Written By: Juhi Sharma

Do you have property in the hype areas of the town? Are you looking to earn money from it, but don’t want to open your own business? There is a way you can now earn money without getting involved in the operations and complicated life of a business owner. Yes, you heard us right, there is a way you can financially benefit from your unused properties, it's guaranteed, it's secure and it is very demure. This blog is all about helping you with "how to lease your property to a franchise".

That’s right with minimal risk and effort, you can turn your properties into a stable and long-term financial income. Does that pique your interest? Do you want to know the secret of leasing your property to big franchises in the country? Would you like to discover how to let a big franchise rent your commercial property?? Here’s how you can get started:

Guidelines on how to lease your real estate property to a franchise:

Research:

• Research different franchises that are actively looking for properties to expand their business and find the one that fits your property the best. Each franchise requires a different kind of set-up, which is why it is important to research and figure out which suits your property’s layout.
• Check if there are similar franchises in your area because franchises usually look for exclusive areas. Since the more the merrier is not exactly applicable when it comes to franchising it's important to pick an area where there is demand with low to no supply.
• Once you have got the franchises shortlisted, it is important to compare your property to the requirements of the franchises, look into their land requirement, how many square feet they require, do they need a particular layout or is there a parking mandatory with their need of land?

We have the franchise of our choice figured out and now to the steps to rent property to franchise comes prepping our location to charm the tenants.

Preparation: How to prepare to lease your property to franchise

• Franchises usually go for ready-to-move properties. A property that is well-maintained, hygienic, and complies with local zoning and safety codes is more likely to get selected, so ensure that your property fulfills all the necessary demands.
• Getting the license for the type of business you want to attract is the next step. Make sure that the property has all the government licenses.
• Once those are done, it's time to do a quick utility check, taking note that the plumbing, electricity, and internet are up and working, a big franchise needs efficient and working locations, so it's important that there are all the required facilities and their opening can go without a hitch.

We have the franchises shortlisted and our property is ready to be in business, step three is reaching out to the franchises for leasing.

Lease Agreement:

• For leasing, you can go one of two ways. You can either reach out to a franchise directly, franchises looking to expand usually have their requirements and extension plans on their websites, you can contact them from there or you can contact a corporate real estate department to help you hook up with the perfect franchise that aligns with your property size, location, features and more.
• Hiring someone with experience can easily connect you with a franchise looking to expand and negotiate with the franchise on your behalf, these brokers have a wide net of clients and can cut your trouble by half.
• There are networking events known as business expos these are a great way to meet with potential clients, socialize, and familiarize with the circle.

Got a match? Fantastic! That is half the work already done. Here is what you can expect and need to keep in mind. Here is what you can expect and need to keep in mind.

Requirements you must know on how to lease your property as a franchise:

• Usually, a big franchise will bring in a long-term lease offer, in this case, it’s important to be prepared to offer similar terms, which last anywhere from five to fifteen years.
• A good franchise may require a custom layout, so you might need to offer renovation services to meet their basic standards. Discuss with them in advance if they will handle these renovations or build-outs themselves or do you need to handle them. Sometimes these franchises ask the landlords to cover a portion of the said cost under tenant improvement allowances (TIAs).
• It is important to be open with your services, and offer a flexible rent-free period allowing the franchise to settle in easily, if it is a retail business you can opt for percentage-based rent or offer reduced rent for the starting few months as the business solidifies.

Now to the fun part, the money-making. This is a common business so when deciding on rent it’s important to make sure that you are getting a fair amount.

Rent Rates:

• Do a thorough research on what the rental rates are in your area, it's important to be profitable but in the rental business, it is even more important to provide a more competitive rate to stay in the game.
• Some prestigious brands can request a reduced rent in return for brand prestige and bringing traffic to the location, so be vigilant and smart while handling these scenarios.
• There are many structures of rent distribution, one of the most common where both parties get some benefit is the one where the brand pays base rent price with a percentage of their sales.

They have laid their terms and expectations but a good entrepreneur is the one who knows how to negotiate.

Negotiation and Laws: 

• Add a clause in your rent agreement for annual or periodic rent increases, accounting for inflation and property value appreciation.
• Many franchises lean towards triple net lease (NNN). This is where the tenant is to cover the taxes, maintenance, and insurance costs in relation to the property. Be ready to discuss these are important so make sure you have information and get in preparation of the same.
• Protecting your interests in such agreements is a must, so make sure you discuss and decide on what happens when and if the company wants to exit the lease early.
• Hire an experienced attorney who can guide you through the process, someone with experience in the field can help you understand and negotiate the deal better while protecting your rights.
• With big franchises, it's even more crucial to have a lawyer as they tend to prepare their own lease agreements. Moreover, a team of lawyers can make sure these documents align with your business interests and you do not end up signing anything without a prep.

What’s next? Nothing. You are ready, sign the agreement.

Signing:

• Being thorough and vigilant is crucial to this process, once you have set the terms of the lease, sign them after carefully reviewing the agreement yourself. Make sure all the details are in the agreement, like the clause regarding rent, maintenance, renovations, renewal options, and so on.
• Coordinate with the franchise team and make sure they can settle smoothly and there is a hitch in the build-out process.

Leasing can be a comparatively easy way to build a financial income if done right and carefully, it is extremely important to be aware of your rights and responsibilities when it comes to leasing a property.

While we are on the subject, let's discuss the parts played by different parties in the arrangement:

Role of the Landlord:

• The pain role or responsibility of the landlord is to lease a fully licensed commercial property to the franchisee or the franchisor, depending on the agreement between the said parties.
• To follow through with the terms of the lease and make sure you do your part in maintaining the building as and when necessary.
• Get your money! You have earned it. Rent collection as per the terms of the agreement is a part of the landlord's role. Ensure that the collected rent matches the clause of the agreement. Whether it is via percentage, fix, or a combination of the two it is your responsibility to collect the same.

Roles of the Franchisee:

• To handle the day-to-day operations in running a business. A franchisee needs to take care of all the operational obligations.
• The franchisee is to follow the guidelines set by the franchisor and the terms of the lease agreement and follow the protocol.
• Rent is on the basis of the terms of the lease agreement.
• The franchisee might also have to pay for utilities, insurance, and other operational costs per the agreement with the landlord.

Role of the Franchisor:

• The franchisor’s role is to provide the franchise with the business model, branding tools, and operational support.
• Some franchises have a specific when it comes to the location and ambiance of the property, a franchisor gives input with location selection in such scenarios and provides support if there is a need for build-out to match the standards of the brand.

Leasing your property to a big franchise ensures profit and income security along with the safety of the property, these franchisors do a thorough search before taking on an investor or franchisee, so your property will remain safe and because usually, such big companies have large funds you won’t have to worry about late or skipped payments.

For further information on how to lease your residential or commercial property to a big or small franchise, reach out to FranchiseBAZAR.

Disclaimer: The brands mentioned in this blog are the recommendations provided by the author. FranchiseBAZAR does not claim to work with these brands / represent them / or are associated with them in any manner. Investors and prospective franchisees are to do their own due diligence before investing in any franchise business at their own risk and discretion. FranchiseBAZAR or its Directors disclaim any liability or risks arising out of any transactions that may take place due to the information provided in this blog.