and before you sign. Leases can be 50 pages long and it's tempting to skim over portions. Don't.
- Negotiate directly with the holding company. The broker has his own agenda – not the least of it being his commission. The holding company has the ultimate say in the lease and is less likely to quibble over the things a property manager will.
- L eave out the emotions. Don't go in heart-set on getting this specific site or you'll under-negotiate. Remember, it isn't the only property available.