Franchise Agreements; Leases and Tenant Improvements
By Lance Winslow

In the legal realm of the franchise world there are a multitude of agreements, stipulations and methods of doing business, which must be considered to protect the assets of the franchising company, as well as the brand-name. One common issue in franchise law, which covers multiple legal areas; including real estate, brand image and ongoing business activities includes requirements on leases and tenant improvements.

In our franchising agreements it was determined that we needed additional clauses in our franchise agreement, as well as additional stipulations in our confidential operations manual to address this very issue. Below please find a copy of the clause in our franchise agreements to address this issue;

3.1 Lease

Master Franchisee must execute a lease or otherwise secure sales office and warehouse premises for the operation of the Location within ninety (90) calendar days after execution of this Agreement by Franchisor. If Franchisee does not secure premises within such 90-day period, Franchisor may terminate this Franchise Agreement.

3.2 Tenant Improvements

Upon execution of the lease for the Location, Franchisee must commence construction and installation of all tenant improvements, trade fixtures, displays and interior décor necessary or appropriate to commence business. The leased or owned premises must be maintained in a safe and orderly manner, present a neat and businesslike appearance and be adequately staffed. A generalized space plan and layout must meet Franchisor approval. Franchisor will make itself reasonably available to assist Franchisee in the design or layout of such premises and in the types of improvements appropriate.

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If you own a franchising company you may wish to consider these yourself. It would therefore be wise to contact a competent, knowledgeable and experienced franchisor attorney, who also understood real estate law. I hope you will consider this in 2006.

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