Multi-Unit Franchisee Magazine Issue I, 2014 | Page 83

l e a s e n e g o t i a t i o n 101 lower rent against the chance of costly surprises down the road. • Common area maintenance (CAM). These are expenses the landlord passes on to the tenants. Shared expenses can include maintenance, landscaping and other upkeep, real estate taxes, or specific references to triple net charges. CAM charges are common in shopping centers, where tenants are charged a share of expenses such as parking lot maintenance, snow removal, outdoor lighting, insurance, property taxes, etc. CAM charges do not normally include capital improvements made to the property. Experts encourage franchisees to understand these figures and negotiate a fixed rate or a cap on CAM increases. • Tenant improvement allowance (TIA): This is the sum the landlord agrees to spend on improvements, based on square footage or as a lump sum. The lease clause that covers this is called “Improvements and Alterations.” For franchisees, a leased space must be customized to meet the franchisor’s Jim McKenna specifications. The tenant and landlord should agree on who does the design, the contractor, the timetable, and how to allocate the cost. If the cost exceeds what the landlord offers, the franchisee must pay the overage; using your own contractor provides more control over costs. Also think ahead to franchisormandated upgrades, and be clear before signing which improvements need the landlord’s approval. • Rider. A supplement or addendum attached that becomes part of the lease; the more specific and detailed, the better for both franchisee and landlord in terms of avoiding future disputes. Franchisees frequently have unique requirements based on their franchise agreement. A good franchise attorney will ensure the rider includes all the provisions required by the franchisor. • Personal guarantee. For those new to franchising, it will be tough to eliminate a personal guarantee. Cheng encourages tenants to seek ways to limit liabilities after a few years in business, pay a larger deposit up front that will be refunded in exchange for a shorter personal guarantee, or inquire if other properties can be used to guarantee the lease. One final thought: If the landlord refuses to negotiate at all, most likely you can find a better deal—and a better landlord—someplace else. ISSUE 2 OF 20 4 1 ADVERTISING DEADLINE april 4th, 20 4 1 Call [phone] ext. 202 - or email [email protected] to reserve your ad space! Multi-Unit Franchisee Is s u e I, 2014  81