Franchise tenants today usually bring desirable leasing results to most investment properties.  That being said, there is a need to understand the differences in leasing a property or premises to a franchise tenant verses a traditional small family business.

Franchise tenants are different when it comes to lease occupancy.  Landlords should adjust their leasing targets and negotiation goals if they are to attract franchise based tenants.

Know The Franchisee Facts

Here are some important factors to understand when it comes to finding and placing a typical franchise tenant into an investment property:

  1. BRAND: The brand that they bring to the property and the premises should be consistent with the corporate image of the franchise group; that branding will likely improve the tenancy mix and profile of the investment property. To achieve the consistency, they may require special authorities and approvals applying to signage, branding, and location.  There is a balance to achieve from a marketing perspective if the franchise tenant is to be located in a property containing a number of other tenancies and businesses.
  2. LEASE TERMS: The lease terms and conditions applying to occupancy will need to be matched to the franchise agreement used by the intended tenant. In other words the term of occupancy and any options will need to align to the duration of the franchise agreement.
  3. CUSTOMER ATTRACTION: It is likely that the brand and the franchise group will bring customers to your property. That can then extend benefits to other tenants within the same overall property.  When it comes to a retail property or shopping centre, you may have a number of franchise type tenants within the same tenancy mix.  Placement then becomes a consideration so that sales and customer interest across the tenancy mix can be preserved.
  4. WHO SIGNS THE LEASE?: It is quite common for a franchisee to sign the lease for vacant premises. Landlords typically require a business plan from the franchisee as part of that process so that the future of the tenant in occupancy can be understood and believed.  The franchisor will not generally sign a lease for premises unless the site is strategically advantageous over the long term.  In that case they will run the site as a corporate location with a management structure in place.
  5. ESTABLISHED BUSINESS MODEL: A franchise type tenant will bring a proven business model to an investment property and vacant tenancy; that has distinct advantages for the property owner and investor. The franchisor will generally have assessed the long term suitability and capability of the franchisee before they get to the point of lease negotiation.  On that basis many franchisees are more successful over the long term given that they have a proven business model to support business activities and marketing.
  6. APPROACH FRANCHISE GROUPS DIRECTLY: Directly market any vacancies that you have within suitable properties to the head offices of all major franchise groups. Soon you will understand the types of properties that they looking for and the prime locations that suit their business model.  They will also share with you the standard lease terms and conditions that they will need when it comes to a lease negotiation and tenancy commitment.  It is not unusual for a commercial real estate agent to be a preferred lease negotiator for a franchise group in any town or city.

Given all of these facts, is it easy to see why a franchise type tenant can be a desirable solution for a vacancy in any property.  Take the time to connect with franchise groups and tenants through your region.  Regular ongoing contact will help you achieve leasing results and repeat business with these specialty tenants.