Challenge
Lusthaus Law represented a new restaurant client in a franchise acquisition in New York. Due to conditions in the local real estate market, we negotiated the franchise agreement to address the time allotted to sign a lease and open the location. Once the client found a suitable space, they hired us to review and negotiate the lease.
There were some hurdles to overcome when it came to the commercial lease and aligning the terms of a franchise agreement and a commercial lease is always a priority. Additionally, another tenant was occupying the desired space. Let’s explore our approach to both and how we resolved the matter favorably for our client.
Solution
Experienced NY franchise attorneys know that the franchise agreement’s requirements typically lay the foundation for the lease or purchase of real property by the franchisee. Our first goal was to tie the length of the lease term to the franchise agreement to ensure they were co-terminus.
Additionally, we included the franchisor’s addendum in the lease. This franchise lease addendum is how a franchisor commonly approaches the issue of location control without subjecting itself to the liabilities associated with leasing real property.
We also negotiated certain lease provisions with the landlord to ensure the franchisee will be able to comply with the franchisor’s brand standards, particularly if they are revised during the concurrent terms of the franchise agreement and the lease. For example, we made sure that the client could change its use (or product offerings) and signage. This way, if the franchise system undergoes a rebrand over the course of the lease, the franchisee will be able to meet the new corporate branding guidelines without much objection from the landlord.
With regard to the existing tenant, we negotiated an outside date by which the landlord must give possession to the franchisee. All parties were aware of the firm move-in and launch date.
Result
One of the provisions of the lease we crafted involved a scenario wherein the landlord was unable to provide the space by the move-in date. If the current tenant does not leave, the franchisee tenant can exit the lease without jeopardizing the franchise agreement.
With a co-terminus franchise agreement and commercial lease, the franchisee is well-positioned to open on time and in good faith. This matter demonstrated why franchisees need to hire a NY franchise attorney with commercial real estate experience from the outset.
Lusthaus Law ensured that the client is protected against liabilities that could affect its operations and stability. This will help establish a good reputation within the franchise system and hopefully this provides the client with the opportunity to add multiple restaurants in the territory.