Finding the right office or retail space can be challenging. As a franchisee, the conditions for leasing may be detailed in your franchise agreement and you may have access to training, expertise or legal assistance from your franchisor. However, finding the best location and getting favorable lease terms falls to you. Here are some tips:
- Start early – Consider using a commercial real estate broker to find site options quickly. New franchisees should begin looking six months in advance of opening the business to allow time for build out and equipment installation.
- Calculate space needs – Your franchisor may be able to provide space guidelines. A good rule of thumb for office space is 1000 square feet per four employees. Smaller start-ups may consider sub-leasing or a co-working space.
- Map out your target area – Look at where your target customer and competitors are located. Check for the locations of complementary businesses that may help your franchise succeed.
- Location, location, location – Is the site easily accessible? Does the building have curb appeal? Is ample parking is available? Is the building secure for customers and employees, especially at night?
- Consider the lease length – If you are a new franchisee, look for a lease with a shorter timeframe, usually one or two years, to avoid being locked in to a location during startup.
- Review multiple locations – Don’t restrict yourself to one location as it limits your effectiveness in negotiations.
- Calculate costs – In addition to base rent, a lease agreement may charge percentage rent based on gross sales, a cost of living escalator, shared utilities, charges for common area maintenance, merchant association fees and a percentage of real estate taxes. Ask what past tenants have paid to estimate all-in costs.
- Ask about a collateral assignment – Many franchisors require franchisees to sign a collateral agreement with the landlord that gives the franchisor notice if the franchisee defaults on the lease. The collateral agreement gives the franchisor the opportunity to correct any problems before the franchisee/tenant is evicted.
- Get ready to negotiate – Let the property owner make the first move with a lease proposal so you can counter-offer and negotiate.
- Seek legal assistance – If your franchisor does not offer legal assistance, you may wish to seek the advice of an experienced real estate attorney to review leasing terms and to negotiate with the property owner.
 Tips collected from the following articles:
- “7 Expert Tips on Finding the Perfect Office Space for Your Startup,” by Kim Lachance Shandrow, Entrepreneur.com, Dec. 1, 2015. Available at: https://www.entrepreneur.com/article/253009
- “Negotiate from Strength: 7 Tips for Leasing Commercial and Retail Space,” by Dale Willerton, Multi-Unit Franchisee, undated. Available at: http://www.franchising.com/articles/negotiate_from_strength_7_tips_for_leasing_commercial_and_retail_space.html
- “Leasing Commercial Space,” the Small Business Administration, undated. Available at: https://www.sba.gov/starting-business/choose-your-business-location-equipment/leasing-commercial-space
- “Collateral Assignment of Lease (Pro-franchisor),” Leasing Realty blog post by Abrams Garfinkel Margolis Bergson law firm, Dec. 23, 2016. Available at: http://leasingreality-dev.com/co-brokerage-agreements/
- “Understanding a Lease,” MSA Worldwide blog post, undated. Available at: http://www.msaworldwide.com/franchising-resources/articles/understanding_a_lease
This news is provided as a service to you by Marlin Business Services Corp., a nationwide leader in commercial lending solutions for the U.S. small business sector. Marlin’s equipment financing and loan programs are available directly and through third-party vendor programs, including manufacturers, distributors, independent dealers and brokers, to deliver financing and working capital that help build your success.