Franchise Lease Review
We review the lease or sublease for your franchise site before you sign, including how it connects to your franchise agreement.
- Fixed fee, confirmed before we start.
- Leases, subleases and licences from franchisors.
- Written advice before you sign.
What does a franchise lease review cover?
A franchise lease review checks the lease or sublease for your franchise site before you sign it. It also checks how that lease connects to your franchise agreement, because the two documents depend on each other.
The checks are the same as in any retail lease review: rent, outgoings, make good, options and the personal guarantee. A franchise site adds a second layer.
How franchise site leases are set up
There are two common arrangements.
- Sublease or licence from the franchisor. The franchisor holds the head lease with the landlord and grants you a sublease or licence. You take on the head lease obligations, usually without being a party to the head lease.
- Lease in your name. You sign the lease with the landlord directly. The franchisor usually signs a side deed giving it rights to take over the lease if the franchise ends.
Each one puts the risk in a different place. We tell you which one you have and what it means for you.
How the franchise agreement affects the lease
- Cross-default. A breach of the franchise agreement is often a breach of the lease, and the other way around.
- Termination. If the franchise agreement ends, your right to occupy the site may end too. You may have to assign the lease to the franchisor, or leave while still owing money.
- Term. The lease term and options should line up with the franchise term. A mismatch can leave you with a lease and no franchise, or a franchise and no site.
- Assignment. Selling the business usually needs consent from both the franchisor and the landlord.
- Guarantees. You may be asked for a personal guarantee in favour of the landlord, the franchisor, or both.
The Franchising Code of Conduct
The Franchising Code of Conduct requires the franchisor to give you a disclosure document and a copy of the Code before you sign. The disclosure document includes information about the site and any lease arrangements. The Code also gives you a short cooling-off period after you sign.
The Code sits alongside the lease. It doesn’t replace the protections in your state’s retail leases Act.
The retail leases Act still applies
If the site is a retail shop, your state’s retail leases Act usually applies to the lease or sublease, and whoever grants it, the landlord or the franchisor, has to follow it. That can mean a disclosure statement or a minimum term. In Queensland, a franchisee who signs the lease or takes a sublease usually needs a Form 12, but one who occupies under a licence from the franchisor doesn’t.
Questions
Something else? Enquire online or email us.
Do you review the whole franchise agreement?
We read the parts of the franchise agreement that affect the lease, such as default, termination, term and assignment. If you want advice on the whole agreement, tell us when you enquire and we'll confirm whether we can help.
Can I get a copy of the head lease?
It's usually worth asking for one. A sublease usually requires you to comply with the head lease, so it helps to see what the head lease says before you agree.
Signing up to a franchise site?
Send us the lease or sublease and the franchise agreement, and we'll tell you the next step.
- Fixed fees.
- Online, Australia-wide.
- Landlords and tenants.