Franchisee Real Estate Lease: Build and Build-out

Leasing the business premises (real estate) can make or break a franchisee, requiring adequate legal oversight thereof.

Contact Neufeld Legal PC for franchising legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

Although there are a multiplicity of factors at play when a franchisee is looking to commence their particular franchise operation, two of the more consequential aspects that the franchisee (lessor) needs to be aware of are the build (construction of the building) and the build-out (internal work on the leased premises).

The Build: The build relates to the construction of the actual building within which the leased premises will be situated. Where the building has already been constructed and is fully operational, this isn't a concern for the franchisee. However, where construction has not been completed and/or the building isn't operational, the franchisee needs to undertake appropriate proactive steps to insure that any delays or other challenges do not impact their ability to timely launch their franchised business, or otherwise prematurely commence their obligations to the franchisors and other third parties, where appropriate arrangements could be previously set in place.

The Build-Out: The build-out of one's franchised business within the leased premises can be an expensive undertaking, which needs to strictly comply with the franchisor's specific parameters for commercial operations. The cost of this build-out can be significant, and very often will exceed the franchisor's preliminary estimates, especially where there are issues with respect to the leased premises that need to be overcome or the price estimates are out-dated and/or not reflective of current costs in your particular city. As such, appropriate consideration needs to be given at the outset as to what the actual cost will be for the build-out, including obtaining the franchisor's preliminary estimates early on, together with more realistic estimates from local contractors, such that you might calculate those costs into your budget and any financing that you are looking to secure (while not over-relying on any potential tenant improvement allowance that might receive from the landlord).

Failing to consider and address the build and the build-out of your franchise's leased premises can have serious consequences, such that it is critical that these matters are appropriately addressed early-on when you still have some ability to control and deal with them. There are many consequential matters from a commmercial leasing perspective that can have serious financial consequences for your franchise, such that identifiying those aspects and addressing them appropriately can make a serious difference when you are undertaking a costly new venture with the launch of a new franchise.

Christopher Neufeld is a business lawyer knowledgeable in the rigors and challenges of the franchise business, together with the legal constructs that are critical to their effective operation. For experienced legal representation in starting, acquiring / selling, operating and managing a franchise, contact franchisee lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.

Franchisee Real Estate Leasing Basics - Many franchise arrangements require that business operations are undertaken from commercially leased real estate, where it is next to impossible to purchase acceptable real estate at which the franchised business is to be undertaken. As such, it is imperative that your commercial leasing arrangements are correctly undertaken and don't financially hurt your business' profitability, with an understanding of the basics of commercial leasing of real estate being important. Read more.

 

Franchisee Real Estate Lease: Build and Build-out - Although there are a multiplicity of factors at play when a franchisee is looking to commence their particular franchise operation, two of the more consequential aspects that the franchisee (lessor) needs to be aware of are the build (construction of the building) and the build-out (internal work on the leased premises). Read more.

 

Franchisor as Tenant (with Franchisee subleasing) - Whereas the typical leasing arrangement is for the franchisee to lease the subject property from the property owner (landlord); on occasion, the franchisor will lease the property from the property owner and thereafter proceed to sublease that same property to the franchisee. As opposed to the franchisee leasing directly from the property owner, having the franchisor enter into the lease with the property owner can be advantageous to the franchisee. Read more.

 

Contact us via email at chris@neufeldlegal.com or call 403-400-4092 / 905-616-8864.