Multi-Unit Franchisee Magazine Issue I, 2014 | Page 82

l e a s e n e g o t i a t i o n 101
she says “You just can’t buy.” In 2012,
when they opened at that site, the store
set records for the brand’s largest-ever
U.S. opening.
“Almost every time, we thought we
ended up with our second pick and it has
turned out to be great,” she says. Their
strategy is working. In 2012, Marco’s
named the pair its Multi-Unit Franchisees of the Year.
Coming to terms

Once a franchisee narrows down their
choices, the focus turns to the economics
of the deal, which can include a myriad
of terms that can make or break the
business (see below). While there is no
standard lease agreement, Cheng says
she generally sees two types of leases: a
lengthy document that addresses every
detail large and small; and one where the
landlord has only a two-page document.
Both types require a sharp eye, she cautions. And in either case, she says, seek
counsel and address any sticky issues
at the start.
Franchisees also must look hard for
any requirements or regulations in the
lease document that restrict them from
doing business, such as limits on hours
or the type or size of signage, to ensure
there is no conflict with their franchise
agreement.
Grace always negotiates out the landlord’s right to relocate his sign within
the shopping center during the course
of the lease. “This is just death,” he says.
Gordon advises franchisees to make
sure the rent commencement date matches
the day the franchisee will be ready for
business. Otherwise, they will owe rent
before the cash starts to flow.
Renewal time

Even with a long-term lease, franchisees
must think ahead to renewal options before signing. Cheng advises franchisees
to lock down renewal terms in the initial lease to prevent the landlord from
changing the agreement at renewal time.
Over the years, Grace says he has
seen the power balance in lease negotiation cycle back and forth between
tenant and landlord. These days, he is
in the process of re-upping his available

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Multi-Unit Franchisee Is s ue I, 2014

renewal options and, for the most part,
has negotiated rent reductions based on
current market value. “I try to be fair,”
he says. “I am willing to pay market
rent, but I don’t want to pay more than
market rent.”
A good track record from a tenant
who pays the rent on time and is a solid
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