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9 tips for negotiating leases when opening a franchise business

Opening a franchise business in New Jersey involves navigating various challenges. Negotiating lease terms with the landlord is one aspect that requires careful consideration.

After all, the success of your franchise can largely depend on a favorable lease that aligns with your business goals and financial capabilities.

1. Research market rates

Before starting lease negotiations, research the market rates for commercial spaces in the area. Understanding the prevailing rental prices will provide you with valuable knowledge to negotiate a fair and competitive lease agreement.

2. Know your budget

Establish a clear budget for your lease expenses. Calculate the maximum amount you can allocate for rent without compromising the profitability of your franchise. This information better equips you to negotiate lease terms that align with your financial capabilities.

3. Leverage franchise success

Highlight the success of your franchise and its positive impact on the local economy. Landlords may be more willing to negotiate favorable terms if they see the potential for increased foot traffic and economic growth in their property.

4. Negotiate lease duration

Franchise agreements generally run for 15 to 20 years, but you have more flexibility with your lease length. Consider negotiating the lease duration to suit your business goals. While longer leases may provide stability, shorter terms offer flexibility. Discussing the possibility of renewal options can also be advantageous, providing both parties with a sense of security.

5. Understand maintenance responsibilities

Clearly define maintenance responsibilities in the lease agreement. Discuss who will be responsible for repairs, upkeep and other maintenance issues. Clarifying these details upfront can prevent disputes and ensure a smooth relationship between you and the landlord.

6. Seek tenant improvement allowance

If the commercial space requires modifications to meet the specific needs of your franchise, negotiate a tenant improvement allowance. This financial contribution from the landlord can help offset the costs of necessary alterations, making the space more suitable for your business.

7. Include an exit clause

Incorporate an exit clause to provide an exit strategy should unforeseen circumstances arise. Understanding the terms for terminating the lease can protect your business from potential financial burdens in the future.

8. Clarify subleasing options

Discuss subleasing options with the landlord. If your business faces challenges, having the ability to sublease the space to another tenant can offer a safety net and mitigate potential losses.

9. Review and understand restrictions

Thoroughly review any restrictions in the lease agreement. Ensure you understand limitations on signage, business hours and other operational aspects. This clarity will prevent misunderstandings and help you follow the terms of the lease.

By approaching lease negotiations with these tips in mind, you can increase the likelihood of securing favorable terms for your franchise business in New Jersey.



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